1. Taxes in all forms will GO UP: Frankly there is no attempt by any government anywhere in the world to become more efficient – this will force taxes to go up.

2. More institutions will fail us: If you were a 50 year old American you should be worried about your Social Security benefits dying much much before you die. You will surely outlive your Social Security.

3. If you are a 25 year old Indian working in a PSU organisation or even in the Government your pension is likely to be self managed. If you are scared of equities, think again. Inflation will chew your investments. Learn financial management, record keeping, investing in equities, asset allocation, re-balancing, etc.

4. Holy cow institutions like Life Insurance Corporation, Unit Trust of India, State Bank of India will SURELY give you NEGATIVE REAL RETURNS on your ‘investments’ – because these are not investments, they are savings instruments.

5. If you are in the government service, be ready for big parts of your organisation being privatised. For e.g. the railways may outsource the canteen, banks may outsource credit rating, banks may outsource payroll management – things which look unbelievable now.

6. National Pension Scheme will not take off in the current mode. Not sure when it will take off. Fund managers may have the mandate to invest in index funds, but the performance gap between 2 schemes will be so high, that there will be panic.

7. The return on bond funds will be negative when interest rates are dropping!

8. NPS does not realise that people are not as scared about fees as they are scared of poor management! esp when it comes to money management!

9. The regulator normally speaks the language of the biggest player…so do not have too much expectations from that side!

10. Whatever is happening in financial services is also happening in the medical field…so be careful there too!

Be careful the government, big psu companies, ….will …

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the single word is NO. When I was reading an article recently I saw an article with similar headlines…it was an article in Newsweek and it said ‘One word Can Save Your Life: No’. Make no mistake this article was written by a doctor. She was not trying to save on deductibles, she was not trying to save money….AND THEY WERE APPLYING it to THEIR LIVES.

I could not but nod my head in agreement.

Cut. Come to India. With so many financial planners, quasi financial planners, quacks, banks, life and general insurance companies, mutual funds, portfolio advisors, portfolio managers, etc. fairly obviously somebody would have got you!

It is also so difficult NOT TO SEE THE ADVANTAGES when confronted by a good salesman (hopefully trained by me!!). Who can deny the need for focus, asset allocation, pension plan, child plan, neighbour’s wife plan, own mother in hospital plan, funeral plan, broken dentures plan, cancer plan, kidney failure plan, tiger eating you on the highway plan, ….- given the right name, selling it to the retail ‘prospect’ seems like selling toothpaste.

If you have teeth, you have to buy toothpaste, right?

So if you have a child you need a child plan, if you have a body you should have a medical plan, if somebody you knew got cancer, you need a cancer plan. Like they say anybody with a forehead thinks he can plan, so be it! If you will retire you need a retirement plan. ….so on and so forth.

So you agree to a Wealth plan, a Child plan, a pension plan, a medical insurance plan, an endowment plan, a ULIP, and an income replacement plan. Then the next word ‘Asset allocation’…sir you need to be in equities, gold, land, bonds, bank fixed deposits, post office savings, ppf, blah blah blah. Of course you need a few credit cards too.

Then the other word ‘leveraging’. So you need a home loan, a car loan, a personal loan (taken to make the down payment of the house which you anyway cannot afford!), a travel or foreign tour plan, children’s education loan, OMG these guys are innovative are they not?

Then the dreaded word diversification again. Large cap fund, banking fund, pharma fund, gold fund, midcap fund, small cap fund, elss.

Now that you have said yes to all this – he says sir you need to be in different fund houses too – so a Hdfc, Prudential Icici, Reliance, ….and a few more fund houses as per the distribution targets of the ‘advisor’.

So now you have a fairly simple request converted to 4 pages of holdings, some as a SIP, some ULIPs, ….and the client is completely confused.

Frankly what does the customer need?

Well if he has the ability, need and willingness to invest in education he should look at a couple of well managed multi cap funds like Hdfc top 200, Hdfc equity fund, Pru I discovery, Franklin India Bluechip…one term plan, one credit card..or to make it even simpler an index fund.

And sir do not invest in a lumpsum – do a systematic investment plan, a systematic transfer plan, a trigger option, a variable investment plan, a weekly transfer, a monthly transfer plan……..another list of options!

Once he has the basics in place, he should learn the art of say NO. No to channels, magazines, websites, blogs, planners, …just keep it simple dude.

Read the article and you will be able to relate to the financial world what that article says about the Medical world.

PS: My doctor has kept me off medicines for the past 28 years. I love him. Not sure if I can say about all the doctors….I have a few friends, a few clients, a few readers of my blog, …..I just drew a parallel from a Newsweek article to our noble profession of financial advise!

http://www.thedailybeast.com/newsweek/2011/08/14/some-medical-tests-procedures-do-more-harm-than-good.html

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Financial planner: supposed to know everything about you PERSONALLY so actually called ‘personal financial planner’ who helps you with YOUR GOALS and the steps to achieve them. He tells you your asset allocation – say 70% equity and 30% Debt.

Portfolio Manager: He chooses in which shares and which mutual funds should your money be invested.

Broker: Executes transactions on the basis of the Portfolio Manager’s advise.

Demat provider: Keeps safe custody of shares, bonds, and now even mutual funds

Insurance BROKER: buys you the TERM life policy based on financial stability of the provider and the least cost basis.

Clerk: Enters all this in www.valueresearchonline.com, myiris.com or www.moneycontrol.com to keep track of all these transactions

CA: Files your tax return on the basis of the details provided by the clerk.

To add to all this you can have another financial planner who will whet the process and tell you things are fine (just joking? think again!)

Banker: Claims he can do all of the above.

Investor: Gets a 24% gross return..pays fees to all the above and then is left with a 7.9% return. May have actually been happier in a PPF

http://www.bookzone.in/newtopsellers10.asp?qs=30 feels good to be the bestseller of the month at a leading book store in Mumbai

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Here is part 1 of an article I wrote for Money Mantra…

How to select a good mutual fund.

Selecting a mutual fund for investing is a very important step indeed. It is not just important it is crucial. However it is the second step, not the first.

It is surprising at the number of people I meet or hear from – they all have same questions. So when they ask me ‘How do we select a mutual fund?’ for me it is an amusing question. So like all self respecting advisors I start with the dreaded line- “Well, it depends…..’

Then I ask them – “What are your financial goals, if any?”. Now only if you have big long term goals does the choice of a mutual fund really matter. If you are investing for a short period of time – you are investing in say a liquid fund. It hardly matters in which liquid fund you invest – the performance gap between two liquid funds is not so high. Choose the liquid fund with a high AUM (assets under management) – and one which gives good service in terms of redemption on the phone or net, or such considerations.

However if you are looking for a longer term investment – which means you are looking to be invested for at least 8 to 10 years, you are looking to invest in equity mutual funds. This article is aimed at selecting a good equity mutual fund for a long term.

1. The most important first step is to have an investment goal. A fantastic fund selection done without having an investment goal is completely useless. You should know the reason for your investment, how long you can be in the investment, at what stage you will re-allocate, etc. before you make your first investment.
2. Your focus will lead to the correct asset allocation – the very important factor which will decide how much money you will put into an equity fund.
3. Do your homework: Buy large cap well diversified good quality funds. Do not buy opportunities funds, international funds, contra funds as a staple part of your portfolio.
4. All funds in India are no load funds – which means there is no sales cost. This is good and it means all your money gets invested. For a large cap equity fund, it may not make too much sense to pay somebody to pick the fund for you, try doing it yourself.
5. Have a demonic watch on the asset management charges. As a fund starts to do well, it should attract a lot of investors, and as its assets increase it should keep dropping its asset management charges. Look at well managed funds with charges below 1.9% p.a. – there are many.
6. Look at the portfolio turnover ratio – the greater the ratio, the more is your total cost. One cost which is not visible to the investor is the brokerage that the fund scheme pays. This is a function of the turnover of the portfolio. So a fund with a lower turnover would be incurring lesser costs.

http://www.subramoney.com/book-written-by-me/

http://www.subramoney.com/book-written-by-me/

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One female – nothing to do with equity markets in her professional life – was a sitting duck for many people selling financial products. To the credit of the salesmen she had all the schemes in her portfolio – belonging to 2-3 terribly performing fund houses. Even though she had some good fund choices too, they were not of very big amounts. She did not need any life insurance (rich husband, rich in-laws, no children) – but her portfolio was full of life insurance schemes, and a few pension plans. So here was a person who had not heard of asset allocation, SIP, etc. but had built a portfolio of Rs. 2-3 crores of ‘investments’ largely in debt products (what i call savings products).

Recently I ran into her at a ‘sathsang’ and she got chatting. She had started investing in direct equities – and had got out of the equity mutual funds. I was not worried because her husband’s portfolio was well managed (sorry ladies!). However, on probing she told me the following nice story.

In 2006 she had a lot of fixed deposits in banks and her bank was pushing her to put money in equities. So she traded heavily in MUTUAL FUNDS (hmmm…the entry loads you see!) but did not make much money in trading. She had churned her portfolio of Rs. 50 lakhs from Jan ’07 to June ’07. She had even held one or two schemes till Aug, 07. She then met somebody (could also be me, not sure) and based on that advice she decided to invest and hold for a few months (if not years). So she stopped trading, and invested in Dec, 07, Jan and Feb, 08. However she invested lumpsum – not minding too much about market timing or SIP. She had the money and needed to put the money to work, so she did it. However in Jan 09, Feb and March 09 she sold – because the markets fell (no she did not need the money).

However in June she picked up some courage and started buying some stocks. Given that the markets went up from there she did well. Well in the sense that her portfolio is up from June ’09. However she had no idea as to how much she lost in her mutual funds (she just knows she lost money) and how much her own equity portfolio is up.

Like if she bought BASF when the index was 9000 she could have bought it for Rs. 153 – now it is Rs. 445 (almost 3 times) when the index has gone up almost twice. That would have been great.

However she had bought Bharati (she was in the red in Bharati!), L&T, Hdfc, Icici etc. In most of these shares her money had not doubled – it had actually underperformed the index. However her conclusion now is

‘I CAN MANAGE BETTER THAN MY FUND MANAGER’ – SIMPLE i have already arrived at this conclusion, do not confuse me numbo jumbo like benchmark, comparative performance etc. In fact she told me ‘If you think this is just luck, pray I get lucky – but do not give me gyan on asset allocation, SIP, etc. it does not work for me. It may work for others.

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1.Personalised asset allocation. The portfolio should be based on your personal investment goals. It would not be just a general strategy like “growth” or “income.” Thus the money that you need in 6 days would be in a savings bank account, money that you require in 6 months in a floater account, and money that you require in 6 years in an (say) Index fund or allocated to equity as chosen by the portfolio manager. If you did go to a proper portfolio manager he would do 2 things for you. One is create a portfolio that suits your personality. For a senior government servant with an indexed pension he could take more risk in the portfolio, and for a financial product sales man he would take less risk.

2. Transparency. You should be able to see your portfolio on a 24/7 basis – all your investments should be posted to a website where you can do an analysis as you wish. The website should give your capital gains – booked and un-booked profits, current value of your investments, etc. Obviously you will have the whole thing password protected and therefore secure.
In case of mutual funds, you know what’s in your account only when you get the month end portfolio – but you have no clear idea when it was bought and at what price. Here you can see what you own.

3. Tax efficient. Your portfolio can be run so that taxes are optimized. If you went to him at your age of 55, he might decide to book profits once you have retired or after you start getting the senior citizen benefits.

4. Costs: PMS managers charge a flat annual fee plus profits. Most of their money is made on the profits unlike a flat fee like a mutual fund. However you will still incur costs like custodian charges, administration fee, brokerage (therefore churn costs), etc. If your portfolio is being managed by an equity broker it is very difficult for you to know the intention of each and every transaction. Hence it is necessary for you to keep a keen watch.
5. Performance. PMS accounts often offer the services of decent money managers with good investment systems and favorable track records. However unless you have put your own money in various schemes you cannot compare the various managers. There is no public data of all the portfolio managers unlike in the case of mutual fund managers.

6. Convenience. If you are too busy to give your investments the attention they deserve – or if you are an inexperienced or emotional investor – having a professional run your portfolio may be a good solution.

Having said all nice things in a few days time I will also tell you the disadvantages of a PMS.

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Your financial problems would have been caused by some (or all) the following financial behavior:

~ Not planning: The single biggest problem for most people is that they just do not plan their finances. Even if they are not happy about the results of what they have done so far, they do not change the way things are done.

~Not seeking advice from the correct source: Amazing that people who are related to people in mutual funds, life insurance companies, banks, or first cousins of financial planners etc. do not consult them. Once in a while sheepishly my ‘friends’ and ‘cousins’ allege that I help them financially – in terms of advice. I refuse to even acknowledge some of them in public.

~ Overspending: Many people with not very high incomes have very high ambitions. Most of this problem is because the salesmen in most shops do not tell you the price of a product, they only tell you the EMI — so anything from a plasma TV to a luxury home on the outskirts of the city are made to look cheap! After all at Rs 2,899 a month does a plasma TV not look cheap?

~ Not talking finance at home: Children are kept away from the finance topics at the dining table. Finance is perhaps the second most taboo topic at home! So many children grow up without knowing how much of sacrifice their parents have gone through to educate them. Or the foolish financial products that they have bought.

~ Parents spending on education and marriage: There are just too many kids out there who believe that they need to worry about savings, investment and life insurance only at the age of 32 plus. This means your father, father-in-law or a bank loan has funded your education and marriage. Kids should take on financial responsibility at a much younger age than what is happening currently. Of course one girl told me “My parents want the tamasha, let them pay for it. I wanted only a simple marriage!

~ Marriage between financially incompatible people: Most marriages under stress are actually under financial stress. Either the husband or the wife is from a rich background and the other partner cannot understand or cope with the spending pattern. It is necessary to match people financially before marriage.

www.akshayapatra.org – if you are feeling good about reading this post go to this site and donate some money!!

~ Delaying saving for retirement: “I am only 27 years old why should I think of retirement” seems to be a very valid refrain for many 32 year olds! Every year that you delay in investing the greater the amount that you will have to save later in your life. Till the age of 32 it might be feasible for you to catch up, but after some time the amount that you need to save for retirement just flies away. www.myirisplus.com
~ Very little life insurance: With all the risks of life styles, travel, etc. illness and premature death are common. We all have classmates who had heart attack at the age of 32 but still pretend that we do not need life or medical insurance.

~ Putting away too much in a pension plan: I refuse to elaborate it here. Call me or email me.

~ Not prepared for medical emergencies: Normally big emergencies — financially speaking — are medical emergencies. Being unprepared for them — by not having an emergency fund is quite common.

~ Lack of asset allocation: Risk is not a new concept. However, it is a difficult concept to understand. At 3k index people were afraid of the market. At 21k everybody and his aunt wanted to be in the equity market — and there are enough advisors who keep saying, “Equity returns are superior to debt returns.” This is true with a rider — in the long run. So there could be a much larger allocation to equity at higher prices — to make for the time missed out earlier.?

~ Falling prey to financial pitches: The quality of pitches has improved! Aggressive young kids are recruited by brokerage houses, banks, mutual funds, life insurance companies, etc. and all these kids are selling mutual funds, life insurance, portfolio management schemes, structured products, et al.

~ Buying financial products from ‘obligated persons’: This is perhaps one of the worst things you can do in your financial life. A friend, relative, neighbor, colleague who has been doing something else suddenly becomes a financial guru because they have become an agent! You are saddled with a dud product for life!

~ Financial illiteracy: Most people do not wish to know or learn about financial products. They simply ask, “Where do I have to sign” — so buying a mutual fund is easier than buying life insurance!

~ Ignoring small numbers for too long: What difference will it make if I save Rs 1,000 a month? Well over a long period it could make you a millionaire! So start early and invest wisely. It will make you rich. That is the power of compounding.

~ Urgent vs important: Most expenses, which look urgent, are perhaps not so important — the shirt or shoe at a sale. That luxury item which was being offered at 30 per cent discount is such an example. These small leakages are all reducing the amount of money you will have for the bigger things like education or retirement.

~ Focusing too much on money: Money is no longer a commodity to buy things. It is a scorecard of one’s life. That will cause stress, and yoga might help. However if you will seek a branded yoga teacher — so that your friends think you have arrived, yoga it self could cause financial stress!

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Similarly if you want to be a good investor watching television or the pink papers or the personal finance magazines and websites may be not the best way to prepare!

What do you really need to do to lead a simple, healthy life? Eat simple food (which your body knows), keep regular habits, get some exercise, get adequate sleep – these simple things should help you in your quest for a good healthy life.

It is exactly same for your investments – keep it simple (do not invest in asset classes you do not understand), invest regularly in mutual funds (for your short term requirement i.e. less than 6-7 years) or unit linked plans (longer term requirements), keep some money in banks for an emergency, spend less than what you earn. Learning about equity, commodities, ‘real’ estate and debt markets is a must if you are serious about investing. Learning happens from books – classic well written books which have stood the test of time. It is very difficult to learn from magazines, television, etc. and there are valid reasons for the same.

The limitations that media has in ‘educating’ an amateur is multi-fold. Let us look at some of them:

Journalists are trained to be journalists, not financial analysts. To create wealth over long periods of time you need to do some simple things – like goal setting, creating a financial inventory, etc. whereas a journalist ends up giving ‘tips’ on which share to buy or which mutual fund to pick. For doing this he is aided by websites (nationally valuresearchonline.com and internationally Morningstar.com) which do a fantastic job of using the past data.

Unfortunately they come with a plug line ‘past is not an indicator of future performance’. Though of course for most of the investors and advisors what some of these funds say is the basis of creating ‘future’ portfolios, usually to the detriment of the ‘poor’ investor. In fact stories like “Ten best funds to invest TODAY” are great on the cover of a magazine but do precious little to ‘educate’ the real investor. Topics like asset allocation, risk analysis, compounding, indexing, etc. are surely not cover story material at all. That unfortunately is perhaps what the retail investor needs!

Media does not employ specialists – the person covering mutual funds covers banking, life insurance, car loans, and everything in personal finance. This person is completely out of breadth – from where will they find depth?

When an an expert speaks on television – it sounds more like weather prediction or astrology. The take away for the viewer is almost nothing. For example I have caught myself saying “Before you invest you should do a proper fundamental analysis of the company”. Take a worse statement “Frankly this share looks very weak fundamentally, but technically I do not know whether it is a good time to sell or some upside is still left”. This may be a perfectly accurate statement, but it is utterly useless for the common investor.

There is a huge conflict between what is good for the investor (not trader) and what the financial services industry wants him to do. Warren Buffet says ‘inaction’ for long periods of time is a sensible strategy to adopt. However the media can make you feel rotten for doing nothing. Programs are titled “Is it time to switch from Equity funds to Gold funds” – this is enough for the retail investor to start twitching his thumbs and call his ‘adviser’ who will help him churn. In a rising market – analysts, media and the end user of the information (for whom purportedly the information is being sought, analyzed and delivered) are all optimistic about the company prediction. It is exactly the opposite in a falling market. Does the media coverage of a single share create more volatility in ‘trading’ markets? I do not have enough evidence to speak for or against this.

One fantastic exercise a retail investor can do. Invest in a 200 page note book and see what each person coming to the channel (or writes) says. Make a summary and read it after 6 months. You might have a humor book on your hand. Maybe the publisher may pay you a nice round sum which you can use as a retirement plan.

If on television you hear me telling one viewer “you should reduce your exposure to Kotak K-30 and use the proceeds to invest in Franklin India Prima” and tell another viewer “you should sell your Franklin India Prima and invest in Kotak K-30” am I contradicting myself? No. One viewer may be shifting from large cap to mid-cap and the other shifting from mid cap to large cap schemes. Imagine the plight of a viewer, especially if he is making notes.

Normally in sectoral funds you should be buying it only when everybody is shunning it – which means when it is languishing at some low net asset value. Currently for example if everybody is pushing an infrastructure fund, maybe as an investor should be looking at a FMCG fund or a pharma fund! So the inherent conflict between advising, media and selling comes to the fore.

For a seasoned investor magazines and television come across as a series of advertisements – some obvious and some not so obvious. So to make out the difference between advice, and noise is significantly difficult if not impossible.

Most magazines (and channels) can rarely make out the difference between ‘traders’ and ‘investors’ – which means you will hear statements like – Investors will benefit by a reduction (or abolition) of securities trading tax. Frankly investors should not be worried about transaction costs at all – it is for the traders to worry about transaction costs. There can be many such examples to quote from.

Investment advice is very simple – but has to be delivered in a different way for each of the recipient. At times it has to be delivered like a teacher, sometimes like a friend, and sometimes like a child to a parent – and sometimes like a parent to a child. It is difficult for mass media to do this consistently and for a long period of time. At times the end user may not find it palatable, but deliver you must. Like a doctor giving bitter medicines to a patient or a mother mixing bitter medicines with honey so that it can be eaten.

In case of a magazine the editorial is clearly in a different location from the articles and the advertisement. In case of television unfortunately that distinction is impossible to make – in most times for the journos themselves! There is no website or magazine which ever checks the ideas given by ‘an expert’ after some time – say 4-6 weeks or on the happening of an event.

So if your teacher is the pink paper or a television channel, please have a plan B for retirement – it will be too late by the time you can correct!

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Most of the “killer” diseases have been eradicated or a cure found for. If you are in a household mentioned above, at your age of 72 years, you will still have to worry about inflation!

You will have to worry about – inflation, a long term care insurance (which will take care of your hospitalisation bills, day care, etc.), and a pension that takes care of all your needs – even if it needs a manager to take care of your money. I know one 72 year old who likes to keep all his money in savings accounts and bank fixed deposits. Asking him to invest in any other asset class is a nightmare and another 80 year old who happily keeps all his money in equity – his dividend income is far, far greater than his requirements.

Both may be extreme cases, but a 72 year old has a serious possibilities of living till the age of say 90 – in such a case – inflation is a serious worry.

May God bless his soul, but I hope he dies by the time he is 78, because I expect him to exhaust his savings – and he is not at all keen to take anything from his children.

In the course of my consulting I meet all kinds of people – excessively into equity, and excessively into real estate, debt etc. Please read about asset allocation and go only for a balanced portfolio – nor more than 60% in volatile assets like equities or real estate.

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Every person you see working beyond the age of 59 is worried about his or her retirement. Almost all the research conducted on the subject over the last few years shows that most individuals are unable to demonstrate financial readiness for their retirement years. The Oasis research says the average balance in the provident fund is only Rs. 24,000. Now, if you are not a son-in-law of the government and do not have an indexed pension, you have to create a sizeable corpus for your retirement.

This only serves to underline the fact that saving for retirement is a dynamic, continuous and challenging process that requires careful planning and follow-through. Running out of money is a serious, serious worry for all of us. Also we do not want to be leaving waving the last Rs. 100 note as a tip for the undertaker. Let’s analyze our own behavior. If it costs Rs. 20 to reach my office – will we dare leave our house with exactly Rs. 20 in our purse? I think not. We carry say Rs. 200 + ATM card + a credit card….just in case. Similarly in case we need Rs. X for retirement; we may need to keep say 2X if not 3X – just in case.

Another behaviour pattern that I have seen is among some clients. Their spending pattern changes completely because of fear. One client refuses to take a taxi – (he can afford to BUY a taxi every month!) because he feels it is expensive.  Fear is something which is easy for an outsider like me to see, but the person experiencing it may not even realize this. I know a 78 year old with a net worth of Rs. 2 crores, monthly expenses of Rs.2 Lakhs a year, dividend income of Rs. 5L, telling me “I am worried to withdraw from my capital – what should I do?”. It really set me thinking. On the one hand I meet 17 year olds spending like there is no tomorrow and on the other hand here is a 78 year old worried about withdrawing from his capital I have arranged his portfolio in such a way that if a 9/11 does not happen regularly, he will not touch his volatile assets till his age of 120 at least.

Here are some helpful tips that should help you on your way to a comfortable retirement.

1. Start as Soon as You Can –I MEAN TODAY
It’s obvious that it is better to start saving at an early age, but it is never too late to start – even if you are already close to your retirement years – because every paisa saved helps to cover your expenses.

If you save Rs.2000 every month for 40 years at a rate of 12%, you will have saved significantly more than an individual who saves at the same rate for 10 years. (See Albert Einstein and Compound Interest). Also, keep in mind that asset allocation will become increasingly important as you get closer to retirement. This is because your volatility tolerance generally decreases as the number of years in which you can recuperate any losses goes down.

2. Treat Your Savings as an Expense – it is as real as death and taxes, so, be prepared.

Saving on a regular basis can be a challenge, and investing it even greater a challenge especially when you consider the expenses we all face. You can guard amounts you want to add to your nest egg from this temptation by treating your retirement savings as a recurring expense, similar to paying rent, EMI, or society charges. This is even easier if the amount is debited from your salary account.

You may have your salary credited to a savings account and have the amount scheduled for automatic debit, to be credited to a retirement savings account on the same day the salary is credited. (a.k.a Systematic Investment Planning)

3. Save as Much as You Can in a Tax-Deferred Account

Contributing amounts earmarked for your retirement to a tax-deferred retirement account deters you from spending those amounts on impulse, because you are likely to face tax consequences and penalties. All retirement accounts have some form of penalty on withdrawals – either in the form of a lock-in or in the form of the same being added to your income. Examples of this include PPF, pension plans, equity funds that you earmark for retirement, etc.
Look at this positively – the lure of current consumption is too strong hence such measures are a must.

4. Diversify Your Portfolio

You cannot put all of your eggs in one basket holds true for all assets. Putting all your savings into one form of investment increases the risk of losing all your investments, and it may limit your Return on Investment. As such, asset allocation is a key part of managing your retirement assets. Understand that there is risk involved in investing in equities, but NOT INVESTING in equities, is far, far riskier.
Proper asset allocation considers factors such as the following:
•    Your age – this is usually reflected in the aggressiveness of your portfolio, which will likely take more risks when you’re younger, and less the closer you get to retirement age
•    Your volatility tolerance – this helps to ensure that, should any losses occur, they occur at a time when the losses can still be recuperated
•    Whether you need to have your assets grow or produce income
5. Consider All Your Potential Expenses in Your Financial Plan

When planning for retirement, most people I meet underestimate – we make the mistake of not considering expenses for medical costs, nursing, and other voluntary expenses like employing a cook, maid, hiring a vehicle to get around, travel, gifting, etc. When deciding how much you need to save for retirement, make a list of all the expenses you may incur during your retirement years. .

6. Budget
Saving a lot of money is great, but the benefits are eroded or even nullified if it means you have to use a credit card to pay your living expenses. Therefore, preparing and working within a budget is essential. Your retirement savings should be counted among your budgeted recurring expenses in order to ensure that your disposable income is calculated accurately.

7. Periodically Reassess Your Portfolio
As you get closer to retirement and your financial needs, expenses and risk tolerance change, strategic asset allocation must be performed on your portfolio to allow for any necessary adjustments. This will help you ensure that your retirement planning is on target.

8. Reassess Your Expenses and Make Changes Where Possible
If your lifestyle, income and/or fiscal responsibilities have changed, it may be a good idea to reassess your financial profile and make adjustments where possible, so as to change the amounts you add to your retirement nest egg. For instance, you may have finished paying off your mortgage or the loan for your car, or the number of individuals for which you are financially responsible may have changed. A reassessment of your income, expenses and financial obligations will help to determine if you need to increase or decrease the amount you save on a regular basis. And keep revisiting your life insurance portfolio.

9. Consider Your Spouse
If you are married, consider whether your spouse is also saving and whether certain expenses can be shared during your retirement years. If your spouse hasn’t been saving, you need to determine whether your retirement savings can cover not only your expenses, but those of your spouse as well.

10. Work with an Experienced Financial Planner
Unless you are experienced in the field of financial planning and portfolio management, engaging the services of an experienced and qualified financial planner will be necessary. Choosing the one who is right for you will be one of the most important decisions you make.

Conclusion

What we’ve discussed here are just a few of the factors that may affect the success of your retirement plan and determine whether you enjoy a financially secure retirement. Your financial planner will help you to determine whether you should consider other factors. As we said before, starting early will definitely make the task ahead easier, but it is not too late to adopt some of these practices, even if you are already retired.

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