Personal Finance

Sunday, September 14, 2008

Got a credit card without applying for one?

Niraj Wadhwa* was surprised when he opened the envelope he received one Saturday afternoon. There was a small, flashy credit card tucked inside the envelope. "Not again," Niraj murmured to himself.

He had not asked or applied for it. But the issuing bank decided that he should have one without his permission.

This was the third such credit card Niraj had received after he joined a financial sector BPO in Hyderabad six months back. Interestingly, the card belonged to the bank where he had his salaried account. "They know exactly what my salary and banking habits are and perhaps because of that they gave me a credit limit of Rs 30,000," says the 22 year old.

"I wanted to return it but then had to find time when I could do it," he sighs. Niraj works night shifts and sleeps during the day.

Also, it's not that he is not a credit card fan. Niraj is already using two credit cards -- one belonging to the same bank where he has his salary account -- since the last two years. However, an unsolicited credit card was the last thing he needed in his life.

Cut to Mumbai. Raji Patwardhan*, a mother of two, was shocked when she used an unsolicited credit card at a known grocer's and the transaction did not go through as it was blocked by the issuing bank as a pick up card ie a stolen card. A frantic call to the bank's call centre resolved the matter for her but not before she swore she will never ever use unsolicited credit cards.

Niraj and Raji from two different places in India may not be two random cases who got unsolicited credit cards. For, the banking regulator, the Reserve Bank of India [Get Quote], RBI, has geared up for some action after receiving several complaints on this front.

A circular issued by RBI advising banks on July 23 about unsolicited credit cards states "unsolicited credit cards should not be issued and that in case an unsolicited card is issued and activated without the consent of the recipient and the latter is billed for the same, the card issuing bank shall not only reverse the charges forthwith, but also pay a penalty without demur (raising any objections) to the recipient amounting to twice the value of the charges reversed." Rejoice!

What's more, the person getting an unsolicited credit card could approach the Banking Ombudsman who would decide on the amount of compensation payable by the issuing bank to the one who receives such cards.

You can seek this compensation based on the amount of time you will lose in canceling such cards, money spent in doing the same, and for the mental harassment and anguish it will cause to you.

There's even help if an unsolicited credit card has been misused by somebody else before reaching you.

Citing some instances the RBI has observed that the card issuing bank will be solely responsible for losses arising out of such misuse. The card receiver or the person in whose name such a card has been issued will bear no responsibility. Rejoice again.

But how the banks implement these orders from RBI is another question. "This could perhaps win RBI a host of credit card users but only if such advice is heeded by the issuing banks in letter as well as spirit," says Niraj who's a bit sceptical about how the credit card issuing banks will look at it.

"What happened to the RBI order restricting credit card companies from using high-handed tactics in recovering loans from defaulters?" he demands. "We still get to hear and read about such incidents still happening," he adds showcasing his scepticism.

A dummy's guide to cutting commuting costs

Inflation is at its peak. Rising cost of consumer durables, food and fuel have left most of us in a difficult situation. We all are thinking about ways to beat inflation and how to reduce our monthly expenses.

I am sure most of you must have, at some point, made it a point to cut down on your lifestyle expenses. Didn't you?

Also, I am equally sure that most of you must not have succeeded. Did you?

Well, whatever your success ratio the point is that more can be done. Let's first look at managing travel/commuting costs and time.

To begin with let's try to economise on the things which have started costing more and pinching our pockets like never before.

Fuel forms a big chunk of it. With rising crude prices petrol/ diesel prices seems to be pinching everyone the most. With banks offering competitive interest rates in the recent past -- not now as interest rates are also on an upward journey -- owning a vehicle has become very easy and most of you, I am sure, must be owning either a two or a four-wheeler. Consequently, your fuel bills must have skyrocketed and hence the mounting expenses!

If you are looking at cutting fuel expenses you are probably starting out on this exercise quite wisely.

Car pool

A tried-and-tested method and one of the best ways to reduce travel cost when driving to work. Share a car with office colleagues or neighbours or friends heading in the same direction. Car pooling not only helps in reducing travel costs but also decongests traffic and reduces pollution as well your stress levels.

If you have no one with whom you can pool your car or vice versa then check this site out: commuteeasy.com which can help you to find car pools in your area. The only limitation of this site is that it offers its services in limited cities like Bengaluru [Images], Pune, Chennai, Hyderabad and Mumbai.

Public transportation

It is the best and cheapest mode of travelling. Sanket Mehta, 24, a businessman from Mumbai's Fort area, says: "For me to travel from my home in Santa Cruz to Fort in peak hours takes at least an hour and a half. I use the train instead and reach my office in an hour or so; I don't get tired as well. Also, it's much more economical."

Trains and buses can be very crowded especially at peak hours. But they are economical and you don't have the headache of finding a parking space. You will understand this more if you are a resident of one of India's biggest metros where congestion is creating a huge problem. Remember where you can use bus or train; avoid taking a taxi or a rickshaw. Iy you live in a city that has taxis or rickshaws try to share them to reduce the burden of travelling fares.

Plan in advance

You can schedule your day in advance so that you can club appointments or places you have to go to. This way you can plan your route and transportation in advance and not only save time but also fuel. Also, if there is no urgency then select non-peak hours to reach your destination so that way if travelling by car you reach early as well as save on time and fuel. Again try to use public transport and if travelling during non-peak hours then you do not even have to worry about the crowds.

Walk where possible

Avoid taking your car or rickshaw or taxi to short distances where it's possible to walk. Like, going to a grocer's near your house.

Driving tips

Use driving tips to save that extra litre of petrol. You can get driving tips from your car dealer as well as from the service station you visit or even from the Internet.

School drive

For all those with children you should try to use the school bus instead of dropping your kids to school by car, taxi or rickshaw. Or form a car pool to drop kids to their school. With the amount of classes students attend these days parents spend half their time in dropping their kids to classes and picking them up.

Again parents can get together a group of children from their neighbourhood and form a car pool or can hire a bus to drop kids off to their classes and pick them up. This will prove economical both in terms of time and money.

Use teleconferencing

Technology can be a great boon in current times. Business people can use teleconferencing where possible instead of travelling.

Free home delivery

On weekends or even on weekdays instead of going out for dinner or lunch you can order your food at home. Almost all the restaurants have free home delivery service. This way you can save on fuel by not travelling to the restaurant, save on time by avoiding the waiting time at the restaurant (that is to wait first for a place and then for food which can be used for some effective task like reading a newspaper at home or doing some household chore). Also, you will save on time spent in searching for a parking lot, that is, if no valet service is available.

Buy passes

One should make use of monthly, quarterly or annual bus and train passes wherever available. It saves time because you can avoid peak hour queues to buy tickets everyday and arrange for small change. Also, the passes are a much cheaper option than buying tickets everyday if you go for periodic passes.

However, this only applies if you are travelling the same route everyday for work or other purpose. Also, students and senior citizens should try to use the discount available to them.

There are also a bunch of other even more radical innovations to save petrol flying around -- like using bicycles to work. It's not always practical solution especially in India. But creating an awareness sparks new ideas to cut costs.

Do you have an interesting idea on how to cut costs? Would you like to share your idea of cutting costs while travelling, shopping, eating out, buying clothes? Let us know on the message board below!

'Am young, can take risks: Where to invest?'

Is it the right time to invest in equity and mutal funds if you are young, willing to take risk and have a long-term investment horizon of 7-10 years?

Where should you invest if you satisfy the above criteria? What role does life insurance play in your overall long-term investment plan? What should be the right asset allocation to beat inflation and yet earn decent returns?

In a chat with Get Ahead readers on July 9, financial planning expert Vetapalem Sridhar answered these and several other queries related to mutual fund investments, financial planning and how to achieve financial freedom for you and your family.

For those of you who missed the chat, here is the transcript.

Mr. Gosavi asked, Hi.I hav 3 queries. 1. Hows Birla sunlife dream plan. I hav taken it for 25L cover for 25 yrs (my age is 25) at a premium 7k/annum. 2. I hav read in newspapers that property prices will be down by 15-20%in Mumbai (As in delhi its reduced) but in Mumbai prices are not coming down. I want to purchase a flat for residential pupose in Navi Mumbai.r u able to see any correction in Mumbai property prices.3.From last 3- 4 days we are seeing mkt is going up. so can we say the bearphase is over. should I again start investing in mutual funds. Pl answer. Thanks.

Vetapalem Sridhar answers, Hi! 1. In Birla Dream Plan getting a 25L cover for 25 yrs with an annual premium of 7K is not possible. Plz recheck� 2. Like I hv already mentioned in my past chats, it would make sense to wait for a couple of mths before u buy a property 3. Nobody can predict the mkt with certainty. In hindsight we can say that bear mkt was over or that it started. The best way to create wealth in the long term is to invest regularly with discipline with a long term focus without worrying too much about where mkts r going in the short term.

Pavan asked, Hi Sreedhar, good afternoon. I started investing 10K pm through SIP from last few months. My current portifolio has the following funds Principal TaxSavings (15%) HDFC [Get Quote] TaxSaver (15%) HDFC Equity (20%) Reliance [Get Quote] Vision (15%) DSP ML Top 100 (15%) Sundaram Select Focus (20%) Do you have any suggestions/recommendations on the above distribution? Still i can invest 2-4K more per month. Can you suggest suitable funds so that my portfolio is perfectly balanced. I'm 25 Yrs old, i can take risk to certain extent. My investment horizon is 3-5 Yrs. Thanks In Advance.

Vetapalem Sridhar answers, Hi Pavan, I think u hv done a gud job of creating a well balanced portf. Continue with the existing funds. Also do not increase any further funds, distribute the additional money betn the existing funds itself. A 5-7 yrs horizon would be more appropriate.

AmitG asked, Hello Sridhar, Can you suggest some Mutual Funds that are predominantly large cap in nature. And, what should be the quantum of allocation in them looking towards a 5 to 10 years growth option plan ? Thanks and Regards.

Vetapalem Sridhar answers, Some of the well managed Large Cap funds are HDFC Growth Fund, Reliance Vision, Sundaram Select Focus, Franklin Bluechip, etc...Allocation would depend on individual circumstances and objectives. But of the equity part of ur investments a MINIMUM of 60% allocation to Large Caps is generally advisable. U can expect reasonable returns (say around 15% annualised) with a 5-10 yrs horizon.

Unni asked, Can you please tell about MaxNewYorkLife plocy called "Life Invest"? I'm planning to start investing 10K per mnth for next 10 years as part of my retirement solution.

Vetapalem Sridhar answers, Hi Unni, it may be more advisable to invest into a Mutual Fund thro a SIP to build funds to take care of ur retirement needs. For insurance cover u may consider a TERM Insurance Plan.

hari asked, Hi,I have got two jeevan anand LIC [Get Quote] policies worth 5 lakhs each for which I am paying 28650/-, and 20250/- respectively. I have got a home loan of 10 lakhs taken mid last year, and the EMI at present is 11366/- for 15 years.My take home salary per month is 42000. My Monthly expenses come around 17000/-. I have also got a car loan worth 4000/- per month.I am investing 40000/- per year in ULIP's(LIC-MarketPlus-Growth). Let me know, where else can I invest my remaining money.

Vetapalem Sridhar answers, Hi Hari, first get urself an adequate TERM Insurance cover for a 10-15 yrs tenure. U can look at options from SBI [Get Quote] Shield, ICICI [Get Quote] Pru LifeGuard WROP, Reliance TERM Plan etc. Once u do this u can make ur Jeevan Anand LIC policies paid up. Then from ur surplus mthly savings do a SIP into 3-4 funds with a 10 yrs plus horizon. This would help u create more wealth in the long term.

Vicks asked, Sridhar, I had invested 40k in ELSS, 25K in ULIP and 25K in Insurance and 10K in PPF last year. Can i continue with the same this year too?

Vetapalem Sridhar answers, Hi Vicks, I hv a simple Q for u: What is it that u expect from the above investments? If u r satisfied with ur answer then u can continue with the same. It seems that u have invested the money in different places without much thought as to why u r investing there. The first thing that u should do is to first list down ur objectives and needs. These should be the guiding factors to arrive at a plan which would help u identify where u should invest the money. This would ensure that u invest in places which would help u meet ur future objectives.

Pradeep8 asked, Are these SIP MF are ok to invest. ICICI Pru Infrastructure, DSP Merrill Lynch India TIGER fund, SBI Magnum global Fund, Birla Sun Life Equity fund, Reliance Diversified power sector fund

Vetapalem Sridhar answers, Hi Pradeep, Most funds picked by u r thematic/sector funds. Fundamentals of investing suggest that u should first build a gud core portfolio of well diversified stable funds (eg: well managed large cap funds). Once this is in place then u may look at adding some aggresive funds based on risk appetite (eg: mid and small cap funds). Once this is done if u want to increase exposure to a specific sector due to ur superior understanding of that sector, only then would it make sense to invest in that specific sector fund.

biml asked, Hello Sir,Good afternoon..hope u will answer my question..I want to invest in Sundram BNP taxsaver fund in SIP mode for long term..is that a good fund..Please answer my question.. i will be very thankful to you..

Vetapalem Sridhar answers, Hi, Sundaram Tax Saver is on my recommended list along with Principal Tax Savings and HDFC Tax Saver. But we should be aware that no one can predict with certainity whether these funds will be superior performers in future or not. But we can say that the Funds r run by capable Professionals.

varun asked, I am 27 years old with no liabilities. how should I invest Rs1 lakh investment for tax saving. should it be in Insurance, PPF , Pension Plan , NSC or any other instrument.

Vetapalem Sridhar answers, ELSS (Tax Saving) Mutual Funds would be the best option if u have a 5-7 yrs horizon of investment. Before u get married u should take up an adequate TERM Insurance Plan.

ramani asked, Hi, I want to invest 5lacs in MF taking into consideration of 3years time horizon. Please suggest balanced MF portfolio which atleast yeilds 15 % ROI.

Vetapalem Sridhar answers, Dear Ramani, It is not really possible to say where the mkts will be in 3 yrs time. Though there is a very gud chance that u may get ur expected returns in 3 yrs time, but then u should be aware that there is some probability that mkts may not deliver those returns (which is the risk for u). Evaluate the consequence of what will happen if u do not get the expected returns. If it is acceptable then u can invest the money. The best option is to invest the money with a 5-7 yrs horizon...

SalariedEmployee asked, Hi Sridhar! I have been investing in Franklin Templeton Prima Plus and Bluechip MFs under SIP. Is it WISER to withdraw immediately with what I've got OR continue to invest and wait for the markets to recover?

Vetapalem Sridhar answers, The more ur decisions are based on market movements, the more certain u r to not make returns thro equity based investments. The reason is that we generally feel like selling when mkts go down (when ideally we should be BUYING LOW). And we fell like buying when mkts go up in anticipation that they will rise higher. Most people who are able to build wealth over the long run follow a simple process of investing. They invest regularly with discipline and hold onto their investments for a long time. This is a sure shot way to creating wealth. We must realise that the Market as a whole is smarter than an individual. So the probability tht u can be WISER than the mkt is very low. So continue to invest regularly and remain invested till mkts go up and reach newer highs.

arun asked, i awnt to invest in a pension plan .I am 44 yeaars old

Vetapalem Sridhar answers, Hi Arun, existing Pension products r highly inflexible. Although it ensures discipline (the problem which most people face), there r better alternatives available thro which u can create more wealth in the long run. If invested with discipline, Equity oriented MFs would be a superior alternative to create wealth over the long term.

SandeepKumar asked, Are FMPs good vehicle for long term investment? What are good FMPs available now? Will it come under tax planning?

Vetapalem Sridhar answers, FMPs r highly tax efficient investments. Currently the post tax yields on a FMP of more than a yr is around 9.5 to 10% p.a. Though they are an ideal option, there is a RISK that we should be aware of. The Risk is the risk of DEFAULT. When economy faces problems, certain companies are not able to meet their liabilities and hence they may default. So it is very important to first understand where the money is being invested via the FMPs. If all paper are of high quality then there is no problem. But then to be sure of that u should do a thorough study before investing.

mahernoz asked, Hi Sridhar, i have an investment horizon of 5 years, which investment should i make stocks, Fixed Deposits or Gold, what looks good for 5 year horizon.??

Vetapalem Sridhar answers, Dear Mahernoz, Stocks should be the ideal choice. This does not mean that u should put all ur money into stocks. A sutiable Asset Allocation is essential to be able to create a balance between returns and financial stability. Debt/Gold plays the role of bringing stability in ur Financial Life. Plz read thro the following link to understand better. Asset Allocation - Secret to Financial Freedom

Daboo asked, I am 53 years and want to take VRS after 1 year. My monthly expenditure are Rs.20 thousand/month. How much money required to sustain this for another 30 years.

Vetapalem Sridhar answers, Assuming that ur cost of living rises by 7% each year u would roughly need around 40L currently to maintain a lifestyle cost 20K p.m in current terms. This above corpus should grow at a rate of 12% for the first 10 yrs, then at a rate of 11% for the next 10 yrs and finally at a rate of 10%. With a 50:50 debt equity ratio u can maintian the above need returns.

arunr asked, Hi , I am 28 year old amd most of my investments are in equity , i feel abou 95% , should i invest more in debt and other related insturments, if yes could you suggets some good mutual funds for it

Vetapalem Sridhar answers, Hi Arun, extremes in any direction is not gud. U should work out a suitable asset allocation based on ur individual circumstances. Being young you can afford to take higher risk. Also if u find that the allocation to equity is on the higher side, dont sell equity to rebalance, it would make more sense to reduce equity investments during the coming months and instead invest into debt to create a sutiable asset allocation. For the debt part currently, FDs are a more suitable option.

sundar asked, I am 29 years old . I am investiong Rs 1000 in each mutucal funds through monthly SIP in following mutual funds like DSP ML Top100 , Magnum Contra, Kotak opportunities, Sundaram SMILE, Sundaram Capex opportunities , SBI Magnum TAx gain and Sundaram Tax saver . My investment time horizon 15 to 20 years . Please advise whether My selection of mutual fund is correct or anything I will change ? Please give your advise

Vetapalem Sridhar answers, Hi Sundar, the portf is more towards the aggressive side. Would suggest that u replace Sundaram Capex, by sundaram Select focus, and just invest in 1 tax scheme. Over 15-20 yrs u should be able to build wealth.

Mahendraa asked, Are the index funds good for retirement planning( say 20yr)

Vetapalem Sridhar answers, Yes they are definitely gud for retirement planning. But in developing mkts like India, as there are a lot of opportunities, regular diversified funds, over the coming few years, have a greater chance to outperform index funds. With ur strategy u should be able to meet ur objective of retirement. The only care that u should take is to not compare the returns of index funds with regular funds.

Srikant asked, I want ot have Rs. 50 lacs after 10 years. How much would be required to be saved monthly to achive this and where to invest. Kindly advice

Vetapalem Sridhar answers, Assuming a 15% annualised returns thro equities, a 18K mthly investment for the next 10 yrs would enable u to accumulate around 50L. A SIP into 3-4 diversified equity funds should enable u to meet ur goal.

imran asked, My monthly salary is Rs 40,000 and I have done my investment with the best of my knowledge. Investment details; Loan - 20 Laks for 20 years EMI - 20,000 LIC - 27,000 Mutual Funds, Rel Pow Sec - 3000 HDFC Top 200 - 2000 Franklin pension plan - 2000 Is there any source of improvements in my current planning? Please give me your valuable feedback

Vetapalem Sridhar answers, The first thing that u should do is to get a TERM Insurance Plan. Look at SBI Shield, Reliance Term Plan, ICICI Pru Lifeguard WROP. Stop the SIP in Franklin Pension Plan. Instead u can select one of their other funds like Franklin Flexicap or Franklin Prima Plus. Do not add any Sector funds to ur portf.

abhishekdhulia asked, Hi Sridhar, How do you see the health of Indian stock markets and economy in next ten years, say by 2020. How is the future of equity till 2020. thanks

Vetapalem Sridhar answers, There is tremendous potential in India as a country which will evenutally get reflected by the rise of the Indian Stock Mkts over the coming 10-15 yrs. There will be gud times and bad, but over the long term u can make very gud returns to investing into India equities. If somebody really invests wisely with discipline, a lot of wealth (maybe enough to achieve Financial Freedom) can be built in a 10-15 yrs horizon.

kartik asked, HI! Sridhar . i am new in investment. i want to invest in stock market. can you suggest me which medium is good . like ICICIDIRECT.com , SHAREKHAN.com

Vetapalem Sridhar answers, Hi Kartik, each of the mediums comes with some gud and some bad aspects. U need to evaluate and see which one u feel more comfortable with. For some ICICI is a gr8 system due to convenience, but for others it maybe a medium which has higher costs and hence not suitable. Talk to the respective org. and find out about costs and the services and evalute based on wat it is u r looking from them.

dg asked, Hi all, I want to start SIP of Rs 5000/- per month for a long term perspective (to create fund for my child). So far I have sorted out below funds, please let me know if these are good funds. 1) Rel. Vision/DSP Top 100 2) Rel. Growth 3) HDFC Prudence 4) SBI Contra I want to avoid thematic funds as of now as they are effected by this crash. Pls let me know if these are good funds to invest. Also let me know if you have any other funds which will give better results.

Vetapalem Sridhar answers, Pick 2 funds to invest for ur child. The funds mentioned by u r gud. A balanced fund (Prudence) may not be the most ideal option. Also do take up adequate TERM Insruance Cover to protect ur family in case of an eventuality. Plz read thro the following link to know more about investing for ur child. Investing for children A Slide Show, click NEXT to read thro.

nm1 asked, Hi Sridhar, I am having a credit card by one bank. They are offering insurance for 20L for a premium of Rs. 2000p.a. Shall I accept it. On what terms? Pl. suggest.

Vetapalem Sridhar answers, Hi, wat insurance are they offering u? I think it would be better that u first evalute ur needs and arrive at the amount of insurance that u require. Once u do this then find out a suitable TERM Insurance policy to meet this need. It maybe wiser to pass this offer.

Dilli asked, Hello sridhar, Good afternoon. I started investing 14k PM through SIP for last two years. My current portfolio has the following funds, Fidelity Equity (20%) Franklin Bluechip (20%), SBI Magnum Contra (20%), Reliance Growth (20%), HDFC equity (20%). My age is 31 years with two kids (1 Month and 3 years age). Do you have any suggestions for me?

Vetapalem Sridhar answers, Hi, get urself an adequate TERM Insurance Cover. U hv a reasonably gud portf. Continue investing thro the above funds. Do not invest into any child specific investment plans. Build funds thro the above funds itself. Invest with discipline and dont worry about short to medium term volatility in the equity mkts. Over the long run u will definitely make reasonbaly gud returns.

TSK asked, Hi sridar, I have one starnge question for you. Please clarify, if you dont mind. I have taken an LIC Anand policy for 15L for 15yrs premium. When I chat with friends, i came to know that investing the same money in equities for the same period of time, we will get multiple times of return, isnt? which is better?

Vetapalem Sridhar answers, Ur friends r right. Over 15 yrs by investing in equities u will end up with multiple times the money that u would hv accumulated in the LIC Policy. But then u should take a separate TERM Cover to cover for the risk.

Aashna asked, Hello Sir, Can u help me which plan is better for insurance from LIC's Jeevan Saral, Jeevan Ananad or Jeevan Sathi?

Vetapalem Sridhar answers, If u r look at a Insurance Cover then from LIC, Anmol Jeevan and Amulya Jeevan would be better options. If u look at building funds for future, then Mutual Funds would be a better option.

ldadlsjflsdjf asked, when is end for this type of inflation growing and when will be the stability in the markets

Vetapalem Sridhar answers, Inflation is calculated keeping previous years prices as the base. Assuming prices remain at current levels, then we can assume that inflation figures coming out for the next 8-10 mths would be in double digits. Once the base effect increases we will again see inflation coming down. A lot of it is also dependent on OIL and the Fiscal Position in India.

namastetapan asked, HI, i am aged 30. I have a home loan of 18 lacs and the EMI is 16000 per month from HDFC Bank. I have also taken insurance policy of the same amount inorder to provide security in case of death. I have Life insurance of 3 lacs 2 endowement policy and one if regular income(every 4 year). For all the policy i pay a total of 25000 as premimum. I also have gone in for Pension fund from ICICI where i am investing 10000 per month.The plan is for 20 years. I have invested app 1 lac in stock market and my time horizon is 3 to 5 years. I had a SIP from Fidelity Tax plan for 2 years. Please suggest whats missing from my portfolio. I can invest 10000 per month.

Vetapalem Sridhar answers, A small Q: Why r u investing in a Pension plan for 20 yrs and in stock market for only 3 to 5 yrs? Be aware that in 3-5 yrs there is a risk in stock mkts, but with a 20 yrs horizon there is a greater probability that u will make better returns thro equities investments as compared to a Pension Plan. Increase ur Insruance Cover thro an additional TERM Insruance Plan. Stop the 2 endowment policies once u have the term plan in place. Start a SIP in 2-3 funds with a 20 yrs horizon to build wealth.

pksuri10 asked, Hi Sridhar:My net take home is around 1.25L apart from 18K as PF and I have loan of around 23L for which EMI is 21000. I have pension policies(10K) for me and my wife and 25K pa policy for my child. I have around 10L in cash/inv.My monthy expenses are around 25K. I save 50K pa in PPF Ideally how much should I save and where to invest seing the current scenarion in equity market. If I go for SIP, which MF should I opt for.

Vetapalem Sridhar answers, Hi, u r in a strong state financially. If u plan well there is no reason why u cannot achieve Financial Freedom in 12-15 yrs time. First get urself an adequate TERM Insurance cover. U r left with more 50K approx. Of this atlest 35 to 40K should be invested into equities with a 12-15 yrs horizon. This should be a step in direction to achieve Financial Freedom.

joy asked, what is the best investment option for a short term of 3-6 months. My objective is to preserve capital and beat inflation. I have a surplus of 5 lacs which I want to save for my down payment for my new home which I am planning in 3-6 months. pls suggest.

Vetapalem Sridhar answers, Best option is to invest in a LIQUID Fund of a Mutual Fund. U cannot beat inflation.

advise asked, Dear Sridhar,Hello!!!I have put my questions on this chat before also.I hope I will positively get reply today. I am 35 with good risk appetite for 5 years atleast. I have right now SIP of 8000/- and would like to increase upto 25000/-Rs,ie wish to add 17000/-Rs more per month (Preferably in equity diversified fund).I have SIP of 2000 in Reliance growth,1000 in ICICI Service industries and 5000 in Reliance RSF fund. Please advice regarding SIP. Waiting for your response this time. Thanks a lot Sridhar.

Vetapalem Sridhar answers, U do not have a gud portf in place. U need to build a portf of 5-6 funds to create a reasonably balanced portf. Would suggest that u add 2 large cap funds and replace ICICI services fund by a midcap fund.

Vetapalem Sridhar says, Thats all for now Friends...Will be back soon!

How I lost my sleep over an insurance policy

It's a bank whose tagline around the world glorifies its inability to sleep. And, after having been at the receiving end of Citibank's bordering on the manic enthusiasm to unfairly ferret out money from me, I am forced to admit the veracity of its advertising slogan.

When I signed on a relationship, tangentially, with Citibank three years ago, I didn't anticipate this at all. After all, I thought, it came with an impeccable global reputation.

Perhaps the fault lay with me. Despite being a Commerce graduate, despite having done a spot of CA articleship before becoming a journalist, I refused to invest in the stock markets although everyone around me made merry as the Sensex was preparing to take off. Probably it was in a moment of weakness that I let Citibank's Sunil meet me in the office about investing in a Birla Sun Life policy-cum-SIP (systematic investment plan).

Sunil was suave and sincere, two qualities that middle class folk like me unfortunately rate over other valid parameters. He had come fully prepared to paint a rosy picture of my financial future, if...

It was quite simple, really. Invest Rs 60,000 a year in the Birla Sun Life scheme under its Enhancer plan, and in 15 years at the then-existing Sensex levels (it was around 8,000 points then) the investment would make me a rich man indeed. If the Sensex went up to 10,000 points, it would be so much better, and if it went up to 12,000, man... You get the picture. Our money will be invested 70:30 in equity and debt, to balance out the risk factor.

Sunil had come with graphics, PowerPoint presentations, printouts, the works.

Looking back there were so many things I could have asked the suave Sunil who had by now started calling me on my cell phone, and visiting me at home to sell the plan. But I guess I was stupid, and raised a couple of points, what I thought then were critical.

I can't pay Rs 60,000 in lump-sum. And what happens if the market tanks? Very middle class questions, you will realise. And Citibank's Sunil had his answer ready.

The policy comes with a 3-year lock-in period, and we are free to walk away any time after that and we will be returned our investment plus 3 per cent interest, he said.

And we don't have to invest Rs 60,000 at one go. Citibank would provide us (yes, listening to the rosy picture, my wife too decided to invest separately) a gold credit card, it will pay Rs 60,000 to Birla Sun Life every year, which will be recovered from us @ Rs 5,000 a month each.

Seemed fair, and we bought into it. Soon after the Sensex started soaring, and we were happy that we had made at least one sensible financial decision/ investment, that someone else was investing our money wisely for us.

The first bummer came at the first renewal of the policy. Imagine our shock when we found Rs 120,000 (remember my wife too had bought one policy) as the amount due on our credit card statement at the end of the first year. I spoke to Citibank and told them their Sunil had told us we will be charged only Rs 5,000 per month and not asked to pay our premium at one go. And their answer was illuminating.

No, they said, that was applicable for only the first year; the second year on we are expected to pay Rs 60,000 per policy at one go. Frantically, I managed to trace Sunil, told him this went against his assurance to us, and somehow got Citibank to heed us. Ok, you can pay the amount over 12 EMIs, they agreed.

But, the next month on a penalty for this 'late payment' started appearing on our credit card statement, as a trickle initially, and no amount of remonstrating with call centre executives could shake it off. Today, after we have surrendered the card after paying off the legitimate dues, this amount is a bomb.

In the meantime part of our house burnt down, and among the things lost were our Birla Sun Life policy documents. And by the time we restored our home, got back documents like passports, PAN cards etc, it was into the third year of the policy. The Sensex had peaked in the meantime and was slowly returning to earth.

Shucks, we said, our investment must have done really well, there is something to look forward to after such gloom. We got duplicate policy documents done, got online access to our policy and decided to check out our NAV (net asset value).

Imagine our horror when we found that despite the markets booming, and despite the crash the Sensex was still higher than what it was when we got on, we had actually lost money! Even today, the Sensex is almost double what it was when we started on the Birla Sun Life policy.

We realised we had been sold a rotten lemon by Citibank, and decided to exit the policy at the end of three years. At least we will get our investment of Rs 360,000 (Rs 60,000 x 3 years x 2 of us) plus 3 per cent interest.

And once we terminate the policy, why do we need the Citibank gold card either! So we wrote to the bank that never sleeps asking them not to renew our card at the end of three years.

Now comes the best part. We got our money back from Birla Sun Life, but not Rs 180,000 plus 3 per cent each, but Rs 130,000 each. My wife and I had lost Rs 50,000 each, because we decided to trust a suave and sincere sounding Citibank executive. If we hadn't, and let our money sit idly in our bank accounts, we would have been better off!

As middle class people what can we do but shrug, be happy that we didn't lose the shirt on our back, and move on?

But Citibank is not one to give up easily, if it was it wouldn't have its tentacles all over the world would it?

I still get a monthly credit card statement from it even though the bank's customer care replied to my letter expressing sadness at our decision to part ways.

And, I still get collection agents ringing my doorbell, speaking on the intercom from the lobby asking me pay up the outstandings on my card. Once I asked them, out of curiosity, what was the amount pending according to Citibank since I had paid all my legitimate EMIs before terminating the card?

Rs 6,000, sir, he said. They sent you to my house to collect Rs 6,000, I asked the collection agent in wonder. Just Rs 6,000!

This month, out of curiosity I opened the latest credit card statement from Citibank which comes home despite me not possessing their credit card, and was shocked to find out that it demanded 'immediate payment' of Rs 137,454!

Truly, I can vouch for the fact that Citi not only never sleeps, it also ruins your sleep.

Health insurance policies YOU must have

How many health insurance policies should you have? Should you have mediclaim policies at all if you do not have any medical problems?

Which are the best health insurance policies available for you today in India? How can one claim money after hospitalisation if you do not have a cashless mediclaim facility?

How and where can you lodge complaints against your mediclaim insurance company if you have a problem?

In a chat with readers on September 9, Harsh Roongta answered these and many more queries related to your and your family's health insurance needs.

For those of you who missed the chat, here is the unedited transcript.

dharmesh asked, Is it possible to have health insurance above age of 60.

Harsh Roongta answers, Of Course it is possible. Several companies allow fresh policies to be taken after the age of 60 years also. You could look up a partial list of such companies by using this link. http://www.apnainsurance.com/health-insurance-india/quotes.html This is right now a partial list only. You can look up the Varishta Mediclaim policy and the Star health policy for senior citizens as examples of polices tailor made for senior citizens. But other compaies also have such policies.

mehrv asked, Hi, Mr. Harsh. Good Afternoon to you. How are you doing? I am 28 and want to buy a mediclaim for my family i.e Myself & wife (SA 3-4 lac). Should I go for Individual Mediclaim or Family Floater? Also, suggest me which company should i go for??

Harsh Roongta answers, If you can afford it you should go for Individual policies rather than floater policy. Another rule of the thumb is that if the policy covers people younger than 35 years then maybe a floater is ok otherwise it is always better to pay a slighly higher price and take individual policies.

abhay asked, I am already having health [both domicillary and hospitalisation benefit] insurance cover from my employer for self and family. DO I need to get the same done seperately from other insuarnce co.

Harsh Roongta answers, Not understood by what you mean by hospitalisation policy. If it covers you for reimbursing medical expnses incurred on illness or disease treated in a hospoital then you may not need aother policy. However if you may possibly look at changing jobs then you should look at having your own policy so that you can carry your no claim history with you when you leave your job.Some group schemes allow you to carry your claims history with you when you leave the group (i.e. you leave the job). In that case you do not need any additional insurance. Otherwise the short answer is if you can afford it go for your own policy as well over and above your employers policy.

mkmkmk asked, what are your views on critical illness cover policies? Thanks

Harsh Roongta answers, This is an absolute must which most people completely ignore. Given the stress and strain of modern lifestyles our chances of being afflicted by very serious diseases such as stroke, organ failure, multiple schelorosis, Cancer, bypass surgery, etc. has increased dramatically. If we survive these diseases our income generating ability is either nil or severally reduced. This is where the critical illness policy comes in. It pays off a lump sum frm which you can buy an annuity income. This is an absolute must even though it is very expensive.

satya asked, Hi Harsh, Many health insurance policies accept claim only if we admit in the hospital for min. 3 days. Is there any policy suitable for OPD like in developed countries?

Harsh Roongta answers, To teh best of our knowledge only ICICI [Get Quote] Lombard has a policy called Health Adavntage plus which allows this though hemmed in by various conditions. This information may not be fully complete and must be understood in that context.

hi asked, Hello Mr. Harsh. I am on look out for "economical" health policy for my aged parents 66 & 60 yrs. I had approached mediclaim, given the premium rates per year, we thought it is better to leave it to fate at this stage than go for health insurance. Are there any ideal companies out there, who covers insurance for the age but not so money minded. Thanks. Jeet.

Harsh Roongta answers, Please do not leave this to fate. You do have insurance companies who cover this. Please read the answer to a similiar question earlier in this chat.

Vishwas asked, Hello sir, my question is why don't we get the refund of premium incase of claim free period unlike normal insurance policies.

Harsh Roongta answers, It is your own money that comes back to you from Life Insurance companies. You pay the price in terms of very high premiums.At Apnainsurance we always advise our readers to segregate their insurance requirements from their investment requirements. We would advise you the same.

uuu asked, do you suggest how much one can have medicalim at the age of 30?

Harsh Roongta answers, It depends on your family's medical history, your economic profile and affordability. We would advise you to go for the maximum possible mediclaim kind of insurance as you can afford.

nidhi asked, can u get insurance even though u have heart problems

Harsh Roongta answers, Ifyou mean Life Insurance - yes that will be available by payment of extra health premium provided you are otherwise in good health now. For Mediclaim kind of policy this will be treated as a pre-existing disease and can get covered by most companies in the 4th or 5th year of the policy. Most companies will require a detailed health check up before they agree to provide an insurance cover for such a person.

PradeepKumar asked, Sir, I am 29 years old and my wife is 24 years old. My working company already provides me health insurance. But i wanted to take a policy from outside also. So can you suggest a policiy which can give me critical illness cover as well. I searched in the apna insurance website but i could not found one. I want both health insurance and critical illness policy

Harsh Roongta answers, I presume you are looking for a common policy that will provide Mediclaim kind of reimbursement as well as a lump sum on contracting (and surviving) a critical illness. Of the top of my head the only such policy that comes to my mind is Appollo DKV's Easy Health. However the Critcal illness cover on such a policy may not be adequate. I would suggest you look at separate polcies for mediclaim kind of polciy and for critical illness. The link for mediclaim kind of policies is given below: http://www.apnainsurance.com/health-insurance-india/quotes.html For standalone critcal illness policies the link is given here http://www.apnainsurance.com/health-insurance-india/critical-illness-quotes.html However on Critical Illness our advise is to take it as a rider on top of a term policy for the reasons mentioned in thsi article. http://www.apnainsurance.com/articles/health-insurance-india/Health-insurance-life-insurer-or-non-life-insurer.html. Trust this information was useful

uut asked, is there is any rating for health insurance policy

Harsh Roongta answers, Great question but so far unfortunately no ratings exist.

PUPPA asked, I HAVE TAKEN FAMILY FLOAT HEALTH POLICIES FROM icici LOMBARD FOR 4 PEOPLE.MY DAUGHTER BITTEN BY A DOG BUT I CLAIMED .THIS WAS REJECTED BY TTK TWICE.

Harsh Roongta answers, Whilst your individual polcy needs to be studied as a thumb rule unless she was hospitalised because of this dog bite you may not be eligible for any reimbursement. However if you belive this claim was incorrectly rejected you should complain to th Insurance Ombudsman at http://www.irdaindia.org/

bablookumar asked, Where we can complain regarding TPA and insurance firms?

Harsh Roongta answers, see the immeidately prior answer. Insurance ombudsman - details avialble on this link http://www.irdaindia.org/

Tushar asked, I am 49 yrs. old have no problem( Health). I do not have any insurance on health right now. Should I take ? if so then what would be right value? I can go upto Rs.1500/per year.

Harsh Roongta answers, You should definitely take a mediclaim kind of policy. See this link for getting quotes for the same: http://www.apnainsurance.com/health-insurance-india/quotes.html.

biswajitdas asked, hello, Mr. Harsh, i would like to know which one of the two would be better company for mediclaim - new india assurance company or reliance general insurance.

Harsh Roongta answers, There is a old chinese saying that says it does not matter whether the cat is black or white as long as it catches mice :-) :-). So decide based on your needs.

rnvs asked, I repeat my Q. Is there any health insurance where the cover grows each year in line with inflation. I am ready to pay increasing premium in line with that. As 1 lakh cover was enough in 2002 but we need now Rs 3 lakhs for the same kind of treatment.

Harsh Roongta answers, Please note that a mediclaim kind of policy is normally a yearly policy. Thus you can in any case increase the policy amount at the time of renewal.

uut asked, whether online mediclaim policy have less benefits?

Harsh Roongta answers, To the best of our knowledge there is no difference between the policy issued off line and online.

Vivek asked, Dear Mr. Harsh, This is my second que. Executive of Some cos. says even expenses of a small wound while visit to the doctor will be covered.Is it truely in practice?

Harsh Roongta answers, Very unlikley. Write in to us at CEO@apnainsurance.com with teh details offered by the company and we will be able to advise you more specifically.

risiranjan asked, What about Max new york life's Lifeline series ?? How u rate these products

Harsh Roongta answers, Max New york Life is a life insurance company. Whilst i am not completely aware of the specific plan details, in general life insurance companies offer Critical illness plans as well as hospitalisation cash (with surgery benefit plans). See this link for a discussion on health insuarnce from Life insuarnce companies versus from a general insurance company. http://www.apnainsurance.com/articles/health-insurance-india/Health-insurance-life-insurer-or-non-life-insurer.html.

Alok Gupta asked, Hi, I would like to take a term insurance of 50 L which one is best and I would like to pay it in one premium?

Harsh Roongta answers, Please see this link for a partial list of insurance companies (the list will be complete in a couple of weeks).

sunil sood asked, How do we tackle the reduced claims passed by compay instead of paying complete amount? Also, if i avail a claim today then does the rest of year cover remain?Also in next year will the premium for same cover increase / decrease.

Harsh Roongta answers, If you think that the claim has been wrongly reduced you can complain to the Insurance ombudsman (www.irdindia.org) . The cover continues to remain for the balance year and to the extent of balance amount. Renewal (whether on same or increased premium) is at the discretion of the Insurance company.

Tom asked, I want a medical insurance plus a investment plan....Plz guide.

Harsh Roongta answers, You cannot get a mediclaim kind of plan. However for other kind of Health Cover you can consider LIC's [Get Quote] Health Plus or Reliance's [Get Quote] Health and Wealth Plan. However please note that at Apnainsuarnce we recommend to our readers to segregate their insurance and investment requirements. In nay case niether of these plans can substitute for a mediclaim kind of plan.

sunil sood asked, Sir, continuing my earlier question, if RENEWAL is at their discretion, then they will never do it for same premium....Its cheating

Harsh Roongta answers, Sunil - Just to be fair to the insurance companies they also need to make money. Incraese in renewal premium if a cliam has been made is prevalent worldwide and not just in India. Consider that most Insurance companies also provide for a discount in case of no claim and this is the flip side to making a claim. The key issue is for the consumers to be aware of all ramification in an insurance policy and that is where comapnies like Apnainsurance witha well functioning research bureau play a vital role in spreading consumer awareness about insurance products.

rnvs asked, Citi bank credit card gives a health insurance, where they go on increasing their premium each year for same sum assured. Are they not violating any rules of insurance regulation in India?

Harsh Roongta answers, I am not aware of any regulation that prevents the insurance company from increasing the premium year on year (except a cap on the percentage increase which i am sure has been followed in this case). In any case if you send us the details on CEO@apnainsurance.com we acn provide you with a more detailed answer.

BIJAY asked, I HAVE MEDICLAIM FOR LAST 9 YRS.FOR SUM OF RS.2 LACS WITH ONE OF NATIONALISED CO.,SINCE NOW SO MANY PRIVATE INSURANCE CO.OFFERING ATTRACTIVE SCHEME ALSO. MY QUESTION IS THIS THAT IF I START ONE LAC SUM FROM PRIVETE INSURANCE AND REMAING 1 LACS I RENEW WITH OLD POLICY THAN IF ANY DIESEASE CLAIM OCURED THAN LOGIC OF PRE DEASESE APPLIED FOR CLAIM OF NEW 1 LAC POLICY OF PRIVETE INSURANCE?

Harsh Roongta answers, To the Best of our knowledge only Appollo DKV will take into account your claim free status with the PSU insurance company. Even here the pre-existing disease will be covered only in the 2nd year of the cover. Instead of what you are propsoing why dont you look at an additional cover with a private company rather tahn shif part of your cover as it might also lead to some logistical isues at the time of making a claim in either of the companies.

sunnysun asked, Dear sir i fully agree with you on being selective towards investment and insurance that is to say one must go ONLY for an insurance and forget the premium, instead of going for a endowmment policy. But i think these days the ULIP's are a better option. Your comments?

Harsh Roongta answers, Would like to repeat our recommendations. Take pure Insurance and put the premium saved in the mutual fund company of the brand that you prefer. It is likely to give you a better result than buying an ULIP apart from being more flexible and liquid.

asif asked, does health insurance cover the whole family

Harsh Roongta answers, Yes Asif if you pay for them. Also most insurance companies have definitions of who constitutes a family in relation to the main policy holder.

kishore asked, What is the point if --> Apnainsurance is niether a Insurance company nor an Insurance Broker/Agent. You should take professional advise before you take any desicion on buying insurance.

Harsh Roongta answers, I agree. Apnainsurance only provides unbiased expert advise. To keep our independence intact we have chosen to keep away from becoming a distributor or agent. This kind of forum is good for generalised advise. you should definitely seek specific customised advise for yourself before taking any investment or insurance buying desicions.

pappu asked, are smokers allowed to take mediclaim?

Harsh Roongta answers, Why not.

rakeesh asked, can we claim interest for the delayed settlement of claim.

Harsh Roongta answers, Unlikely unless you file a complaint with the consumer court and this is allowed by them.

MohitVijay asked, Sir Can you please tell me some best insurance plan? Because many companies have some hidden terms and conditions. Please tell me some best Plan in your Knowledge. Currently I have my health insurance from NIC-SBBJ.

Harsh Roongta answers, If you already have a no cliam track record stick with them as tht is more important perhaps then the other terms and conditions.

rakesh asked, Sir, 1. When we have more than one mediclaim policy, how to go about the claim procedure if we want to claim from more than one? 2. Normally when the hospital knows that the treatment is on insurance they increase the bill. Is it possible NOT disclose this to hospital and claim is submitted later?

Harsh Roongta answers, Off course you can pay the hospital first and seek reimbursement later. for the other question about the claim procedure in the caseof multiple polies please send it to ceo@apnainsurance.com and we will respond.

Harsh Roongta says, Ok Folks. My typing Fingers just gave way :-) :-). Please go through the chat transcripts as a question similiar to yours might already have been answered. If you still have any further question please logon to www.apnainsurance.com or write in to ceo@apnainsurance.com. Take good care of yourself till we chat again next fortnight.