Saving versus investing: Tradeoff on risk, returns

As investors we often use the terms savings and investments interchangeably — that is to use one's extra money for some gains. However, there is a fine line which differentiates savings from investments. Savings means when you put your money in relatively safer financial products that give you the freedom to access your money whenever you want, in some cases that may come at a small cost to you like penal interest when you break a bank fixed deposit (FD). A savings account in a bank, an FD, a recurring deposit, money market instruments, etc. are examples of savings. Some of these, to some limit, are even insured by a government agency, which gives these some built in safety net.

Another way to look at this is the returns you get from such safer financial products barely meet the rate of inflation. And if you are one of those investors who have to pay income tax on what you earn, on a post-tax basis your returns become even less. So in effect, at times, when you are just a saver, you are worse off on real terms.

So how does this work? Suppose your current monthly expense on food and other essentials is Rs 5,000. The annual rate of inflation is 10%. So after a year from now you need to spend Rs 5,500 on food and other essentials of exactly the same quantity and quality so that you maintain the same standard of life. Now when that Rs 5,000 is kept in a bank FD that pays you 10%, at the end of the year you get Rs 5,500, that includes Rs 500 as your FD interest income. So far so good. But now suppose you are in the 10% rate of income tax bracket. In this case you need to pay a tax of Rs 50 on the Rs 500 interest income. So at the net basis, even though you get an FD rate of l interest that is equal to the rate of inflation, at the net ba sis you are left with Rs 5,450. Compared to this your month y expenses have gone up to Rs 5,500. So there is a gap of Rs 50 here. Now to keep the same standard of living, you would need to spend an extra Rs 50.

The alternative is to cut down on your quality or quantity of food and other essentials that you buy so that your monthly expenses are reduced to Rs 5,450. In this case, either you spend extra Rs 50 from your other savings or capital, or you cut down on your food and other essentials, you are worse off in real terms.

Such situations do not usually pinch the average people when he/she is working unless the rate of inflation is very high. But the same could be a weighing factor for retired people who are living on their life's savings. Financial planners and advisers say people should try to invest, rather than save. This means when you invest, you take some risks, but you also stand a chance to beat the rate of inflation, and also taxes at the net level so that your real income does not go down.

Financial planners and advisers, however, also warn that when you invest, since you have a greater chance of earning more than when you save, you also carry higher risks. So the ideal situation should be to find out your risk taking ability, and then invest to beat the inflation. Unlike savings, when you invest, you put your money in mutual funds, stocks and other financial products which have higher risks compared to savings banks, FDs, etc. While investing, there is a trade-off between taking higher risks and the chance of getting higher returns.

The two other articles on this page go into greater detail in explaining the difference between savings and investments. Courtesy:TOI

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RBI: Banks should not charge for inoperative savings accounts without a minimum balance

In a recent development the RBI has asked banks not to implement penalties on consumers, who don’t have a minimum balance in their inoperative account.

The measure has come as a big relief for consumers as they were charged penalties by banks for their dormant bank accounts.

“It is advised that henceforth banks are not permitted to levy penal charges for non-maintenance of minimum balances in any inoperative account,” RBI said in a notification. Several banks, including the State Bank of India, do not levy any charge if the minimum balance is not maintained in an inoperative savings account.

In the first bi-monthly monetary policy statement for 2014-15 released last month, the RBI had said banks should also not take undue advantage of customer difficulty or inattention.

“Instead of levying penal charges for non maintenance of minimum balance in ordinary savings bank accounts, banks should limit services available on such accounts to those available to basic savings bank deposit accounts and restore the services when the balances improve to the minimum required level,” the report said.

Courtesy: PTI 

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Highest ever consumer confidence, says Nielsen India survey

In a recent online survey conducted by Nielsen on consumers it has been established that there has been an epic growth in consumer confidence since fourth quarter of 2012.

Despite the rising inflation and political delirium, the Indian consumers tend to remain positive regarding their purchasing or buying choices.

Industry experts believe that after a period of political uncertainty, the new government will bring in more stability in the market dynamics.

Piyush Mathur, President, Nielsen India says, “Consumers are reconciled to the negative economic conditions and despite the challenge of inflation, are hoping for a better year. ”   

Around 30,000 people across 60 countries responded to the survey. The key findings of the survey are as follows:

·   Consumer confidence increased in 60 percent of the markets measured by Nielsen, up from 43 per cent in the previous quarter (Q4 of 2013).

·      Around 74 percent of respondents in India are optimistic about job prospects over the next 12 months and the sentiment is up by 4 percentage points from the last quarter.

·     Around 54 percent of online respondents polled indicated that this is a good time to buy things they want and need.

·        The intention of online respondents investing spare cash in savings is up by six percentage points to 68 percent from last quarter.

·        Nearly half of those polled (49 percent) are looking to invest in new technology products and buy new clothes

·        More than 32 percent indicated they would invest in a retirement fund.

·        About 36 percent intend to invest in the stock market and in mutual funds.

In addition to these trends the consumer market will also become more positive if a stable government is elected to power. This scenario will lead to a rise in investment, better employment opportunities and more importantly an affirmative sentiment among the consumers.  

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Salads: An evergreen recipe to stay healthy

Combination of fresh greens, vegetables, fruits, fragrant herbs, beans, sprouts, tofu, cheese, rice, pasta, meats, fish or poultry, nuts and seeds — salads can be a perfect accompaniment or a complete meal in itself. Not only does a salad add visual excitement, it also adds flavour, crunch and lends character to the meal. 

They can be served chilled or warm with sweet, spicy or creamy dressings. The key to a good salad is at least three primary colours and simplicity in flavour.What makes a salad such an integral part of healthy eating is that you can eat as much of it without worrying about calories. Depending on the other ingredients and the kinds of dressing, content of proteins, fats and carbohydrates vary.

Dressings usually are a clever balance between tangy and sweet. Always choose cold pressed oils like extra-virgin olive or sesame and for a sharper taste mustard can be truly magical.

Creamy dressings can be made lighter with hung curd and low fat mayo, ketchup and mustard. The tang can be provided with natural acids like malt vinegar, rice vinegar or the robust balsamic vinegar, or simply orange juice and lime. Throw in some toasted seeds like sunflower, sesame, flax and nuts to add the crunch.

Low on calories and loaded with fibre, vitamins, minerals and antioxidants, salads can help beat the flab without your the need to portion control. They can be treated as free foods, with the exception of potatoes, sweet potatoes, and other starches which need to be limited.

Salads provide certain vitamins and antioxidants, such as vitamins B and C and folic acid, which get destroyed when heated. They also provide special disease fighting plant pigments called phytochemicals, which have antioxidant properties. These chemicals protect us from chronic degenerative diseases such as cancer, cardiovascular diseases, diabetes, cataract and ageing.

One of the major concerns of salads is their microbiological safety. Make sure that raw vegetables and fruits are thoroughly washed in salted cold water or potassium permanganate solution, if possible. Choose organic produce whenever possible.

 If you have a garden, grow as many fresh vegetables, fruits and herbs as you can, organically. Over-ripe or bruised vegetables and fruits can be a source of infection. Make sure that you do not leave cut fruits and vegetables for long durations. In general, avoid eating salads outside the house or in cheap eateries.

With endless varieties and novel combinations right from the good old Russian, coleslaw, tossed green and Caeser to the exotic ones like nicoise, Greek, salads are surely a recipe to good health.

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New India Assurance launches special health insurance scheme for families with girl children

New India Assurance's 'New India Asha Kiran' policy gives 50 per cent discount for girl children,

Government-run general insurer New India Assurance today launched a special health insurance scheme for families with girl children.

The scheme, 'New India Asha Kiran', has been launched on the eve of International Women's Day.

"We have launched this product, specially designed for families with only girl children, on the occasion of International Women's Day. This product is reasonably priced as discounts are offered for insuring girl children," Chairman and Managing Director of New India Assurance G Srinivasan told reporters here.

"We hope this product receives sound response from consumers," he added.

As per the company, this floater policy gives 50 per cent discount for the girl children. In case of accident to parents, the sum insured will be placed as fixed deposit in the name of the girl children.

"Though we don't have any concrete estimate of how many families are there with only girl children, we think around 20-30 per cent families may come under this segment," Srinivasan said.

The recently piloted product for domestic workers would soon be available for retail customers, he said.

The country's largest general insurer would come up with more innovative products in the coming months. "We will soon come up with such innovative products," Srinivasan said.

The state-run insurer posted a 36 per cent rise in net profit at Rs 701 crore in the third quarter ended December 31, 2013 from Rs 517 crore in the same period last year.

COURTESY: THE FINANCIAL EXPRESS (http://ow.ly/upnoT)

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No power subsidy from April 1 in Delhi

Prepare to pay your full-unsubsidized-electricity bill from April. Subsidy for consumption up to 400 units, announced by the Sheila Dikshit government and later increased by the Arvind Kejriwal government, will cease in the new financial year as there is no provision for it in the interim budget for 2014-15 approved by Parliament on Friday.

On December 31, 2013, Kejriwal had slashed electricity rates by 50% for consumption up to 400 units. The Congress government had also been subsidizing the first two slabs of 0-200 units and 201-400 units. The Delhi cabinet had approved the subsidy for the January-March quarter and it was to be reviewed as the government had ordered a CAG audit of power companies. 

The state government had also prepared an estimate of Rs 669 crore for power subsidy in the April-September period but, sources said, this did not figure in the 'vote on account' approved by Parliament. "If the subsidy estimate is not in the budget, it cannot be given. This is a call that will have to be taken by the next elected government," said a source. Courtesy: TNN

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Big relief on subsidised LPG cylinders

Now you can buy more than one cylinder per month

Post government decision to raise annual quota of subsidised cooking gas, the Cabinet allowed consumers to buy more than one subsidised cylinder in a month. The government had raised the annual cap on supply of cheaper LPG from nine to 12 cylinders of 14.2-kg each. Therefore it paved way for one cylinder in a month.

These developments lead to a public unrest as they generally require more than one cylinder in a month. The Oil Ministry cleared a proposal for consideration of the Cabinet suggesting that consumers should have the freedom to book a refill after 21 days, within the overall cap of 12 subsidised bottles in a year.

According to sources the Cabinet headed by the Prime Minister agreed with the proposal. The sources also added that raising the cap from nine to 12 cylinders will impose an additional financial burden of about Rs 3,801 crore per annum.

The government had initially capped the supply of subsidised LPG cylinders to six per household annually in September 2012 which was further raised to nine in January 2013. Consumers who exhaust their quota have to buy LPG at the market price of Rs 1,258 per cylinder whereas; subsidised LPG costs Rs 414 per cylinder in Delhi.

In addition to the above mentioned developments, the Cabinet Committee on Political Affairs (CCPA) also decided to scrap the decision of making Aadhaar cards mandatory to get subsidy on domestic LPG cylinders. However, the decision to delink Aadhaar cards from the subsidy has not been implemented due to certain clarifications that are awaited from the Cabinet. Courtesy:PTI

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Haryana Urban Development Authority (HUDA) fined for Rs 5 lakhs for not providing drinking water

The National Consumers Disputes Redressal Commission (NCDRC) has sent a strong message to civic authorities that often get into litigation for denying basic amenities to consumers by opposing their genuine complaints. Pulling up the Haryana Urban Development Authority (HUDA) to failing to provide clean drinking water to residents to MGA Hisar, the apex court has imposed a fine of five lakh rupees on the authority.

“Public authorities spent more money on contesting cases than the amount they might have to pay to the claimant. In addition thereto, precious time, effort and other resources go down the drain in vain,” said the NDRC bench presided over by VB Gupta.

The residents of MGA Hisar had complained to the district consumer forum that even though plots in the residential area had been opened to purchase by HUDA, there was no supply of clean drinking water and no provision for waste management. The authority argued that they were supplying water in the morning and evening through tube wells, and there was no need to provide cannal water.

“The officials of the petitioner authority in the present case are bent upon not providing water that is for human consumption to the allot tees of the respondent,” the bench said.

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