Invest Today for a Better Tomorrow

  •   Fri, Jun 17 2011
  •   By Godwin Lobo

June 18, 2011

In today's complex world, while parents work hard for their children's education, food, clothes, shelter, it is important for them to also plan their retired life.

Lots of retired folks have time and again wondered how they would be able to survive their final years. While, having your children to take care of your financial needs today is a "bonus", it is important that parents plan for their own future.

As long as we are working, it is important that a sizeable amount goes into savings. It is very important that we pay ourselves first (save), before we start spending for our necessities and luxuries.

It is also important that we avail all the available tax saving schemes, that is Public Provident Fund, Insurance, Infrastructure Bonds etc and provide medical bills to the extent of our compensation with maximum of INR 15,000 as per IT Act.

It is said, a higher percentage of your savings should be invested in Equity with a simple thumb rule of 100 minus your age. If one is not aware of the equity markets, nor able to devote time to their investments which can be very volatile at times, it is better to invest through mutual funds. There are various types of mutual funds with different objectives and the investor should either be guided by a financial advisor or their banker as the case may be.

During the early stages of one's life, investments can also be made by purchasing their own house (even if it entails taking a housing loan). As you have age on your side, one should definetly aim to buy a house which also results in forced savings.

However, if some of the lucky ones already own a house either through their own means or through parents, it would not be wise to buy another house by way of a loan.

With the yellow metal (gold) and silver prices shooting up, a smaller percentage of your investable surplus should be invested. This also depends on your family size. For example, if you have two daughters, then the percentage could be higher compared to families with one daughter. Thus, the families would not need to spend on gold ornaments on their childrens wedding in one shot, as anyway there are other expenses.

An important point to note is that the returns, that you plan (including pension) should atleast be equal to your current expenses. Your expenses might reduce on the personal front, and in case your children have settled or finished their education, the expenses to that extent would be lower. However the medical expenses would arise and hence it is advisable to opt for a medical insurance.


Retired/Senior Citizens

It is very important for people in this category to protect their capital. Hence if anyone offers you interest rates way above any bank has been offering, it is better not to invest. There are no free lunches and any temptations in this regard should be avoided.

With the equity markets investments being long term and volatile, it is advisable not to invest.

The objective of investments for retired people should be monthly, quarterly, half-yearly and yearly interest money to your account with capital protection. While there are some investments like RBI Bonds which give you half yearly returns, post office investments and company/bank fixed deposits give you monthly returns. Some banks or company fixed deposits give you higher interest rates for yearly options. It is important that you spread your investments across various tenors, so that interest amount keeps on flowing frequently.

In case you are on higher tax bracket, one can also invest in Fixed Maturity plans (mutual fund) which gives you decent returns besides monthly savings plan.

People who have invested in a second house or commerical property should lease the same.

Finally, the objective of any individual should be to invest sensibily, prudently and create wealth. The wealth generated should be sensibily passed on to the next generation in a fair and transparent manner without creating any differences amongst the children. Hence a registered "will" should be made. Obviously one would not want his / her hard earned money be spent on court cases.

While I have tried to cover atleast some basic concepts on investing, this is an ongoing exercise and is person specific, situation specfic.
By Godwin Lobo
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Comment on this article

  • A. S. Mathew, U.S.A.

    Thu, Jun 23 2011

    MR. RON, Karnataka:

    Thank you for your kind response.
    I am so poor in handling money,
    never tried to make money in life.
    Thank God for many other far
    richer blessings in my life. I was
    running a business for the last
    20 years, and due to the recession,
    I lost a good amount of money for
    ever. Many of my friends invested
    in stocks and real estates lost
    far greater amount than I lost.
    Now, I find my joy of life by
    those memories where I could help
    the needy and when I could wipe
    the tears of the crying people.

    The founder of Holiday Inn Hotel
    MR. KEMMON WILLIAMS said " if we
    need $ 50000.00 to have a comfortable lifestyle, then the
    excess of the money is simply for
    keeping a score". He was poor, his
    father died when he was very young
    and started working when he was
    14 years old making and selling
    pop corns in movie theaters in
    Memphis, Tennessee.

    It is sad to hear that you
    lost a huge amount in business, but
    please don't get discouraged. It
    was a great practical lesson you
    have learnt in life, and based on
    that bitter experience, start over
    again, and God can give you several
    fold of that amount through another
    miracle.

  • Prabir, Paris

    Thu, Jun 23 2011

    The article was quite interesting and whilst most of us would think that "this is logical and common knowledge" we still miss the bigger picture owing to greed. Whilst India has its own share of issues, i dont think the US or the Europe are far behind. The 2008 crisis is the glaring example of greed.

  • ron, karnataka

    Tue, Jun 21 2011

    Mathew,

    You are right. India has achieved a gresat deal in Exporting Fraud & cheating to other countries too in a big way. We have money launderers in the Gulf having public ltd. companies within the country, and the promoters of these companies have floated Banks in rogue countries from Decades & kept them under Family trusts to preseve the looted wealth. I my self have been taken for a ride by these guys for over a Million USA $. It is strange Govts. in India doesnot take actions against these criminals inspite of being informed. I understand these criminals have guys close to Rulers of this country & they are shielded for minorityy vote bank. It matters very little who goes to hell for our Govts. as long as they serve their interest for coming to power with their minority votes.

  • Manaf, Kuwait

    Mon, Jun 20 2011

    Important article in today's volatile market. Just as income is critical / sensitive for a retiree capital protection is even more important which is aptly mentioned in this article. As the saying goes "money save is money earned"

  • Jasmine, Mangalore/Australia

    Mon, Jun 20 2011

    Ron, MIPs came into existence when interest rates on deposits were lower and hence mutual funds invested a portion of their investments in equities.
    The aim was to atleast give returns to beat inflation.Fantastic article by Godwin providing all us the "broader perspective" As mentioned by him, there are different kind of schemes with different objectives and one should ably guided by an advisor / banker.

  • A.S.Mathew, U.S.A.

    Mon, Jun 20 2011

    It is very true that everybody
    must put certain percentage of
    their income in a saving plan. If we put money in any government
    bond or bank for lesser interest
    rate, the overall return in the
    long term will be less but we are
    sure that if the world didn't
    end, we can get that back in due
    time. Out of the extreme greed, playing with highly dangerous
    investment schemes can lead to
    total loss of everything before
    our eyes. Recently many people
    have lost crores of Rs. through
    many crooked investment schemes
    operated by professional crooks.
    The Financial advisors are not
    omniscient in giving a perfect
    advice, so depending on their
    total direction may or may not end up in high dividends of our
    investment.

  • ashenoy, mangloor

    Mon, Jun 20 2011

    Unlike in western countries most pension incomes do not even feed the needs of the elderly and taxation grabs, Indian retirees are in a plum situation. In India where cost of living is much lower and lifestyles are much laid back and easy, retirees must make a effort to invest in the most risk-free investments like FDs and stay away from greedy investments like mutual funds. Retirees with limited or medium income must remain risk-averse. Market related investments may provide higher returns in the long-term these are very risky indeed and retirees must stay away from such manipulative and risky ventures. Retiress must be capital sensitive and not income sensitive.

  • Ron, karnataka

    Sun, Jun 19 2011

    Dear Godwin

    Having an experience of 4 decades in investment field, i would suggest donot recommend to readers, Monthly income plans (MIP) as AMC's normally do manilpulate returns at the time of redemption siting losses due to Marked to Market conditionsof Debt papers. While getting in they will convince you 10% plus return, but at redemption it wont be more than 5.7% after tax if you are lucky. Take it from me. Better in FD in the bank. Even a 11.75% debenture or bond after tax can hardly give you 8% returns after tax if one is in the higher bracket of tax payer.

  • Antony Herbert Crasta, Mangalore/Sydney

    Sat, Jun 18 2011

    Good article and quite a useful one at that too, especially for the elderly and retirees. Unlike Western European countries and USA, Canada, Australia and NZ, etc, where there is a social security system and an old age pension is in place, once you reach an age of 60 or 65, in India, while the Government employees do have the pension scheme, a large majority of people in the Private Sector, besides their Provident Fund, little savings left when they retire, and quite a few of them have to depend upon their children to look after them in their twilight years, which is not all that good situation in the modern times. One would, therefore, as the writer has suggested, do well to put aside substantial amount of money towards savings, once their obligation with regard to paying up the home mortgage and bringing up and educating their children etc is over. This is all the more important because the average life expectancy has gone up substantially in the recent times here in Australia, for instance, for women, it is 88 years and for men 85, and I am sure, the same situation in India as well - must be nearing 70 years as against 60 a few years ago. As the writer has suggested, the best place to put one`s hard earned money would be in Post Offices, Banks, RBI Bonds, and well known Mutual Funds. Investing in shares etc is not at all advisable for the elderly, not least in the present share market scenario, which has been quite volatile and sliding down for a while.


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