Monday, May 22, 2017

Sovereign Gold Bonds, SGB, Have you missed buying? No worries.. you have chance to buy it better

*Buy SGB on secondary market through your trading account

Gold, the Godly metal of Indian household, are nowadays available in fancy formats to woo the prospering Indians. Since the economy watchdogs kept repeating the perils of buying the physical format, the rush for paper gold nd electronic gold has become a statement. While GoldBEES (GOLD ETF) is here around for sometime, Indian Government has taken a bold step by introducing Sovereign Gold Bonds, which is issued periodically with an attractive interest rate payout attached to it.

The first two tranches of the SGB offered 2.75% taxable interest on the investment beginning September 2015, the third issue onwards it remained stable at 2.5% half-yearly or as they call it semi-annually. But what if you have missed the issues due to lack f cash crunch, indecisiveness or merely being lazy, you still have a chance. Not only chance to buy, but also to decide which one of the 7 listed bonds currently available in the list. 

Plan your life-goals with the new age ULIP!

Yes, that is absolutely true. You can choose the SGB Bonds listed on BSE/NSE from your stock broker, even better if you have a trading account. The bonds which come with 8 years of maturity, can be bought on the trading app with few clicks, now at reduced time period (as the maturity date is pre-decided). So, if you buy Sep 2015 SGB, the maturity stands at 2023 which is about 5 years and few months, much less than 8 years maturity. And, guess what, if you stay invested till maturity you will be exempted from paying any capital gain tax. Moreover, you earn 2.75% interest on each unit based on the issue price. 

Looks like a win-win situation for the new investors, as because of volatile markets, Gold prices have come down and many of these SGB is trading below their offer prices. Hence buying below offer price means better interest income (better yield). I am not fond of investing in Gold and recommend investing a maximum of 8-10% of total portfolio, but for somebody who likes the divine metal, it makes a smart choice to invest in SGB through the secondary market.

5 ways they sell you wrong financial products

*LTCG in Gold is applicable as debt instruments
*Selling SGB in secondary market will attract as per tax laws
*Tax-exemption benefit is available for only holding until maturity
*The volume of SGB is not very high in secondary market, difficult to trade in large quantity
* 1 unit of SGB is equal to 1 gm of Gold
* The price of SGB OF different tranche varies in trades, though having same underlying asset

Saturday, May 13, 2017

5 ways they sell you wrong financial products

#Mis-selling is rampant in financial services and it spares none! Beaware and take decisions rationally. Here in this post we would focus on how they sell you wrong financial products and how can you fight it.

Financial literacy is important. Even more important is to know how to manage own finance. Be it loan, insurance, stocks, or simple savings account in banks, on a regular basis we need to deal with some decision making with our finances which defines our financial habits and saving behaviour. Many people are averse to discussing this important aspect "money" as they dislike numbers, or even hate to keep a check untill a major decision needs to be taken like tax saving, taking housing loan, or god forbid some medical emergency. The sales representatives of various forms like advisors, brokers or plain simple sales executives of the financial industry mints money during these emergencies without providing the right guidance for which they are paid for. Not only the less educated people, even financially aware people fall in the trap lured by bonus, rewards and false promises. Let us look at what are the common methods are used for misselling the products. Surprisingly in many cases the buyer is partially aware that product is not right for them. Let us look at 5 common ways of getting conned.

1. Buy an insurance to open new bank account - without taking the name, this is a common feature in India's largest public sector bank. Public sector bank account pass book is often used as a address proof. So, when somebody especially new in the city tries to open an account in the branch of this Bank, he/she is politely directed to the branch manager, where the applicant is almost forced to buy a life/health insurance in exchange of a savings account. It has been a personal experience in large city as well as smaller towns. Besides account opening this method is openly encouraged by seniors in the system for any work/favor a customer asks for (within the scope of banking services )

2. Hiding the hidden charges - This is also common, cold callers luring potential customers with half information. It is seen that despite probing multiple times, the executives dont give out details. And, the customer only comes to know once he start using the product, hence, trapped for short time or for ever. It is common for life insurance and credit cards.

3. Emotional black mailing by family and friends - Rampant in life insurance industry, driven by incentive model, the large number work force is part-time advisors, highly crowded by house-wives, retired professionals or somebody looking for an extra income. They often sell highly incentivised product for quick buck without bothering about the need of the person. Being family or friends, buyers often give-in to save the relationship or motivate them. This emotional buying cost them dearly. They mostly don't even go back and complain even unsatisfied. 

4. The vanish act - Selling a product takes the seller closer to his target. Spilling the beans about the risks involved or fee structure can take them one step back and a 10 pitches back. To avoid the hassle, they simply sell the product to never return to service their customer. 

5. Not explaining the complex products - They are in a hurry or simply they don't understand the product. Often, they sell complex products like ULIP plans, endowment plans even pension plans without taking out time to explain the details unless asked for.

Take accountability 

Though regulatory bodies like SEBI, IRDA doing their bit, it is important for every individual to basic research on the product you are buying. The basic Google search on the product can throw up a lot of information on the product. The aggregator sites on insurance, loans, deposits can further help with additional information and best rates. 

Ask the broker for written guidelines on product usage and costs involved , especially on insurance and credit cards. Do read the terms and conditions, however pathetically time consuming it may feel. It is your duty to do double check as much as it is the with the sellers. And don't buy the product if you find discrepancy in what the seller said and mentioned in the written document.

If any official/broker/advisor sell you wrong products, do reach out to consumer grievance cell.

Beware. Take charge!