E-gold investment

Gold has been one of the favourite place of many Indians to park money. Jewellery, Gold coins are the traditional methods. Gold ETF made it possible to hold dematerised form of gold in demat accounts. For those who didnt have the demat account, mutual funds came to rescue with gold funds ( non ETF ).
For those who believe in might of gold , NSEL provides another way to hold gold in an e-form.

NSEL enables investors to invest in popular commodities like Gold, Silver & Platinum and hold them in Demat form. Investors can buy, hold, sell and also convert them into physical delivery.

NSEL's porfolio extend beyonds gold into silver,platinum,zinc, copper ,etc. So, for those who  understand investing in these commodities NSEL makes them trade/hold them in electronic form.

You may check National Spot Exchange Limited's site for more information. You may find the FAQ page on the  site useful to know more details.

Please note :- This is an FYI / educational post and not a recommendation to invest in any commodity or any other investment through NSEL.

Safest bet!

Recently, got to see an ad in the regional channel. The advertisement goes on like this.

A small time vendor stands before an old temple tower and talks about the virtues of holding an LIC policy. Similarly another old man holding a cycle talks about the security that he gets by investing in LIC.

People appearing in this ad or those who invest blindly in LIC don't know for sure , where is their money invested.  Lets  take  an example of a  endowment policy with bonus.  how many of the investors in these policies know , where does their money go. What does  LIC do with the money and how safe is their investment?. ( I am not saying that government would let go the LIC bankrupt, that is reserved for another post)

Whenever you make an investment, you need to try and understand a few things

1) What will be my rate of return ? ( in % per annum)
2) Tax impact on the returns.
3) Where does my money go, how does this scheme  make money and how are they able to provide the returns? ( For example, If you invest in bank FD for 8%, you know that bank lends it to someone for an higher % and hence is able to provide you decent returns)
4) What is risk involved in the investment vis -a vis the investment period and the return percentage?

I am not saying that LIC is good or bad. But you should have at-least a better view of where your money is invested.

I would end this post with another story.

XX:  Do you invest in equity?
YY: ( Who's a Manager with a top notch consulting firm): No way, it's just gambling
XX: What sort of investment do you trust.
YY: We trust only in LIC for the last three generations.
XX: What is the policy that you have and what money you have made on it??
YY: hhmmmmm, Not Sure,,any how- You can have a look at the policies ( brings them in a couple of minutes)

One was an ULIP with almost 40K pa invested  for 4 years in a row and standing at a value of 80K( 50% of invested value) and others were some endowment plans with inadequate insurance coverage.
YY was surprised to know that most of his money had gone into equity and his portfolio value was actually down.!! This might have happened, even if he had invested in equity direct or through mutual funds. But, making an conscious effort to understand an investment tool and managing it would really make a difference in the long run.

Please don't  take any advertisement by face value or invest in something because someone close to you is marketing it. Go through at least the basic set of questions listed above , before you invest.

Why a contingency fund is very important.

Praveer was a lucky go guy till very recently. His financial situation seemed to be in control till the time there was a medical contingency in his family . 

There was an approximate need of almost Rs 4 Lakhs towards the situation and only Rs 1 Lakh was covered under the medical policy that he had.  He had no liquid source of cash with him except Rs 10 k in his bank account. 

When he fell short of this amount , he started looking at all sources :- 1. Tapping employer for salary advance didn't work out  2. His equity portfolio and gold/jewellery had vanished a year ago ,for initial down payment for the house 3.  His savings out of a salary and on site assignment had been converted into a posh car, 6 months back.

This is a classical case of under insurance in one sense and in another way not having any money at all ( easily accessible and liquid) for contingencies. At least 6 months expenses needs to be kept aside in FDs or other liquid instruments. 

This  fund should be "sacro sanct" and shouldn't be touched for anything else other than contingencies like medical  needs, creeping through a job loss situation, unforeseen and critical expense in family, etc. 

This goal of having a contingency fund is very critical for all (Even  for those who struggle to keep their day to day living). Praveer could have easily sailed through the situation with a contingency fund or a better insurance planning. But finally, He  had to settle in for a 19% personal loan to make the ends meet.

So, Please set up a contingency fund NOW or if you have some substantial savings already, earmark a portion for contingency.
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