Taresh Bhatia

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  • Taresh Bhatia is a business and financial coach who is fanatically passionate about coaching people. For the past few years...

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  • Taresh Bhatia is a business and financial coach who is fanatically passionate about coaching people. For the past few years...

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  • Taresh Bhatia is a business and financial coach who is fanatically passionate about coaching people. For the past few years...

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3 Buckets


3 Buckets
Its' always nice to make plan for the new year and make resolutions to save or invest money as pert of the new year beginning. Often the question arises on how to do it? Here are some ways to get started:

  1. Start a new, rather 3 type of new bank accounts and name it: INCOME, EXPENSE, SAVING
  2. If you already have a (company opened/ Zero balance), where your salary or most of your income comes in, then name it INCOME
  3. Make a list of all your household expenses, which I categorise as 3: household expense like kitchen etc., then Lifestyle expenses like movie etc, and last, Necessary (can't help it types) like EMI etc.
  4. INCOME account: should have all the "inflows" like salary, interests, dividends etc. coming in to this account, lets say Rs. 10,000/- per month
  5. EXPENSE: here you should have all expenses may be on auto debit mode but no savings linked here.lets say Rs. 7,000/- per month
  6. SAVING: Now from Rs. 10,000/-, less of Rs. 7,000/-, you have a balance of Rs. 3000/- as per the above example.
  7. Once above steps are taken, then you have got certain amount sure to be saved on regular basis and this is what you need to start linking to your financial goals seed money and start lets say ELSS, or other SIP as per your risk profile, goals, investment horizons etc.
  8. So your 3 buckets are lined up and you can make easy plans for goals under this "Advantage 3 Bucket Theory"; its one of the simplest methods of starting your financial planning and for more details, it would be nice to consult a professional financial planners like a 
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  1. If we look behind on 2013, and wish to plan in the year 2014, overall market saw volatile market, both in equity, debt and in global markets also. 2013 was very sentimental driven rather than fundamental with FII driving the markets. One should invest in direct equity only if you have thorough knowledge and in 2014, elections are going to be major dependent factor.
  2. In Equity mutual fund, timing of the market is not important and systematic investment should get you good returns. As the expense ratio has come down in 2013, large and mid cap funds investing for the specific investor would get the desired results.
  3. Insurance market saw major changes which finally became effective from 1st January, 2014 with 400 insurance policies being withdrawn and would be in the interest of the consumer. An interesting trend came about was that anyone who was buying insurance has changed from investment, tax breaks and insurance to buying insurance for the purpose of insurance 'per se'. Changes would be seen in surrender value, minimum insurance cover being about 10 times for person upto age 45 years old. Return illustration changed from 8 and 10 % being changed to 4 and 8 % being the new benefit illustration.  My advise would be to treat insurance as pure insurance vehicle and not try and combine it with investment.
  4. Interest rates changes, pressures on interest rate movement were effective as volatility due external factors in May to July 2013 with money going out due to FII and also the dollar fluctuation, but was protected by RBI. So debt funds investments in 2014 should be matched with inflation and hence short term and ultra short term funds may be looked into as ideal investments in 2014.
  5. Tax free bonds in the long term looks attractive but if looked from financial planning angle and if one falls in the highest tax bracket and also for risk appetite, compared to  FD investments, may consider these new tax free bonds like HUDCO (till 10th Jan on allotment basis)( 10 years: 8.39%, 8.76%, 8.74 % respectively for 10, 15, 20 years and also IIFCL ( 8.26%, 8.63%, 8.75% resp for 10, 15, 20 years being yearly returns). Depending on current scenario and overall goals, then focus on these tax free bonds.
  6. Retirement  planning with NPS, insurance pension products, NSC, PPF all have overall investment tax benefit benefit till Rs. 1 lakh under 80 C. these should be considered as long term investments and considered as part of your overall financial plan.
  7. ELSS: Being a favourite for tax saving mutual fund with 3 years lock in, but to watch out for it loosing its gleam, as an investor normally looking  it as to its tax saving habit  rather than return or goal oriented investment.
  8. Inflation indexed bonds: generally linked to CPI inflation based returns, and being 1.5 % more than the then inflation rate, may get you 9-12 % return with minimum being Rs. 5000 and maximum being Rs. 5 lakh. Major issue to be considered being taxable return and if someone is already in the 30 % tax bracket, then he/ she might not really benefit
  9. Gold investments saw 2013 being one of the negative returns  year and hence in the next few years may not give great returns. Rupee depreciation being one of the main reasons for gold devaluation and hence  should not be considered this year.
  10. Goal oriented financial planning should be the ideal strategy and I would recommend to first choose a professionally qualified, rather a CERTIFIED FINANCIAL PLANNERCM and plan all your financial goals with him. Trust him to develop your financial plan with your current investments mapped in and the gap being also linked to your risk profile leading to an ideal asset allocation. Then continuously monitor your investments periodically and ensure changes are made in line with micro economic indicators. Re balancing your portfolio should be ensured so that returns against the respective benchmark funds are checked and you are in tune with expected returns.

All the best for your 2014 investment and take care of your money!

Taresh Bhatia is a fee based CERTIFIED FINANCIAL PLANNERCM working in Gurgaon. He advises clients on their investment and guides them inline with their financial goals. Taresh is an avid writer, blogger, and personal finance expert.  Having worked for over 250 families in financial planning, he works with his team based in Gurgaon, Delhi NCR, India. He can be contacted on his mobile : +91 9810144683, or by email: taresh@advantagefp.in or visit www.advantagefp.in

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Contingency Fund Planning

  1. 10 Important things to keep in mind for Contingency fund planning: these are essential criteria for a well planned Contingency funding. In my opinion, this should be on top priority of everyone.
  2. You may have made good plan for your financial future but one plan does not come with actual planning, that is Contingencies... when they come, like an emergency, you need to have the money in hand!
  3. Emergencies like an accident or illness or loss of job or market crashes or seasonal fluctuations or change in economic conditions are some events that one needs to think over carefully and make plans to get funds made available on such situations
  4. How much and how does one calculate, well it is easy as you know your industry and job or business well, so if you think 6 months are the minimum and 12 months is maximum, then that the right kind of monthly expenses into 6 or 12, is the amount that you need to keep for contingencies
  5. These funds should be kept solely for this purpose and should not be considered for any other goals, only then these funds can remain secured and well planned.
  6. Liquidity is critical: lets say you need Rs. 1 lakh out of your 6 lakhs, then Rs. 1 lakh should be coming to you in hours
  7. Safety: these funds should not be so much planned for their return but more for safety and your own financial security, as once done, you would feel so great having that kind of money with you safely.
  8. While these funds can be kept in safe savings account, but should some where earn more that the inflation, else they would tend to erode with time and importance of their being there may become redundant, so there are many short term liquid mutual funds that well serve this purpose and hence major part of your contingency funds should be kept there.
  9. Taxation: if you are in the 20 % or 30 % tax bracket, then it is worthwhile to consider funds more optimised than just FD as FD may take away 30 % of the return that you are going to get on your contingency funding.
  10. Keep learning: read more about such funds, the importance and all the options to keep abreast of the latest and trust your financial planner.

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10 ideas on planning

10 ideas on planning
  1. While a ship sails from the port, the captain knows his destination. When his fellow men ask him for the next directions, the captain cannot say, "sail on for another 10 kms, then we shall see how much fuel we have and then decide course of action" No, he cant! so he better be having the knowledge of the winds, fuel consumption, risks of weather and other factors that are going to affect his journey. Critical factors: he needs to keep his sight "ON" to be able to identify dangers and be able to change course, if required,  so it is a dynamic journey, dynamic decisions and expertise which makes him an able captain.
  2. Likewise, in your financial goals journey, you must have financial goals towards the journey of your financial future, rather secured financial goals. You need to evaluate all risks involved before investing. You should be having all the factors evaluated essential for your secured future.
  3. Without setting up goals, you may be a rudderless ship...
  4. Having such analysis done through an experienced and knowledgeable person like a CERTIFIED FINANCIAL PLANNERCM would perhaps  give you the right path which also needs to be reviewed every 6 months or every year.
  5. Change is constant and you must take it in stride.
  6. Is there a cost to getting the above ideas, YES. and you should be prepared to get a professional provide you with such advice. Someone who is certified by a worldwide organisation and brings that confidence and knowledge with him.
  7. when I meet my potential clients, questions like "how much interest will you be able to get" is honestly asking that captain, How far can this ship go...( his ship has the capacity to sail for much longer journeys, but may need re fuelling on reaching one port)
  8.  Have confidence and trust on this captain of your journey and give him to time to wade through the rough weathers.
  9. Get educated on some basic from him only and let this captain give you the basics through some online access (Its like taking a comfortable executive room on that ship!)
  10. Buy the ticket to ride this journey and have a pleasant journey on your financial secured future.

10 Basic concepts on ELSS:

  1. An ELSS (Equity Linked Savings Scheme) is a mutual fund scheme that invests in equity & equity-related securities
  2. ELSS are also eligible investments under section 80C of Income Tax Act 1961, where the investments up to Rs.1 Lac* is eligible for deduction from your total income. Thus you can easily save up to Rs.33,660/- in taxes by investing in ELSS.
  3. ELSS have a lock-in period of three years. This allows the investors to benefit from the long term growth potential of equities.
  4. ELSS offer the following advantages over traditional tax saving investments: Potential for higher returns,
  5. No limits on maximum investment amount, Lower Lock-in period
  6. Advantages of being a Mutual Fund scheme-Tax benefits as an Equity scheme, Tax free dividends, No Long-term Capital Gains,
  7. Choice of AMCs & Schemes and also Options (growth / dividend / reinvestment), Convenience.
  8. Flexibility of investing (Lump sum / SIP / Switch / STP)
  9. Capital Gains Tax-Long Term Capital Gains are tax exempt-That means above 1 year, entire gains are tax free in Equity investments.
  10. Dividend Distribution Tax- Dividends declared by ELSS schemes are Tax Free. Enjoy Tax fee dividends


Taxable Income

Tax before Planning

ELSS Optimal Amt.

New Taxable Income

Tax After Planning



































Expected Returns

Lock-In Period


National Savings Certificate - NSC


6 years


Public Provident Fund - PPF


Up to 15 years


Mutual Fund ELSS

Around 15%-20%

3 years



1 Lac

End Value of Investment in Rs. Lac after - Years



If one invested Rs. 1,00,000/-.then lets take a look at what it give after some years (based on some assumptions):

10 Merits of saving in a ELSS

  1. Income tax benefit under 80 C: Individuals are allowed to invest upto Rs. 1,00,000/- per financial year thus availing rebate deductible from their gross taxable income. On the other hand, there is no ceiling on how much you wish to invest but tax rebate would be limited only to Rs.1,00,000/- in a single financial year while any other mutual fund investments do not qualify for tax rebates.
  2. Least investment time horizon: with minimum 3 years lock in. With most of the other tax saving instruments like PPF, NSC and FD being debt instrument category, ELSS is investing 80-100 % in shares, thus bringing high risk high return in minimum possible time horizon, thus making it th3 shortest lock in  instrument in its tax saving category, but remember if in SIP mode, each amount invested every time get locked in for respective 3 years period.
  3. Easy liquidity: after the 3 years lock in, you can redeem your equity funds or you can also stay invested till you want to, rather do not have to close necessarily after 3 years thus giving you continued tax free returns  on your investments done earlier.
  4. Least investment amounts compared to ULIP or pension plans- with minimum of Rs. 500/- per month while most of the mutual fund require a minimum of Rs. 1000/- to Rs. 5000/- minimum investment.
  5. Earn dividends while your investments are still locked in for 3 years: the option to get dividends is available when investing. 3 type of returns are available: growth, dividend and dividend reinvestment option.
  6. Tax free maturity: both dividends and growth are tax free at maturity. Future returns are hence totally tax free in your hands. Even DTC provides tax exemption from  long term capital gains.
  7. Great opportunity to get flavours of Indian Equity market, especially for young or early investors who should taste equity when their long term goals are not within 3 years. Past 5 years past performance having given 16-19 % kind of returns
  8. Good ideas to start saving habit- start the habit with investing on a regular basis. For those looking at creating wealth creation over medium to long term, ELSS is perhaps the only  tax saving instrument which also is an inflation beating capacity.
  9. SIP: get the benefit of buying the high and the low of the markets thus kind of insulating your investments from perhaps buying when the market was high.
  10. Open ended funds: ELSS are open ended mutual funds which gives you the option to buy anytime.

10 Demerits of investing in ELSS

  1. Current income tax rebate may soon get waived off with the soon to start winter session perhaps going to pass the much awaited DTC (direct tax code) which would or may take off this rebate offer.
  2. If DTC gets passed, it may bring in Exempt, Exempt, Tax (EET) regime which means that the maturity of ELSS could get taxed or added to your income of that year of maturity bringing sudden demerits not planned by you earlier.
  3. Past performance is not to be taken as future returns. With last 3 years abysmal performance and the current volatile market conditions can be taken as investors disinterest today.
  4. Not for risk averse: avoid ELSS if you are not having appetite for risk and also if you are trying to invest for short term goals. ELSS is for those who understand market linked risk and are ready undertake the journey of high risk with high return concept.
  5. Not all funds may give positive returns when you investments turn 3 years old and hence some diversification may help.
  6. Not a great option if you thinking to link some specific future financial goals with ELSS maturity.
  7. Even though the lock in period for ELSS is 3 years, you have to be prepared for a 7-10 years to get the right flavour for equity market.
  8. Equity return are highly volatile and therefore may give even erode the basic capital (capital loss) in the short term.
  9. Premature withdrawal is not allowed before 3 years while other likewise tax saving instruments like PPF, NSC with some penalties, withdrawal is possible. This lock in of 3 yrs means that you cannot withdraw your 12th month SIP till 48th month while like wise investments like ULIPS allow you to get even the last 59th premium paid to be paid out to you on 60th month maturity.
  10. During certain market downturns, one may have to just continue while your investments may be getting you negative return.

CONCLUSION: CONSIDER ELSS  as part of your overall financial plan and not as ad hoc investments as necessarily done goal based investment would perhaps  help reach right conclusions.

IMPORTANT CONSIDERATION: In the final draft of the new tax code, no tax breaks have been provided in case you invest in future ELSS; perhaps, only retirement-oriented investments would be eligible, ELSS may change not be eligible as a "TAX SAVING" investment. It is to be seen that perhaps ELSS may lose tax-saving advantage in the current form of the DTC, if passed. Moreover, DTC provides tax exemption on long-term capital gains from equity funds. Therefore, the gains from investments, made before DTC (if and whenever passed) will remain eventually tax-free.

Disclaimer: Views expressed by Taresh Bhatia and or Advantage Financial Planners LLP are only for study purpose and not as investment advice. All investments  in ELSS are risky and hence consultation with a qualified financial professional like a CFP, CA or tax consultation along with investment advisor are highly recommended. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. ELSS and all Mutual funds are subject to market risks and no past performance should be taken as future performance in any way what so ever. The information transmitted in this blog/ website/ email contains confidential and privileged material and it is meant for the intended recipient only. If you are not the intended recipient of this email, please delete the same and inform the sender immediately. Any disclosure or further distribution of the email is strictly prohibited

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