From rags to riches, in 18 minutes

As a financial planner I do spend a lot of time with 16 year olds working in call centers, media companies, banks and so on. When I am with them and discussing their problems, the one question that often comes to my mind is, “If these guys cannot make their monthly salary stretch one month, how will they be able to stretch their ‘retirement nest egg’ for 30 years?”

 

The normal problems are over running their credit limits, paying partly for their cell phone bills, delaying the rent cheques, and all this, despite being paid well.

 

I try telling them the virtues of saving, starting early, investing, life insurance, mutual fund and all that. At my age I guess I sound like their dad/mom giving them advice, so like dutiful children they hear me patiently and ignore me nicely. Whenever I run into them again, in the canteen or the corridor, they sheepishly tell me “Sir, I was just looking for you. Will you be there till 4.30 pm?”

 

At 5.30 pm when I am leaving, there is no sign. But by now I know their game, so I shrug it off!

 

But surprise, surprise one day a smart, young woman comes up to me and says “Can I invest in a mutual fund or an insurance policy, or preferably both?”

 

I flipped. I had been chasing a lot of these people and only a couple of them had come voluntarily to invest. So I had to probe.

 

Then came out the secret…and I liked it. And since she was a media person, I asked her to write the story in her own words.

 

So here it is…. in her own words.

“I was on my way to work and Murphy's law had struck in the form of a traffic jam. In an attempt to dissuade my cab driver from blaring Himmesh Reshamiya's latest assault on music, I began to chat with him. In the course of my discussion, I asked him if the taxi he drove was his or was he on a shift system like many others. His reply had me speechless. Not only was the taxi he was driving his own, but he also owned six other fiat taxis, one Toyota Qualis, which he hired out and was now debating between a truck and bus for his next acquisition. Wow!

 

I asked him where he got the money from... slightly nervous that I was riding with a possible hit man for Dawood. And his answer was even more surprising. He said "Madam, whenever you need to go some place you take a cab and go. When I have to go some place and I don't have a fare going in that direction, I park my taxi some place and hop into a bus.”

 

I listened as he spoke, “How much does it cost you to travel from your home to your office?” Rs 100 I said. "Well, Rs 200 for a round trip?”, he continued. “ Well let's say you travel through the month by taxi. How much would that cost you?" Some quick math later, I came up with the answer...Rs 6,000! I was spending Rs 6,000 a month to travel Then he said "The bus ticket costs you Rs 10 and say another Rs 20 to get from your home to the bus stop. That’s Rs 60 per day for a round trip. You are saving Rs 140 everyday. That's Rs 4,200 a month... nearly Rs 50,000 a year. If you invested that in something, you'd be able to buy your own car!”  What could I say? I now travel by bus. And am doing a Systematic Investment Plan in a mutual fund and paying a monthly premium in a Unit linked insurance plan."

 

What I could not do in 18 months, a taxi driver had done in 18 minutes.

Don't ignore the red flags in your budget

Well, it is not as though you cannot afford it but these unplanned expenditures do come up too often and need financial planning. 

 

Plan for the unplanned

With some fore-thought even the unplanned can be planned for. Most unplanned expenditure can be divided in three categories.

 

Monthly expenditure

The problem: Regular spending for which you do not really account for is monthly unplanned expenditure. Buy a cup of coffee an the go, spend some money on a taxi fare, buy tickets for a movie, have a hair cut, all these are small impulse purchase for which you pay out of the cash in your pocket. Explains financial planner Gaurav Mashruwala, “There are cash purchases for which you never take a bill and do not account in your budget.” Though small expenses they go unaccounted for and at the end of the month you are wondering where did you spend the extra Rs.2,000/-

The solution: Quite simply, create a separate category of expenditure for it in your budget and allot 2.5%-5% of your monthly budget to these out of pocket expenses. Do not give it a rigid accounting standard. Just like going on a very strict diet does not work, so also accounting for smaller cash expenses should have been flexible.

 

Annual Expenditure

The problem:  Your annual budget is not the monthly budget multiplies by 12. There are several expenses you have either every few months or once a year. These are not taken into account in a monthly budget. Car repair, dental expenses (which no medical insurance covers), Children’s picnics and field trips, gifts for marriages etc., medical expenses which you policy does not cover, donations ….the list can go on. These are expenses that are not really unexpected but still go unplanned because they are non-recurring in nature.

The Solution: Annual expenses absolutely need to be accounted in. Most of them are fairly large. Annual expenses, if divided over the year increase your monthly budget by 10-15%. So if your monthly expense estimation is Rs.30,000/- then you can add atleast another 3,000/- per month to arrive at a more realistic estimate. It is best to keep aside the money each month so as to not feel the crunch at a particularly heavy spending period for example during festivals or the tax paying months. Incase the money goes unspent at the end of the year you can always invest it or buy that Ipod you wanted or still better buy your wife a pair of diamond earrings and get a few months of peace.

 

Unexpected Expenditure

The problem: You’re on a roll. Things are humming at work. Your home has never looked so good. And then bang — it happens. Your maiden aunt who does not have an insurance policy has a bad fall and the burden of the hospital expenses which are a whooping Rs.85,000/- fall on your shoulders. All this when you have just brought the Plasma Television (worth Rs. 1.60 lacs) you have been having dreams about.

 

Sanjay Matai, says,” Medical Expenses, emergency travel, equipment breakdown are the most common unexpected expenses that bogs us down.” These are expenses that are huge and throw not only your budget but also your saving plan out of gear. Even the best planned amongst us are often at a loss about gaining back the ground lost due to unexpected expenditures.

 

The Solution: The solution to unexpected expenses is to create a buffer zone of liquidity. When one needs cash in a hurry then one tends to borrow money against our credit card or take a personal loan. Credit card companies are charging 40% per annum on carry forward amounts; it certainly increases your burden. Money is not always easily available with friends and family.

Financial advisors tell us to create an emergency fund. This fund should be untouchable. Keep some cash available at home as well as some in a saving account. Around 4-5 months worth of salary is a safe amount in this fund. It may mean some money lying idle but an emergency fund is a necessity. Such a fund will enable you to meet these expenses without breaking into your investments.  Not only will you cut down losses made by early cashing in on investment but also it is cash readily available.

If you died tonight, what will your family do?

“Does my family really need Rs. 2 crore on my death?”

 

When I suggested Rs. 2 crore as sum assured for a customer, this was his immediate reaction. Typical of us, I thought. When a sales person gives us a product/scheme our first thought goes to the ‘commission’ he or she makes. I keep wondering why.

 

Even our vegetable vendor has to assure us that the last rupee that we try to squeeze out of him is what he makes. It makes us feel happy. We completely forget that we need tomatoes, which we can afford, and which we like. Why should it be our concern how much he makes?

 

So, I set out to tell the client the following.

 

We buy life insurance to replace income lost due to the death of the breadwinner. The amount of life insurance you need depends on the ‘income stream’ you would want to continue for your family if anything happened to you.

Let's say you earn Rs.800,000 a year. This money provides your family's lifestyle and standard of living. As long as you are alive and well, your loved ones will remain financially secure.

 

What happens when the breadwinner (read ‘You’) are no longer able to earn this money? Bluntly, if you died tonight, what would your family do? How would they pay the home loan EMI, car loan, society charges, utilities, taxes and other bills? Where would the money come from for new clothes for your children, for college fees, or even for your spouse to enjoy an evening out with friends?

Very few people are comfortable answering this question. They live like they will never die and most will die like they never lived. When you have lived a good life, and have a family that you ‘love’ your answers have to be far, far better than these…

 

What you say	What you really mean
My family will get by	You do not know
My family could cut back expenses	You do not know how
My family could sell the house or other assets	You have only one house which is your only asset
I don't know	Aha, the truth!

 

That's why we buy life insurance. So that the answer to that question is, without hesitation or doubt: "They'll be provided for."

How much life insurance do you need? The chart below shows the annual income the insurance proceeds can generate based on the following assumptions: The beginning amount will earn a 5% return after taxes, with principal and interest depleted in 20 years by withdrawing an amount equal to 8% of the original principal every year. Note that different assumptions will generate different results.

Life Insurance Amount	Annual Income It Will Generate
Rs. 1,000,000	Rs. 80,000
Rs. 2,000,000	Rs. 1,60,000
Rs. 4,000,000	Rs. 3,20,000
Rs. 5,000,000	Rs. 4,00,000
Rs. 10,000,000	Rs. 8,00,000
Rs. 20,000,000	Rs. 16,00,000

Example: A life insurance death benefit of Rs.10,000,000 would provide your family with an income stream of Rs.800,000 a year for a 20-year period, after which the entire amount would be depleted. So, if you earn Rs.800,000 a year, you may wish to consider Rs.10,000,000 of life insurance.

How expensive is that? That depends on a number of factors, including your age, health and personal habits (such as whether or not you smoke), and type of insurance.

You have several insurance options, depending on need, budget and situation:

• Term life insurance provides pure death benefit protection, generally for the smallest cost. It is ideal for the person who needs a high amount of coverage but cannot afford endowment for now.  
• Endowment policies can provide lifelong protection for a fixed, level premium. Additionally, it combines death benefit with cash value accumulation. However, the initial cost is generally higher than for a comparable amount of term life insurance.

You can have both!

Let me tell you what my customer did. Without worrying too much about the premium he took a term insurance policy of Rs. 2 crore about 4 years back from the cheapest source. Every year he has been adding Rs. 5 lakhs of endowment policies – a nice way to keep up with the inflation, and the fact that the booming economy has taken his income from earth to stratosphere he is more inclined to save.  

 

Contrary to his first reaction his wife and children wouldn't be rich. However, they would be able to continue to enjoy the financial security and standard of living he has worked so hard to build for them.

Life insurance can replace income lost due to the death of an income earner. It is a cost-effective way to make sure your dreams are completed if you die and are unable to complete them yourself. You may not need Rs 2 crore of life insurance. You may need less. You may need more. The important thing is to make sure you have the amount that's right for you.

 

Remember your dreams are joint dreams. Do not leave your spouse to fend for herself. Give her the confidence to tell the kids, “Papa has become a star, but nothing will change for us”. Give conviction to her voice. Let the 6^th birthday be at the same hotel as the 5^th birthday. Let the interior decorator be told, yes the plans remain the same. Let the kids dream of an Ivy League education. Let the father, father-in-law, and brother-in-law not decide where your wife should stay.

 

Let not the kids who lost one parent to fate lose the other parent to a full time job. Simple, insurance is not because you will die. It is because they will live. We in the financial planning industry cannot protect lives. We try to protect lifestyles. The odds favor us over doctors who try to protect lives.

 

10 commandments of life insurance

Insurance has generally been bought or sold not for what it is intended – the risk cover. But it is the ‘tax saving’ which has been the primary reason for the purchase of an insurance policy.

Hence most of us are saddled with policies which
a) neither serve the purpose of insurance as the sum assured is grossly inadequate as compared to the earning potential of the insured,
b) nor do they give adequate returns to be considered as a viable investment option.

It may be useful to keep the following 10 commandments in mind when buying an insurance policy, to be able to make an informed decision.

1.  Thou shall buy insurance for risk cover
The purpose of an insurance policy is to protect the family members of a person from any financial difficulties in case of his/her untimely death. Such unfortunate eventuality to a breadwinner in the house can put the other family members in serious financial difficulty. Insurance seeks to provide financial help in such times.  

This, therefore, should be the main objective for buying an insurance policy. Any other benefit such as tax advantge etc. should be of secondary consideration.

2.  Thou shall not consider insurance as an investment option
The primary objective of the insurance policy is to provide a risk cover. Hence a part of the premium paid is first appropriated towards this purpose. The balance amount is invested in financial instruments, which are usually very safe ones. Also, the commissions and charges are appreciably higher than other investment options.

Consequently the returns from an insurance policy are nothing much to talk about and hence it cannot be considered as a viable investment option vis-à-vis other competing financial products.

3.  Thou shall preferably buy only a term policy
Term policies are pure insurance products with no investment add-on. They are the cheapest and the simplest of the variety. But here cheapest does not mean that they are in any way inferior to other costlier insurance policies. As far as the basic objective of risk cover is concerned, there is no difference. And usually for most of us this term policy should be more than sufficient.

In such policies the premium paid is foregone at the expiry of the policy and one does not get anything if one survives the policy. This fact that one does not get anything back is perhaps the most important psychological factor for the low popularity of a term policy.

4.  Thou shall preferably a savings-linked insurance policies
In contrast to the term policies are the savings-linked insurance policies such as money-back, endowment and whole-life. These policies provide the risk cover and also give back some returns to the insured at the end of the policy, in case nothing happens to him/her in the interim. The premiums of such policies are much higher compared to the term policies. This assurance of getting some returns at the end of the policy term is why most people opt for such savings-linked policies vis-à-vis term policies.

They however fail to appreciate the fact that a part of the premium is anyway earmarked to provide for risk cover. Then a part of the premium goes towards paying commissions, administrative and other charges. And it is only the balance amount, which gets invested to provide some returns to the insured at the end of the policy. These returns are generally very low as the investment is made in risk-free low-return options.

Therefore, a person may be better-off if he were to buy the cheaper term policy and invest the balance amount, which would have otherwise gone towards high premiums of saving-linked policies, in say MFs. This way he would be risk-covered and also generate higher returns.

5.  Thou shall be wary of the hype
From their business perspective the insurance companies and the agents may be more keen to sell saving-linked policies vis-a-vis the term policies, as the premiums and commissions are much higher. And hence the advertisements and promotions may speak more about such policies.

Therefore, it is for the insured to keep his interests & needs in mind and not be carried away by persuasive agents and publicity.

6.  Thou shall buy ULIP only if your horizon is long term
Unit Linked Insurance Policies (ULIPs) offer an alternative to traditional policies where the returns can be market-linked. Further, one can also choose one’s own investment objective amongst equity, debt and balanced.

However, the charges in the initial years are quite high. Thus the actual benefit of ULIP starts accruing only if one has a long-term investment horizon. The minimum lock-in period of 3-5 years may look attractive, but is too short a period to fully compensate for the high charges in the first 2-3 years. ULIP can prove to be a good investment option (together with insurance) if one keeps paying premium for at least for 10-12 years.

7.  Thou shall not insure yourself if you a lone bird
Insurance is for the benefit of the dependents. Thus, if you are single with no one being financially dependent on you, it may not really be necessary for you to buy an insurance policy.

8.  Thou shall not insure if you are wealthy
You are person of abundant means. You have lots of wealth – properties, bank balances, investments, etc. In your absence, this may be more than sufficient for your family and dependents to continue living comfortably. A few lakhs of rupees from an insurance company may not make any material difference to their future financial well-being.

If such were the case, then you may not need any insurance.

9.  Thou shall not insure the child
Any unfortunate eventuality involving a child is no doubt emotionally very traumatic. But it usually does not hurt the family financially. Whereas, insurance cover is for mitigating the financial difficulty, that may arise with the death of the insured.

Hence, taking a policy for a child is meaningless. It is an unnecessary expense.

10.  Thou shall read the fine print carefully
As they say ‘the devil is in the details’. Therefore, understand the features of the policy, the charges etc., before you buy an insurance policy.

Further, most insurance companies offer a 15-day look-in period after you have taken the policy. Go over the terms and conditions in the policy very carefully. And if you feel that it does not meet your requirement, you can cancel the policy. You may have to pay some administrative charges, but this would be much better than holding on to a bad policy for years to come.

Insurance is a long-term contract usually spanning over decades. Also, these contracts have very little flexibility. A wrong insurance product can financially hurt for a very very long time, unlike many other financial products. Therefore, one should be extra careful and vigilant when deciding on how much to insure, how long to insure, which policy to buy, etc. Once a person is clear about the objective, choosing the right policy at the right price is just a matter of detail.

 

Sidin Sunny Vadukut: An amateur stock-trader's diary

May 2^nd, 2003

Dear Diary,

I have just returned from the office after a long and exhausting day. I had to sit through several senseless marketing meetings and one sales forecasting workshop. Honestly, I am getting a little sick of this company. I would have quit it long ago if it were not for the fact that the salary is good, the canteen is awesome and I know the combination to the petty cash safe.

Mr Ramanathan next door made Rs 100,000 rupees on the stock market yesterday. He bought his wife a new saree and a new fridge. My wife seems to know. She has not spoken to me all evening.

August 21^st, 2003

Dear Diary,

Ramanathan just bought a new car. Apparently he had invested in Infosys [Get Quote]. The wife is now spending all day in Ramanathan's house. This is bothering me. The least she can do is tell Mrs. Ramanathan (Miss Versova 1978) to spend equal time in our house.

Maybe I will also do some stock market. Or something.

March 3^rd, 2004

Dear Diary,

I made Rs 600 profit in one day itself! And I don't even know what I did! I sold some shares of Reliance [Get Quote]. Or maybe I bought it. I have no idea. But I made 600 rupees! Yahoo! I am taking out the family for a movie tonight.

p.s. Saw Mr Ramanathan standing outside the Oberoi while driving back home. The wife was not impressed. I need to beat that man. I will put another Rs 10,000 in the market tomorrow. I will buy something. Or maybe sell it. I don't know. I will do something. Reliance maybe.

December 21^st, 2004

Dear Diary,

I have not traded in six months. I have no idea what I am doing. So far I have made an overall profit of three rupees in the market. Also I have a few Reliance shares which I bought in July.

Should I trade? I don't know. I know nothing about the market.

Ramanathan bought a new car. Accord. Bastard.

June 21^st, 2005

DEAR DIARY!!!

I love the Ambanis! I love you! I love the Market! I made Rs 100,000 in profit today! I am rich! Now I will show my wife what I can do. I will go online and buy her a surprise gift. Maybe a cool new ipod. Or even a cellphone!

Woohoo! I am going to trade all day. Tomorrow I am also going to get cable at home with CNBC! Everyone who does stocks watches CNBC!

p.s. I was almost going to buy an ipod when suddenly I decided to buy 1000 Cipla. Wife has not been informed.

August 20^th, 2005

Dear Diary,

There was a big problem in the office today. The complete petty cash vanished without a trace. Nobody knows what happened. (Hee hee.) We immediately had an inquiry team setup. I will be leading the team.

Bought 1000 Cipla. And a little bit of Reliance. My new Demat account is working awesome on my new computer and broadband connection at home.

September 8^th, 2005

Dear Diary,

The Sensex crossed 8000! The market is booming! Everyone on CNBC is talking about the India story! Growth of more than 8% in GDP! What an awesome time to be in India.

p.s. I lost Rs 300,000 today. Petty cash might get stolen again next month.

January 1^st, 2006

Dear Diary,

Today I made the smartest investment move ever. I withdrew full amount on my credit card and put it into my Demat account. I have a feeling that the market is going to boom today! I will pay my credit card bill in one or two days at the latest.

I saw CNBC all day today and read Economic Times cover to cover.

March 3^rd, 2006

Dear Diary,

The people from the credit card company met me today. We had a conversation involving my mother. I am very upset. I will never again invest in "Uday Shankar Transport and Software Company Pvt. Ltd."

IT is supposed to be booming, no?

I may have some problems with finances. But thankfully I have been doing a lot of overtime in the office and should be able to sell all the equipment from the Server Room next week.

March 11^th, 2006

Dear Diary,

Our company is being closed for police investigations. Someone stole everything from the server room.

I will be paying off my credit card bill today.

p.s. I was being such an idiot. Why would I want to waste that cash on bills when Udayan Mukherjee said that the market is buoyant and that positive signals are coming from western markets on the back of good numbers in the US markets? I can easily pay off the bills next week.

March 14^th, 2006

Dear Diary,

No power today. I used the BEST bill money to buy Reliance. The wife is upset. She does not understand that the positive signals from the US housing market means that the Sensex is going to boom soon.

March 15^th, 2006

Dear Diary,

Telephone got cut today. Wife has gone to native place with the children. I was very upset before I realised that I can use the savings from groceries, food and fees to buy into three new IPOs.

p.s. Warren Buffet wallpaper on desktop for inspiration.

May 22, 2006,

Dear Diary,

Market crashed 1100 points. Oh shit.

On the bright side I have discovered how much more efficient it is to buy fruits and vegetables every day instead of depending on the fridge. I don't think I need that any more.

June 2, 2006,

Dear Diary,

Wife and children came back today. And left immediately when they realised that I had sacrificed, in my fervour for participation in the capital markets, our furniture and kitchen appliances. She has moved to Mr. Ramanathan's place.

I think I will stay off the market for a while till things improve.

p.s. L&T is rocking. Sigh.

September 26^th, 2007

Dear Diary,

Mr. Ambani is worth 50 billion rupees. I know that if I got one more chance at the markets I would make a few millions myself.

Wife and children are back home. Things are going fine.

Maybe if I buy just a little ICICI [Get Quote]. Just a little. Promise.

November 11^th, 2007

Dear Diary,

I've been thinking a lot of how much my wife loves me these last few days. Does she even remember the romance we used to share? The evenings we spent holding hands in that caf�? That diamond ring I gave her at our engagement?

I hope not.

January 21^st, 2008

Dear Diary,

Sub-prime something. Oh shit.

 

One Big 'Secret' You Must Know To Make Money Online!

So you want a profitable website. You do a search on Google and find 56,293,580 websites that will tell you how to go about creating your business. Everyone promises the moon. You start clicking on links and what do you find?

Everyone wants to sell you something!

Their special ebook that will tell you all the answers. Or, if you buy their software, you will be making money tomorrow. Join their membership website for X amount of dollars per month and you will have all the information you need. RIGHT!

I know how you feel, I searched and searched for that one person or program that would actually help me and not take all my money in the process. I tried to go it alone and built many websites. All of them were failures. So I searched again for the help I needed. I never found the website I was looking for. But I did figure out how to do it.

What did I do?

First I started examining all the websites that were on Google's first search results page. I studied and disected these websites. I tried to look for those few things that all these websites had in common.

Then, I downloaded every free ebook I could get my hands on. The writers of these ebooks were trying to sell me the next big trick but each one had some good, helpful information.

Next I joined 27 newsletters and ezines and spend months reading. Most of these newsletters tried to sell me things too, but they couldn't just send out ads, everyone would quit their newsletter. So in order for these ezine owners to keep their readers, they had to give some valuable free information. I took notes and read some more.

I eventually had an entire notebook full of information. That was when I thought I would try out all this new information so I built a website. I used all the tricks I had learned and in about a month, I made $590.45. Yes, it's true, you can build a profitable website without spending all your savings.

I realize $590.45 doesn't make me a millionaire but it's a good start. I have since built three more websites, all of them bringing in more and more money each month. $590.45 was just a drop in the bucket but you have to start somewhere.

Was it hard? No, not really. I do have to warn you though. It does take work. You don't rent some web space and fill it full of links and make money. It takes time and effort.

If you are still reading this article, there is a good chance that you are one of the few who will succeed. Most people would have stopped reading when I mentioned I was taking notes.

There is one big secret to building a money making website. It really isn't even a secret, it's just the answer you must have or you will never get anywhere. You have to write content. No one will visit your website if you don't have any information for them to read.

Most web surfers don't research topics on the internet looking for things to buy. The purchase, is a by product of a good recommendation from a trusted webmaster. You will have to create your information web site and offer compelling content. Once the visitor believes you actually know what you are talking about, they will probably decide to use your recommendation and make a purchase from your links.

If you can read and write, you can have a profitable website. If you are looking for a get rich quick scheme, you are on the wrong side of the table. The only people who get rich from those schemes are the ones selling them. By the way, what did they do to get you to look at their product? That's right! Even scammers have to write content.

If you are willing to do the time and put in some effort, you can make money. That's the only way to make money online. Don't let anyone tell you different, all they want is your money.

"There are 2 places to invest your money - The Indian stock markets and gold

Having said that, let me explain why.

Buying the basket of stocks that make up the BSE-30 Index in 1980 would have given you a return of 136 times your investment. If you were to average out this return over the 27 year period, that works out to 20% per year every year for these past 27 years.

There will be continued economic growth in India over the next decade. This means that Indian companies will continue to grow sales and profits and - because share prices are a function of these growing profits - an investment in shares of Indian companies should generally be a pretty profitable investment.
That is why I like the Indian stock markets - even at a 20,000 Index level.
There will be bad years and scary quarters but a disciplined investor can hope to earn reasonable returns in the long term.

And you can make this return in a variety of ways, each of which is based on disciplined thinking and sharing our frank views with you:

1)	do your own stock selection: be a subscriber to www.equitymaster.com
2)	ask our financial consultant to help build a portfolio of mutual funds for you: be a client of www.personalfn.com
3)	invest in the Quantum Long Term Equity Fund, a vehicle for you to continue ploughing your savings into - regularly: reach out to us at www.QuantumAMC.com

But there is another great investment opportunity staring us right in the face: gold.
That's right. Buy a lot of gold. Gold is now at around USD 900 per ounce. It was trading at USD 37 in 1971. Gold then shot up to USD 850 in 1980, collapsed all the way to USD 260 in 1999, and has only now crossed the previous peak of USD 850 that it established 27 years ago.

I own gold. Now, I am ready to buy some more gold. In the Quantum Gold Fund (an open ended ETF). Just as you should.
Why?
Because many of the central banks of the world have lost sight of what they are supposed to do.

As a student of economics, we were taught that the role of a central bank was to ensure that it maintained the value of the paper currency issued. It did this by ensuring that every time it printed paper, it had a fixed ratio of gold lying in its vaults. But, over the past few decades - and increasingly over the past few years - the central banks have been printing more paper and not worrying about the gold they have as a reserve for their paper currencies. And paper currencies are, in the end, paper. History has shown us that governments have fallen and paper currencies have died with them. Gold has been a currency - a medium of exchange - for centuries. No paper currency has existed for that long. Not the US Dollar. Not the Sterling Pound. Not the Indian Rupee. As governments have printed larger amounts of paper currencies, these currencies have lost value against real assets like property. Or even a samosa.

Of Samosas and Gold...
In 1980, it probably cost you Rs 1 to buy one samosa. Today, it costs you Rs 10. Has the samosa become 10 times larger over the past 27 years? Not at all. The fact is that Indian rupee has lost value over the past 27 years so the samosa wallah wants more of your rupee to sell you the same samosa. He wants 10 times the rupees for that same samosa. Or look at the price of your house. In 1980, it cost Rs 200 to buy one square foot of property in Cuffe Parade, Bombay. Today, it costs Rs. 40,000 per square foot. That is an increase of 200 times! Money, obviously, buys less these days. Paper money has lost value. That is what is called "inflation".

Now look at gold. It was USD 850 briefly in 1980 - when samosa was available at Rs. 1 and land in Bombay at Rs 200. Today it is at USD 900. Interesting, isn't it? The one currency that governments cannot print at will and which has, across civilisations, been a "store of value" - a hedge against inflation in the language of economics - has not really seen any increase in price over the past 27 years.

If the price of gold was to move in line with the price of samosas, gold should be trading at USD 9,000 per ounce or over Rs 1 lakh for every 10 grammes. But gold can be bought for around Rs. 11,000 for every 10 grammes today. If gold was to have moved along with the price of Bombay property, gold should be trading at Rs. 20 lakhs for every 10 grammes.

That may sound absurd. But sometimes the most attractive investment opportunities are those that sound absurd. Like Infosys at its IPO in 1992 or Zee at its IPO in 1993. You could have multiplied your money by over 1,000 times in each of them.

Don't get me wrong - not every absurd idea is a good investment.
And not every investment will increase in value by 10 times let alone by 1,000 times. But, sometimes, simple logic and harsh facts should allow us to make simple investment decisions. Do I expect the price of a samosa to fall to Rs. 1 - because that price for a samosa, justifies the fact that the price of gold has not moved in 27 years? Do I expect the price of Bombay property to fall to Rs. 200 per square foot? Or do I expect gold to start climbing and get closer to the equivalent price of a samosa and the price of Bombay property?

Inflation and uncertainty require insurance. Gold is an insurance against absurd government policies - worldwide. I own gold. And I am buying more of it at the NFO of the Quantum Gold Fund. To diversify my portfolio. To spread my risks. You should consider investing in the Quantum Gold Fund (an open-ended ETF). Unless you believe that your next samosa will cost you Rs. 1.

 

Make Money Online By Selling Information

The Internet has been dubbed The Information Superhighway and it certainly lives up to the name. Everyday, millions of people use the Internet and the World Wide Web to seek out information; whether it's reviews of a new dishwasher, cheapest deals on package holidays, what's on at the local theatre or tracking down old friends. Chances are, if you're looking for information, it can be found somewhere online.

Whilst the Internet is undoubtedly a rich sea of data, not all of it is useful information, relevant to the consumer. This, combined with the desire for instant gratification that the Internet instils in its users, builds up a demand for the right information - right NOW!

Despite the hype about making money quickly, easily, out of thin air or the dot com boom there is money to be made on the Internet. It's a simplification of the process, but if you're someone with the capability to meet some of this demand for information then you have an opportunity to make money online. As a supplier of information, you have the ability to help make the Internet more useful for the consumer by delivering what they want, when they want it. You can, of course, charge a fee for providing this convenience.

Whether or not you actually make a sale is another matter. Just like most other purchasing decisions, if the consumer considers the value of your offer as being greater than its cost (or the pain of not purchasing) then you're likely to make a sale. Get the balance wrong and they'll likely move on.

Whilst a lot of information is freely available online, it's widely accepted that the age of the commercial Internet has arrived. Some may argue that there shouldn't be any cost associated with information and whilst you may be able to find the same information at no cost somewhere on the Internet, often the time saved and the convenience of getting exactly what you want is considered worthy of the expense. As an example, you could try and borrow someone's copy of a newspaper or you could pay to access the latest breaking news from the comfort of your own desk. Unsurprisingly, a large number of people chose the latter when the New York Times switched to a subscription model back in 2003.

There's a great demand for information online. If you're one of the people who can supply to this demand, especially if the information is specialist or niche, then there's little to stop you from charging for your services. With a suitable marketplace to pitch your offer, there's nothing to hold you back from trying is there?

 

 

Easier Way To Make Money Online!

There have never been more people online with the desire to earn money then today.

The big questions have been the same since the start and will not change in the future.

How to make money online.

The answers have been as many as the starts in the sky, but the biggest problem is that most of them never work for more then a few persons.

How can you make money online?

Some of the ways to make money online (according to those who try to sign you up) are,

• Autosurf (let your browser get lost by itself online)
• Read email (add a couple of more emails to the daily spam and get a couple of cents each)
• Chain letters (send $10 to these 3 and put yourself on the list …)
• Paid Surveys (this actually works, when you get any surveys, and you live in a place where you are allowed to take it)
• Ladders of all kinds. (Most often works like a chain letter). The only guaranteed winners are the first ones to sign up.
• Safe lists. Mail anything to millions and they will buy?

The list can be made a mile long.

Are there a better way!

The proven way of earning money works. Get a domain name, build a web site, join affiliate programs and start catching visitors to your site and enter them into an auto responder series.

Sounds good doesn’t it?

But the problem is that you do not have a clue about registering a domain name, building a website, writing ad copy, finding products, using an auto responder, getting the traffic needed and so on.

So what should you do?

How about letting somebody else do the work for you!

Would you like to test-drive a 3-step money making formula today and get your very own fully automated e-commerce website setup with all the bells and whistles that is ready to accept online payments and make money online for you from all around the world, 24-7-365?

This is the next generation of online moneymaking and it will make it possible for anyone without prior knowledge of internet and online marketing to actually make money online.

A completely new breed of business opportunities have emerged the last couple of years. Optimized websites with affiliate programs built in. Pre written auto responder series with your affiliate id’s automatically inserted. Pre planned ways of getting traffic and behind it all supports, setup and everything else you need.

So why not start earning money online today?

Your 7 biggest financial decisions

How you manage a handful of major life choices can make or break your financial future.

A lot of people spend a whole lot of time worrying about the small stuff: a little extra yield on their savings, a few dollars less in mortgage payments, slightly higher returns, slightly lower commissions.

They pore over Internal Revenue Service publications and fat tax guides searching for ways to save a few hundred bucks on taxes. They read personal-finance magazines, buy books and scour the Web looking for tips.

Fine. It pays off. But does managing your money have to be this complicated?

Actually, no. In fact, if you spend all your time focusing on fractions of a point, you may lose sight of the big picture.

The blunt truth is that if you make the right choices early in life on a handful of major decisions, you'll never have to worry about financial security.

1. How you handle risk

Risk affects all aspects of your life. Would you rather work for a rock-solid company with a strong benefits package, join a smaller startup with great stock options or start your own business? The potential payoffs escalate as you take on more risk, and so do the possibilities for disaster. The same is true for investments.

Make sure your risks are age-appropriate. If you're young, you can dust yourself off and start again. For people over 40, the ability to absorb losses diminishes rapidly as retirement nears.

Do your homework. Risk without research is just another form of gambling. Before jumping into any kind of investment, it's vital to do the due diligence required to accurately evaluate risk, the potential for gains and the potential for losses. Don't make yourself a target for unethical advisers or garden-variety con artists.

Example: The long-term rate of return for big-company stocks has averaged 10% yearly over the past 70 years. Say Joe invests $2,000 a year in those stocks (via a low-cost S&P 500 Index fund in a tax-deferred individual retirement account) while Dexter buys supersafe Treasury bonds paying an average of 5%. They start at age 25 and continue until age 65. Though the rate of return is double, the accumulation is quadruple: At age 65, Joe has $1,006,513, while Dexter has just $248,561. Use our Savings Calculator to play with your own figures.

 

2. Your choice of career

There are worse things than a fat paycheck. Your options depend largely on your education and skills, but some fields will always pay better than others. Getting the training needed for a better job could be the best investment you make. Ask yourself what the long-term salary expectations are for your career field and consider how you could make yourself more valuable. (See "10 surprising six-figure jobs" and "The 10 best-paying blue-collar jobs.")

Does your pay depend on distortions in the market? A lot of semiskilled but highly paid union workers now know the sting of competition here and overseas. Blue-collar incomes have stagnated over the past 20 years as manufacturers found cheaper workers abroad. So, consider what your skills would be worth in a truly open, worldwide market.

Will your skills retain their value? Knowledge is the key to survival in the years ahead, whether you're a carpenter or a computer programmer. The pace of innovation is staggering, and those who fail to keep up will find their personal stock in a nose dive. Nothing has a more disastrous impact on financial security than a lengthy period of unemployment.

Example: Joe's salary averages $60,000 over a career of 40 years; Dexter's averages $30,000 per year. In addition to their IRA accounts, they each put 10% of their income aside each year in taxable investment accounts that yield 8% annually. At retirement, Joe has $1,092,093 to Dexter's $546,047.

3. Your lifestyle

You don't have to live like a monk to save money. Americans are conditioned to overbuy. Shopping has gone from being a chore to a hobby, a lifestyle even. Shoppers are encouraged to define their individuality in terms of style, which for most people comes down to a matter of which mass-produced goods one chooses to buy. See MSN Money's Saving Money Decision Center for ideas.

Ask yourself how much house you really require. The square footage of the average U.S. home has been growing steadily since World War II. In the 1980s and '90s, buying ever-larger homes seemed a good investment. Home values generally have outpaced inflation -- by a large margin in some places and despite periods of slow economic growth. Still, as the baby-boom generation downshifts into retirement and the subprime-mortgage mess plays out, those 4,000-square-foot, five-bedroom homes aren't seeing a lot of buyers. Besides, smaller houses are in: Read "For many homeowners, less is so much more" on MSN Real Estate.

Every dollar you don't spend on a house saves roughly $2.40 in mortgage payments. A lot of people calculate what they can afford to pay for a house and use that as the floor price for their house search. They don't even consider less expensive homes, and no self-respecting, commission-hungry Realtor would suggest it. Find a smarter approach in "Don't bite off too much house" and "8 big mortgage mistakes to avoid."

Example: Joe and Dexter each have $40,000 for a down payment on a house. Joe buys a house that requires him to carry a $180,000 mortgage. Dexter buys a larger house and needs a $200,000 loan. Buying the lower-priced house saves Joe $43,286 in mortgage payments over the life of the 30-year mortgage at 6% interest.

 

4. How you manage debt

Pay yourself instead of your creditors. At its most basic, credit is the privilege of spending money you don't have. Before World War II, most people avoided it. To help Americans get over that silly notion, interest on credit card debt was a deductible expense until 1987. Then, Congress created a new pool of deductible interest in the form of home-equity lines of credit.

We've learned our lessons so well that bankruptcies are now at an all-time high. (If you're in trouble, see MSN Money's Bankruptcy Guide.) Everyone is shocked and appalled to discover how deeply in debt the typical American is today. Banks make a lot of money lending to people who can't wait to buy things. For help getting out of debt, see MSN Money's Debt Management Decision Center.

Example: Dexter buys his new $20,000 car with 10% down and a 48-month loan, while Joe postpones the purchase, saving up the money and paying cash. Dexter's monthly payment on the loan is $448, but Joe needs to set aside only $344 each month in a 5% taxable money market account to pay cash for the car at the end of four years. Joe started buying all his cars this way at age 30 and put the $104 savings in an IRA earning 9%. By the time he retires at 65, he'll have an extra $352,000. Think owning a pricey car is a necessity? Read "The real reason you're broke," then check out the concept of car sharing.

5. Protecting your assets

Your most important asset is your ability to work. Disability insurance will pay you a percentage of your income, usually from 60% to 80%, if you're sick or injured and unable to work, but that income never increases. Living 30, 40 or 50 years on a fixed income is one of the surest roads to lifelong poverty. Consider the financial as well as physical risks when you're tempted to buy that Harley-Davidson or take up cliff diving.

You also need to protect the rest of your assets. That means making sure you have adequate auto and home insurance, and, for many people, an umbrella liability policy that provides extra protection against large damage awards in certain civil suits. Just about any lawyer can tell you stories about someone forced into bankruptcy by a damage award that exceeded the limits of his or her insurance coverage. See "4 ways to protect your financial freedom."

If you're self-employed, insulate your assets. Consider forming a limited liability corporation. It's easier to set up and maintain than most other corporate forms and will make it much harder for creditors and attorneys to go after your personal assets.

Example: At age 40, Joe and Dexter are each hit by a judgment in a legal case. Joe has an umbrella liability policy that pays the full amount. The judgment exceeds the limits of Dexter's homeowners insurance, forcing him to turn over the $73,329 he had accumulated in his taxable investment account and file for Chapter 7 bankruptcy protection. It will be seven years, give or take, before his credit rating recovers, but the real damage is the loss of the potential earning power of his investment portfolio. Dexter will have to start saving from scratch at age 40, and instead of a portfolio worth $546,047 at age 65, he'll wind up with just $180,220. Not having adequate insurance will thus wind up costing him $365,827 in lost principal and investment earnings.

6. How many children you have

Today, there's a powerful financial disincentive to have children. Let's start by saying upfront that we all love children. They provide joy and excitement to every family, but this is intended to view them purely from a financial perspective. In the days before Social Security, there was a positive incentive to have lots of children. Not only did they perform necessary labor on the farm or in the family business, but they also were expected to care for their aging parents, come what may. According to the latest figures from the U.S. Department of Agriculture, it now costs between $145,000 and $290,000 just to raise a child through high school. (Higher-income families tend to spend more.)

Add anywhere from $60,000 to $130,000 more for a four-year college education. There are economies of scale as the number of children you have grows, of course, but there are very few multichild discounts available for college. See "6 reasons not to save for kids' college" and "Balancing kids' college and retirement savings."

The cost of a happy accident. Nobody who wants three children is going to be deterred from having that many, of course. But many people who really wanted to hold the line at two wind up with three, and sometimes more, by what is euphemistically called an accident. Just remember that this kind of accident is among the most expensive you can have.

Example: Joe has two children, which will cost him nearly $400,000 to raise to age 18 and $120,000 to send to a public university -- a total of $520,000. Dexter had planned to have two children, but a third came along unexpectedly as he and his wife turned 40. (See "Save a bundle on your new baby.") Even if Dexter scrimps and saves to spend half as much as Joe raising each child, the total tab, including $180,000 for college, will still add up to $480,000.

And because Dexter's income is half of Joe's, he can ill afford the expense. Now, instead of socking money away for retirement, he and his wife are using that money to raise their kids and send them to college.

7. Marrying for better or worse

Take everything you own and divide by two. Deciding whom to marry may not seem like a financial decision, but you'll find out otherwise if you ever have to endure the pain of divorce. Bankruptcy, a legal judgment and even the IRS can't touch certain assets, such as money in retirement plans. But nothing is safe from the divorce attorneys. (See "10 steps to a money-smart divorce.")

On the positive side, getting married can double your income. Though the quaint notion that two can live as cheaply as one is dubious, it doesn't cost twice as much, either. Financial teamwork (see MSN Money's Love and Money Decision Center) early in a marriage can yield a substantial payback in later years, provided you stay together. Choosing someone whose long-term financial goals are similar to yours will reduce friction and help you stay on track.

Example: At age 65, Dexter and his wife decide to split up. (See MSN Money's Suddenly Single Decision Center.) They've tapped their retirement funds to put the last of their children through college. They've managed to pay off the mortgage on their $240,000 house, and it now represents the total of their net worth in today's dollars. They've both worked throughout the marriage, so alimony isn't an issue, but they will have to sell their home and divide the proceeds. Instead of living payment-free in the home they struggled 30 years to own, they'll be paying rent again -- on two homes.

As the examples of Joe and Dexter show, it isn't necessary to be an investment whiz to accumulate a substantial fortune if you make smart choices on a handful of life's big decisions.

At the end of his career, Joe has a net worth, including his home, of more than $2 million. He can retire in style with the security of knowing his conservative investments, with a 6% annual yield, will provide after-tax income of $91,000 until he's 95 -- and leave a $200,000 cushion.

Dexter's $120,000 in assets will give him only $4,000 in annual income after taxes. If he retires at 65, he'll depend on Social Security for a large part of his living expenses and will have only about two-thirds the income he had when he was working. Even if he works part time until he's 75, bringing home $10,000 extra each year, he'll have to save most of that money for the future and will have only $4,000 extra to bolster his income from Social Security.