17 ways to cut costs

THE basic needs of man are food, clothing, shelter and entertainment. Today, most of us have graduated from needs to luxuries. When the newspaper headlines were screaming inflation at 11.9 per cent, it became a topic of worry. Today, the challenges are not just high standard of living, high commodity prices, it's job loss too. How do you deal with meeting your basic requirements with less means to buy them?
While eating just one meal a day is good for Yogis and is a nice way to cut down costs, that is not what I'm suggesting. Instead, Try something simpler.

1. Eat at home

Eating out can be expensive. If you are spending Rs 200 on eating out compared to Rs 50 at home, you would be surprised to know the kind of amount you are spending. A systematic investment plan of Rs 150 (200-50) a day saved for 30 years can give you returns in excess of Rs 5 crore!MUST READ:

2. Know what you are buying

Plan your shopping. If you fill your cart with everything that catches your eye, chances are you will be spending a lot more. Instead, plan your meals for the week ahead and make careful note of what you need to buy. Purchase only the items on the list, avoid the rest.

3. Wear your blinkers

Stores are designed to make you go through a long walk to reach for your most basic items. Reason -- you can tricked into buying what you don't really need. Most basic commodities are found towards the end of the store. So, the next time you go shopping, you could skip the other outlets and move towards your destination.
4. Shop on a full stomach

When you're hungry and shopping, you may end up buying lot of things that look like food! You might also pick up what you don't really need. On the other hand, you can easily avoid unnecessary shopping when you're a full stomach.

5. Do you really need bottled water?

You can take a bottle of water when leaving home rather than buying when you're out.
6. Shop sans the kids

Hungry, tired, cranky kids increase the amount of time it takes to get your shopping done. Kids can really bug you into buying things which are bad for your health and for your purse. Leave them at home when you go out shopping.

7. Buy in bulk

You can save a significant amount of money if buying in bulk. Pay attention to the prices and pick up the family size package if the per unit cost is lower. However, you need to realise that bulk buying has a dark side too! If you are not a big user of any particular product, it could mean wastage.
8. Use store reward cards

If you visit a particular store often, you can sign up for their reward card. In some cases, stores raise their prices when they offer reward cards, and without the card your bill will certainly be higher. If the card offers other benefits, such as a preferred (or free) parking, free schemes, etc., be sure to maximize your benefits before they expire.

9. Buy local products

For instance fruits. Whenever I step into a big branded store, I was pushed into buying 'American grapes'. I fell for it once, and realized only on billing that it was Rs 400 a kg! The Indian variety is normally available for Rs 40. Locally grown or produced food is often available at a cheaper price because you don't pay for long transportation costs. Stick to them.
10. Choose unbranded goods

There is a huge cost difference between a branded product and an unbranded one. Even in case of 'expensive' items like dry-fruits, if you buy it from a wholesale-retail shop you will find a 20 per cent price difference. Some branded foods like cornflakes, are more expensive than dry fruits on a per kilogram basis. If you thought potatoes were selling at Rs 12 a kg, you are correct, but when it gets converted to branded chips, it becomes a little expensive, about Rs 300 a kg!

11. Men are bad shoppers

It is not so much of a gender issue. But the truth is men do not have much patience and that shows while shopping. So, if you are a man, realize that shops know and understand this. So things are arranged in such a way that when you are in a hurry you will end up buying the most expensive items. Look around to find cheaper items.

12. Compare prices and stores

I personally do not compare prices and stores but my wife has a degree in this! She knows which shop is good to buy vegetables, branded goods, unbranded goods. And she plans her shopping accordingly.

13. Shop in sales offers

In India, September to December months are considered as 'festive season'. This is the time when most of the shopping happens. Surprisingly, Hindus, Muslims and Christians have some festivals for which they buy new clothes during this period. So, stores generally keep a pre-festive sale in July-August and a post-festive offer in January. Use these sales to build your wardrobe. You can even get good deals!
14. Shop less frequently

The lesser the number of trips to the shop, the lesser you will buy! So, if you are making more trips to the store, it is time you reduced them.

15. Pay in cash

When you buy your day-to-day requirements with your credit card, you run the risk of paying your credit card dues late. So, for all the saving you have been doing, you may give it away in the form of interest. Cash is a good option. Besides, you tend to be more careful when making cash payments.
16. Check your bill

You should check all the statements which have a financial implication be it your credit card statement, mutual fund statement or your groceries bill. Scanners are fine, but there are possibilities of mistakes. So, you must see the bill before you pay.
17. Buy leather goods in monsoon and umbrellas in winter!Buying goods in off season will cost you less. If it's monsoon, check out for sale on leather goods and umbrellas in winter.

10 simple steps to get off the “expensive” train

Here are 10 simple steps to get off the “expensive” train

1. Plan for your goals and invest your money in the correct assets. Take professional help, if needed. Put the investments on auto pilot like a SIP, RD etc. That is what works best for most people. This will ensure that you can spend only the rest.

2. Understand how much you are spending by tracking the expenses. You will be surprised how much you’re spending on the “misc” head

3. Don’t borrow to spend. Credit card spends ensures that you do precisely that. Use a debit card instead.

4. Buy most provisions for a month at one go. You’ll end up spending less time, effort and money.

5. Do focused shopping. Write out what you want buy, buy that and head for the exit. Don’t take children with you on these occasions. They fill the shopping cart with unwanted fluff.

6. Don’t buy unwanted items or in huge quantity, just because there is some offer.

7. Don’t buy a toy due to your guilt that you are unable to spend enough time with your child. Try and find the time instead. You child wants you, not another toy.

8. Stop spending on that item, once you reach the limit in that month. For instance, if your entertainment allowance for the month is Rs 3,000 and that is spent by the middle of the month, then it needs to be dal-chawal and TV for the rest of the month.

9. Same goes for fuel. Long drives and excursions on weekends are out, once the fuel limit for the month is breached.

10. Don’t switch on the AC by force of habit. Use AC as required. Switch off fans/ lights and other appliances, when no one is around. In many households, TV is on, irrespective of whether someone is watching or otherwise.

Top Ten Investor Fantasies!

Top Ten Investor Fantasies!
In the past few months if reports are to believed, lakhs of new investors have jumped into the stock market. Especially after they saw a small minority of experienced investors getting extra ordinary returns. Anyone who has invested in value buys would easily have made over 100%. With a little bit of more research and knowledge companies like LIC Housing Finance and Jindal Steel have given returns between 300%-500%. These have rewarded investors all on basis of value and not ‘hot tips’ that are manipulated.

Unfortunately many new investors don’t realize this and have a lot of fantasies and myths in their mind when they enter. I had them too when I started out! Here are a few of them:


1. I will spend time trading every day and won’t do anything else. Isn’t that how hot shot multi-millionaires make money in the movies?

2. My uncle has been investing for several years. I will get tips from him. Of course it doesn’t matter that my uncle is on the verge of bankruptcy for the fourth time and has turned into a alcoholic.

3. I have magical powers and any company I invest in will give me returns in excess of 100% within a week.

4. The first company I invested in gave me 10% in a single day. This isn’t just co-incidence and luck, but because I am investment genius.

5. Everything I hear on the business news channel and everything I read in the newspaper actually needs to be followed.

6. Rich investors watch every single move of the Sensex and know exactly where it is headed.

7. I need to get tips from everybody - specially my broker. I don't care about knowledge, it won't make me rich.

8. My broker exists only to make me rich and wealthy. He loves me a lot.

9. I need to sell all my assets and remove all my money from the bank and pour it into a single share that can rise by 1000%. I read about it on an online forum - it must be true.

10. No need to study the business model, research reports, read or study financial statements. Losers do that!

I had many of the above fantasies when I started. They lead to losses - luckily I started investing with very small amounts. Following any of the above will most certainly lead to losses. You can be smarter than me and learn from my fantasies!

Keep smiling, laughing and happy investing!

Yogesh Chabria

Investors have two faces: Fear & Greed

MUMBAI: Everyone knows that fear and greed are the two key factors that drive the stock market. If you talk to any seasoned investors in the market, they would regale you with stories of how people got carried away by greed and lost all their money in the process. Stories about people spooked by ‘fear factor’ also do the rounds of Dalal Street at regular intervals. According to a study by SMC Capitals, “the elements of fear and greed are clearly visible in the trends of allocation of assets by the investors in terms of cash and stocks.’’

The trend, says the study, can be seen at the levels of market cap and bank deposits in the economy. When there is fear among the investing community, the bank deposits go up. And, when there is widespread optimism , the market cap levels go up. “If you look at investor behaviour in the last three years, the pattern is very clear: the first year was of over-optimism, the second was of over-pessimism and now it’s the recovery period. This trend is clearly visible if you look at the market cap and bank deposits (or the real wealth),’’ says Jagannadham Thunuguntla, equity head of New Delhi-based SMC Capitals.

In the study, SMC has compared the BSE market cap from the period starting January 2007, with the aggregate bank deposits in the banking system. The relative measure of the entire market capitalisation of BSE as a percentage of aggregate bank deposits in the entire banking system demonstrates the mindset of the investor community.

For example, in January 2007, the BSE market cap as a percentage of aggregate bank deposits was 152%, which means BSE market cap is 1.52 times more than the entire bank deposits. The figure kept on racing ahead during 2007 as the bull market gathered further momentum. By the time the bull market peaked in December 2007, the figure has reached 235%.

This means that with the deposits available, the banks couldn’t even buy half of the BSE stocks. At that time, the aggregate bank deposits were to the tune of Rs 30.47 lakh crore, whereas the BSE market cap was at Rs 71.69 lakh crore, probably signalling the exuberance in the capital market. By the time the bear market commenced in 2008, the BSE market cap as a percent of aggregate bank deposits kept falling. When the markets touched the bottom in February 2009, it had slid to 74%.

This means the entire listed stocks on BSE could be bought with aggregate bank deposits available with the banking system and it will still be left with 26% of the deposits. By this time, the total BSE market cap was to the tune of Rs 28.62 lakh crore, whereas the aggregate bank deposits were to the tune of Rs 38.48 lakh crore. Now, as the markets have started recovering since March 2009, again this level of BSE market cap as a percentage of aggregate bank deposits has crossed 100% levels and currently it stood at around 129% in August.

IDBI Bank’s executive director and head of personal banking C S Jain said, “Whenever there is fear among investors, they tend to go for bank deposits. Though there has been a rise in bank deposits during the last three years, the trend has been of people going in for short-term deposits that had a tenure of less than a year as they expect markets to bounce back and route their money to stocks,’’ he added.

-Madhu T & Reeba Zachariah, ET Bureau

ADVISORY SERVICE CHARGES MATRIX

Regulators should quit reckless backseat driving says Indian Industry

Quit reckless back seat driving was the message to the chairman of India’s Securities and Exchange Board of India (SEBI) by the mutual Fund AMC’s in a meeting last week. the SEBI Chairman has been demading that AMC’s should not pay upfront fee to the distributors from their own expenses. The SEBI Chairman C B Bhave was told that the AMC’s are not into charities and have business considerations.
It is not just the AMC’s, even the share broking community, distributor and common customers are of the same opinion. While the industry is scared of talking in public because of the alleged high handedness of the authorities, the anger and frustration is clearly showing.Similar outburst can be heard from the insurance industry against the Pension Fund Regulatory Development Authority’s (PFRDA) Chairman D Swarup. D Swarup has failed promoting his New pension scheme (NPS) to the retail customers as there are no intermediaries in between. Industry is scoffing at D Swarup for running Pension Scheme under the impression that it is a public distribution scheme (PDS) (India’s ration distribution to poor below the poverty line) and he expects that people apply in hordes. Industry is also pointing out that D Swarup is asking the government subsidies in terms of lower demat charges and other benefit. They say, D Swarup can be running a charity, but, industry is not. Even the PDS system usses intermediearies who are compensated with built in price by the government. The AMC’s chosen to distribute NPS hope that better sense will prevain on PFRDA.
The entire problem, is that these two government servants are basing the success of their drive to cut intermediary commissions, on a failed attempt to cut stock brokers commissions by SEBI. Since the stock broker community now reaches out to the high net worth investors (HNI) and block deals, the people in small villages and towns remain out of the stock investments. This has led to inequitable distribution of wealth between cities and villages. Stock broking community says that the FII’s drive the stock markets and domestic investments can hardly influence the market as there is no sufficient money in their hands. The SEBI initiative is a total failure. Smaller investors complain that SEBI is more interested in HNI’s. SEBI touts it as a success. Based on SEBI’s self declared success, it has taken off the entry loads in mutual fund, which is metting the same fate of the earlier share broker example. It has been just two months of this ill conceived mutual fund move and D Swarup is now using the Mutual Fund example to be employed on the insurance industry. Worse, D Swarup even quotes his own example of NPS scheme, which he claims is a good example. Other than the mandatory and statutory requirements, the retail version of pension scheme is a failure. Financial industry is not supporting the moves, all they are saying is that if the illconcieved idea has been implemeted in mutual funds, then implement it throughout financial sector for party.
The consultation paper titled “Minimum common Standards for Financial Advisors and Financial Education,” floated by D Swarup is also object of ridicule. Industry says that mind is already made up. The report ignores two fundamental facts. It ignores the fact that people do not invest on their own and they have to be persistently persuaded to invest. Instead the report takes a view that a customer asks for an advice on their own. Tell that to a Insurance or financial adviser and he will end up laughing belly up. Then D Swarup scores a self goal in the report saying that “over 70 per cent of investors buying mutual funds relied on the agent at the time of their most recent investment and almost 90 per cent are buying insurance policies from agents.” Industry points out that the investor need not go to a financial adviser, so why can’t they can investment it themselves.
The second premise is that he says the advice is chargeable. Well, this is the fundamental flaw with the SEBI initiatives too. Industry points out that since this report is more a copy and paste of reports from US, UK and Australian, the authors have not used their grey matters. They point out that India lags in major indicators vis a vis people living in advanced countries. These parameters are mainly education, infrastructure, transport etc when it comes to investing. Blindly copying others standards is not desirable. An advice cannot be sold to people who are reluctant to buy anything. It has to be pushed for their own good.
The customers and the distributors are also complaining. Even a willing customer finds it difficult to buy shares. He simply does not has the time and energy to do it. An agent is fine who gives a breadth of services and the fee is built in the product itself. Sonam (35 years), a house wife feels that these regulations are meant for bigger investors. She stays in Dombivli, a small city near Mumbai. She also says that she has never heard of SEBI or PFRDA. She and her husband have heard of the New pension scheme, but, she has no idea where to get information. She says she is well versed with insurance and has necessary policies. She also asks that who in the right mind will stop commissions?
Mr. Kumar (65 yrs) from Andheri says that if he has been cheated by an agent, there have been other agents who have bailed him out. He says that he is more frustrated by the government offices than agents.
Distributors feel that the government is using customer service plank as the smoke screen. They feel that government is pitching agents against their clients.
Even statistically the two government servants from SEBI and PFRDA are at handicap. The very basis that financial services are being miss sold is not provable statistically. Take example of insurance. To quote SB Mathur, Secretary General, Life Insurance Council (from Business standard, September 9) “Rs 14,500 crore as commission in 2008-09 against a premium of over Rs 220,000 crores collected. That makes average commission of 6.6 per cent. Premium-to-commission ratio fell from 12.1 per cent at the time of opening up of the (insurance sector) sector. It is alleged that high commissions drive agents to do lot of mis-selling. The industry has around 30 crore policies in force (this is the highest in the world according to the IRDA annual report) and has accumulated an asset base of Rs 930,000 crore. The report has some numbers on policies lapsing but it does not look at the high growth in renewal premium income. Renewal premium income has increased from Rs 26,250 crore at the time of liberalising the sector to Rs 156,000 crore in 2007-08 and Rs 220,000 crore in 2008-09. The much criticized unit-linked business has jumped from Rs 8,825 crore in 2006-07 to Rs 22,380 crore in 2007-08 and to over Rs 46,000 crore in 2008-09. All this suggests that selective data which supported the preconceived notions of the authors have found place in the report.”
Mr. Mankame (79 yrs) got his US 64 bonds redeemed by an agent free of cost. He converted his US 64 bonts to a UTI MF scheme and has earned a neat 65% profit since January. He says that the agent had explained all options and he himself opted for the equity option. At the same time, the agent received 2.25% commission from the AMC, but, he says that he could have settled for nothing had Mr. Mankame decided not to invest.
Deep’s mother is a recent widow. An agent found her in tears in a bank and took courage to ask her what was her problem. She showed him a file with policies and funds that she does not understand. The agent volunteered to help her, but, she said that she has no money to pay him. Agents said that he wants nothing, she will definitely require it later. The agent says that he already makes money on products and he need not take fees from the widow just for advice and running around.
Mr. Gupte asks who will help him with mediclaim when he is in the hospital? Neither he will be able to move, his wife does not understand, his kids are too small and his relatives don’t have time. He asks “how will I pay fees to an agent when I have been to hospital and not earned salaries. Besides I would have spent a lot of money and I will not get entire money back.” Mr. Gupte is the sole bread earner in the family.
No sensible person in the Industry, distributors and customers have said that betterment is not good. Neither the industry / distributors, nor the client wants change to existing set up except required refinement. Then what is the change the two government servants are talking about? Is the change a smokescreen for failure or there is vested interests?

India's Financial DON

India's Financial DON

With India’s New pension Scheme as a non starter with common man and the Mutual Fund industry falling back to institutional investors, D Swarup panel in the name of alleged financial reforms has recommended scraping agent fees on financial products. D Swaroop needs no introduction, he is the failed Chairman of the Pension Fund Regulatory Development Authority (PFRDA) which runs the New pension Scheme. Meanwhile the other Civil Servant, C B Bhave, chairman of the Securities and Exchange Board of India (SEBI) has removed the entry fee for investors, a move that has nearly killed the retail Mutual Fund sales in India. C B Bhave already holds the dubious distinction of killing retail (for small investor) Share market activity in India.

The politician and present Union Minister of Home Affairs P Chidambaram is busy coding Tax reforms which is not his job. He now wishes to tax all insurance and investments. His last tenure as finance minister, P Chidambaram ensured the fall of otherwise healthy economy which he inherited by from competent financial ministers before his term. Chidambaram spent all his energies taxing the ripe economy. He was found issuing empty threats to Indian Industry, after the world economic problems set in, while sitting in other world capitals and negotiation non financial deals.

The idea of moving to thin capitalization may not be bad. ‘Thin capitalization’ means a situation an entity has a high proportion of debt than equity. The method of achieving thin capitalization by the Indian government is wrong. Thin capitalization actually goes against the very grain of customer empowerment, the platform C B Bhave and D Swarup are using for their advantage. P Chidambaram’s penchant to tax is not understandable if you see his dismal performance as finance minister. He imposed education cess and the money has not been spent in education. Worst example of P Chidambaram’s tax fetish was taxing the ATM withdrawal. It is alleged that P Chidambaram was eased out of Finance ministers post because of his incompetence.

If these bureaucrats keep their ego out, they might see the damage to the New Pension Scheme and Mutual Fund. Instead they are set to destroy the most successful financial advisory model, the insurance. It was the insurance agents who have built up the retail financial industry in India. The mutual funds was also pushed by the insurance agents in majority of the case. Mutual Fund industry failed to cultivate the individual agents and chased the High net Investments and Institutional investments.

Let us take the example of C B Bhave’s stock market reforms. Today a small investor is left out of the stock markets. How does a small investor buy stocks? Since he has small money the big brokers and sub brokers shun him. He is not so capable of using an internet. Even if, he dose not understand the financial ratios. Now, since the Mutual Fund came to C B Bhaves attention, the small investor will be further left out. Misselling should be dealt with necessary regulation tackling that particular problem. But C B bhave has a history of chopping the head for a tooth ache. No head no problems seems to be his motto.

A small investor can be served only by a individual financial adviser. Had NPS been rewarding, D Swaroop would have been scripting success stories than the self face saving committee recommendations he is making. A small investor cannot pay fees as he barely has money to invest and a individual advisor needs higher commission to survive. The current Insurance model was very sustainable. Even now, the cut in the commission of the Development Officers of the LIC has a telling affect.

The premise that agents should negotiate for commissions with customers is an unworkable idea for which India is not ready yet. Finance ministry (or the Home minister), the SEBI and the PFRDA have not taken any initiative to educate the customer. The entire education of customers was done by the insurance agents and is a continuous process. Let us think of a situation where SEBI, PFRDA, Income tax employees and the Home minister should be paid salaries based on the services they render and should be negotiated with their customers, viz, the mutual fund and insurance distributors. And to truly empower the customers of these entities, there should be minus salaries of these employees are found cheating or not working optimally. Should the Home minister should be paid over time for doing finance jobs or not paid for not going behind the terrorists. And should the Finance minister be paid at all?

If there are reforms required it should be in the bureaucracy, tax departments and the the reforms of the regulatory bodies themselves. These entities have allegedly become the hubs of corruption.


Now, let us ask if these above mentioned departments are truly customer centric? Is the Customer empowerment is limited to the agents? Has the customer won or lost? Is the customer being serviced at all? Is the 2% - 35% percent commissions to agents costly to the customers than the corruption and the unrewarding taxation? By forcing the investor to investing in low yield debt and taxing their returns truly an investment empowerment?