Why home insurance should be your top priority

Here are a few reasons as to why home insurance is a must-have thing and how it can help one to avoid a huge financial setback in the event of any mishap.

A home is not merely a structure made of cement and bricks, it is a space filled with emotions. People earn for their lifetime and give everything to build a place where they could live comfortably with their family. You gave your all to have a home of your own, but do you have any backup plan to protect the same? There are few things which we as a human do not have control over, and to protect the ‘humble abode’ that you have instituted with the years of constant dedication and hard work, home insurance should be your top priority. However, the irony is, people, see it as an unwanted expense, but in fact, it is not. Let us check out some legitimate reasons as to why a house or home insurance is a must-have thing and how it can help you avoid a huge financial setback in the event of any mishap.

1. Natural Disasters

As mentioned earlier, there are few things which are beyond our control, and natural disasters like “Acts of God” are one of them. It can strike anytime, and anywhere. Remember the recent floods of Kerala, Uttarakhand and Mumbai that affected millions of lives with deaths, injuries, and destroyed homes. People witnessed houses and assets getting destroyed in front of their eyes and had to use their hard-earned savings to rebuild homes. It was a traumatic and emotional experience for them. Therefore, to protect yourself and your family against “Acts of God” such as landslides, floods, earthquakes, cyclones, etc., it is important for you to buy a home insurance plan.

Home insurance

2. Man-made Disasters

No doubt we live in a technology dominating society where we have the latest and fanciest of safety measures, such as CCTV security and gated communities, but we cannot rely on them completely for our security, can we? Man-made disasters such as riots, strikes, robberies, terrorism, thefts, etc., are a real risk and still prevalent. And this makes for a strong reason for you to have a proper home insurance plan. However, some insurers may not cover for the losses due to all these risks, but you can ask them for extra protection in the form of riders.

3. Protection for the Contents Within

Home insurance not just covers your house, but also the contents within. Things like electronics, furniture, jewellery, light fixtures, antique items, valuable home appliances, etc., are also covered under a home insurance policy. However, the scope of coverage might vary as per your preferences. In case of any damage or theft, you will get compensation for the same or even get them replaced with the new ones. So when choosing a home insurance plan, you can actually opt for the things that you want to get cover for along with your home insurance.

4. Not Expensive

For many, home insurance may seem like an unnecessary expense but a few know that it comes at a fairly low premium rate, which may be cost lesser than a rupee per day. And in return, home insurance buyers get significant benefits. Further, you get the flexibility to increase or decrease the premium amount as per your affordability by simply adding or removing the items to be insured under the policy.

5. Protection against Lawsuits

What if you incidentally damage someone else’s property owing to the spread of fire? You will be in a legal hassle. But, home insurance can save you from such hassles by covering the cost for the damage caused to another property due to any incident. Not only this, it also covers the cost for the medical expenses of the visitor or guest injured in your property during that event.

6. Coverage for Rent

If in case you experience a loss due to fire perils, and it makes your home inhabitable, be it owing to a natural disaster or manmade circumstance, you may have to find a temporary accommodation until your home gets reconstructed. In that case, your insurer pays for your rent. So, being a responsible individual, it is always wise to be prepared for the worst, and home insurance ensures financial support in such situations.

7. Peace of Mind

You cannot deny the fact that for most people, home insurance actually sounds like a certain expense for an uncertain reason. However, the peace of mind offered by home insurance is more than anything that money can actually buy for you. So, it does not matter whether you own a villa or an apartment, once you buy home insurance for it, you get the luxury of peace of mind because you know that you are prepared for the worse. Buying home insurance is indeed a proactive step you take to protect your home from unforeseen dangers. It signifies what extent you can go to protect your home. Moreover, home insurance is the right policy to provide protection from uncertainties not only to homeowners but to tenants as well. However, when you buy home insurance make sure you opt for the policy offering the best cover.

Follow the 5 simple rules to select debt schemes

The recent credit downgrades have unnerved mutual fund investors.

Follow the 5 simple rules to select debt schemes

  1. Invest in a fund matching your credit & interest rate risk appetite. Always factor in the possibility of default.

Rethink if, – AAA bonds < 50%

Duration > 2


2. Check how diversified is the debt portfolio. A 10,000 cr AUM is invested in just 20-30 bonds, or is spread across 50-80 bonds? This ensures basic safety through diversification. If there are fewer bonds, ensure they are all highest rated, else concentration increases risk.

3. Check the concentration risk of the portfolio especially in lower-rated bonds. High exposure in a single paper means, higher loss in case of default. A high % exposure, say 5-9%, in a very low rated paper, shows recklessness. Much more in multiple papers is indicates higher risk.

4. Check the levels of diversification across all the schemes of the mutual fund. That gives an idea of existence or otherwise of risk management across the fund house. That is a sign of a far greater sense of responsibility towards investors money, a sign of not being reckless.

5. While a fund, it’s fund manager & fund house selection is important, diversification across fund houses is VERY important. Even if a fund house conforms to your expectations today, there are no guarantees that it will continue to conform in the future.


Note: Mutual fund investments are subject to market risks read all scheme related documents carefully.


No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here.

Do your mutual funds have exposure to Essel Group?

Many investors are concerned about the impact the Essel Group fiasco will have on their mutual fund investments.

The Essel Group claims to have reached an understanding with lenders who hold pledged shares of the group’s promoters. This could arrest the decline in the Essel Group stocks. Group companies shares had plummeted 10-33% on Friday, triggered by reports of payment defaults and sale of pledged shares.


While the sharp fall in stock prices dented the NAVs of equity funds holding these scrips, there were fears that the crisis would spread to debt funds as well. More than Rs 8,000 crore worth of bonds and debentures issued by group companies is held by 150 debt mutual funds. Of this, Rs 6,329 is invested in 60 open-ended debt funds while the balance Rs 1,672 crore is in 90 fixed maturity plans (FMPs).

In a statement issued after the meeting with lenders, the Essel Group stated that it has been agreed that the no default will be declared due to the steep fall in price and there will be synergy and co-operation amongst lenders.

The Aditya Birla Sun Life Mutual Fund is the biggest investor, with an exposure of Rs 2,936 crore spread across 28 schemes. This is almost 37% of the total debt fund exposure to the Zee group. 

However, Aditya Birla Mutual fund is confident that the prices of these bonds and debentures will not be impacted. “These bonds are secure.” 

One scheme alone has Rs 1,288 crore invested in Zee group bonds. As on 31 December 2018, the Aditya Birla Sun Life Medium Term Plan held zero-coupon bonds worth Rs 720 crore issued by Sprit Infrapower & Multiventures Pvt Ltd. (credit rating A) and Rs 568 issued by Adilink Infra & Multitrading Private Ltd (unrated). The two holdings account for 12.5% of the fund’s total Rs 10,272 crore portfolio and are its top holdings.

Download (PDF, 16KB)

Another scheme, the Aditya Birla Sun Life Credit Risk Fund, held Rs 740 crore worth of zero-coupon bonds of Sprit Infrapower & Multiventures Pvt Ltd. and Adilink Infra & Multitrading Private Ltd. The two holdings account for 9.2% of its portfolio, with Spirit Infrapower as its top holding (5.62%). The Aditya Birla Sun Life Dynamic Bond Fund has over 8% of its Rs 5,136 crore portfolio invested in Sprit Infrapower bonds.
In percentage terms, Baroda Mutual Fund schemes have the largest exposure to bonds issued by Zee group companies. As on 31 December 2018, the Baroda Credit Risk Fund had Rs 168 crore invested in zero-coupon bonds of ARM Infra & Utilities Pvt Ltd. and Cyquator Media Services Pvt. Ltd. Together, this is 17.7% of its Rs 947 crore portfolio.

The silver lining for debt fund investors is the new rule that allows side pocketing of distressed assets. It is an accounting method that separates illiquid bonds from quality investments in a debt portfolio. If the Zee group bonds crash, open-ended debt funds may cushion themselves by putting them aside in a separate side portfolio. The fund’s NAV then reflects the value of the liquid assets, with a separate NAV assigned to the side pocket assets based on their estimated value.

However, this will not apply to fixed maturity plans (FMPs) where the scheme has a limited tenure and bonds are held till maturity. HDFC Mutual Fund, the second largest investor in Zee group debt with an exposure of Rs 1,196 crore, has most of its exposure through FMPs. It has invested over Rs 900 crore in bonds and debentures through 38 FMPs. Some FMPS have over 20% of their assets invested in Zee group companies.

Note: Mutual fund investments are subject to market risks read all scheme related documents carefully.


No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here.

What happens to MF exposure to DHFL debt after downgrades by CARE

For mutual funds with exposure to DHFL debt, a rating downgrade means that there will be a mark to market impact on individual bond prices, also affecting NAV

After CARE cut ratings from “AAA” to “AA+” for debentures, loans and deposits. Rating for commercial paper (“A1+) has kept under watch with developing implications.

With DHFL group companies debt mess coming under the lens, global brokerage Credit Suisse has warned that it could trigger a second wave of risk aversion in India’s debt fund industry.

Earlier, India’s debt mart faced a major risk aversion during September-October following a debt default by the IL&FS group.

The DHFL debt mess is expected to have a resonating effect as the company is among the larger borrowers from mutual funds (MFs) and their aggregate exposure stood at around Rs 8,650 crore as of December 2018. That amounts to about 0.7 per cent of debt mutual funds asset under management as of December 2018.


About Rs.7,800 crore of such debt has been purchased by open-ended MF schemes, while the rest of the money is with closed-ended funds. Open-ended funds are where investors have the highest liquidity since you can come in or go out anytime. Closed-ended funds don’t allow you to exit before maturity.

Several fund houses have large exposures to DHFL, at 2-15 per cent of total debt AUM, with some schemes having up to 30 per cent of their AUM to DHFL

dhfl mf

UTI Mutual Fund had the maximum exposure of around Rs 2,144 crore as of December 31, 2018, followed by Reliance AMC at Rs 1,488 crore, Axis AMC at Rs 771 crore and Franklin Templeton Rs 571 crore.


Master (1)

Master 3

Master 6

The DHFL issue may result into more scrutiny of credit risk in debt funds, and considering the fact that NBFC funding relies on MFs for 10-30 per cent of their borrowings, debt funds flow will see some hiccups in the coming days.

Some schemes have taken mark-to-market (MTM) losses on this exposure with DHFL paper being repriced at higher yields. Credit Suisse warned if this continues and leads to redemption pressure, it may cause a second wave of risk aversion in domestic debt funds and volatility in their flows.

In the open-ended space, about Rs 300 crore of exposure is to Aadhaar Housing Finance, which will now become the responsibility of Blackstone. DHFL is a Rs 6,200 crore of debt exposure for funds.

Debt raised by firms like DHFL is repaid within a few months (or years) as per maturity. If DHFL at some point is not able to honour its obligations, then that will be default like situation eg. IL&FS. However, such a situation may not really happen.

As a precautionary measure, some mutual funds may, however, write down the value of the bonds.

There is also the option to segregate or side-pocket bad assets so that the impact of the downgrade does not lead to panic redemptions. However, side pocketing can happen only in extreme cases, and that too when there is a default-like scenario.

Existing investors – For mutual funds with exposure to DHFL debt, a rating downgrade means that there will be a mark to market (MTM) impact on individual bond prices. This means there will be an impact on the Net Asset Value (NAV) of the funds.

In some cases, the MTM impact of the first series of downgrades on bond prices can be as significant as 25%. This means a 5% position for the bond in a fund would result in a negative 1.25% MTM performance attribution due to bond holding.

Any redemption from such funds at this point would result in an actual booking of losses.

Keep an eye on schemes with 10-33% exposure to single DHFL security.

Such examples are DHFL Pramerica Ultra Short Term (Dewan Housing Finance Corpn. Ltd. TR-1(30-Apr-19), JM Income (Dewan Housing Finance Corporation Ltd. SR-I CATG III & IV 09.10% (09-Sep-19)), JM Short Term Fund (Dewan Housing Finance Corporation Ltd. SR-I CATG III & IV 09.10% (09-Sep-19)), JM Low Duration (Dewan Housing Finance Corporation Ltd. SR-I CATG III & IV 09.10% (09-Sep-19)), Baroda Dynamic Bond (Dewan Housing Finance Corporation Ltd. SR-III CATG III & IV 09.25% (09-Sep-23)), DHFL Pramerica Medium Term (Dewan Housing Finance Corporation Ltd. SR-II CATG III & IV 9.15% (09-Sep-21)), DHFL Pramerica Floating Rate (Dewan Housing Finance Corporation Ltd. SR-I CATG I & II 09.05% (23-Sep-19)), DHFL Pramerica Low Duration (Dewan Housing Finance Corporation Ltd. SR-I CATG I & II 09.05% (23-Sep-19)), BNP Paribas Medium Term (Dewan Housing Finance Corporation Ltd. SR-I CAT I-IV 08.90% (04-Jun-21)), BOI AXA Short Term Income (Dewan Housing Finance Corporation Ltd. CATG I & II SR-IV 9.1% (16-Aug-19)), Tata Medium Term (Dewan Housing Finance Corporation Ltd. SR-I CAT I-IV 08.90% (04-Jun-21)).


Note: Mutual fund investments are subject to market risks read all scheme related documents carefully.


No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here.


Edelweiss Small Cap Fund : Review

Edelweiss Mutual Fund has launched a new fund Edelweiss Small Cap Fund. The NFO opened for subscription on January 18 and will close on February 1, 2019. The last one year has been very difficult for small-cap stocks with the Nifty Small Cap 250 Index falling 28% in 2018. Deep corrections, however, create attractive investment opportunities and this may be an exciting time for investing in small-cap stocks.

Key NFO Features

NFO Period:

January 18 to February 1, 2019

Exit Load:

If units are redeemed or switched out before 365 days – 1%, if units are redeemed or switched out after 365 days – Nil


Switches from equity schemes and other schemes – Feb1, 2019; till cut off time

Minimum Investment Amount:

Rs.5,000/- ( plus in multiple of Re. 1)

Fund Manager:

Harish Patwardhan

Benchmark Index:

Nifty Small Cap 250 Total Returns Index

Why Small Cap?

Small Cap stocks usually outperform large-cap stocks over long investment horizon. In the last 15 years, the BSE Small-Cap Index rose 16.5 times, while the BSE Sensex (index of the largest 30 stocks by market cap) rose 11.3 times. Even in a mature market like the US, small-cap stocks have outperformed large cap in the last 15 years.

small vs global

Over long tenors, fundamentals have driven small-cap performance. Quality small-cap stocks have delivered stronger earnings per share growth compared to their large-cap counterparts. Stronger earnings growth leads to small-cap outperformance in the long term.

The average number of analysts covering large-caps is 30 and mid-caps is 15. Small-caps are relatively under-researched. Out of 870 stocks in BSE Small-cap Index. 210 stocks are not covered by any analyst 398 stocks are covered by less than 5 analysts. This gives fund manager an edge in spotting good businesses early and generate higher alpha.

The universe of stocks in large and mid-cap segments has shrunk post-SEBI’s mutual fund scheme categorization. While there are only 100 stocks in large-cap and 150 stocks in midcap segments, there are more than 2,500 stocks in the small-cap segment. The broader investment opportunity in the small-cap segment may increasingly lead fund managers to invest in these stocks to create alphas. Higher demand for small caps can benefit small cap investors. Edelweiss estimates that over Rs 1 Lakh crore can flow into the small-cap segment (see chart below).


Small caps have a strong presence in certain industry sectors with high growth potential, where large and midcap stocks have a much smaller presence, e.g. chemical companies, staffing companies etc. Investors can leverage the growth potential of these sectors by investing in small caps.

Why invest in small cap now?

Historical data shows that deep corrections provided attractive investment opportunities in the small-cap segment. When the Nifty Small Cap 250 Index fell by 20 to 30% in the past, the subsequent 5-year average CAGR was around 14%. When the small-cap index fell by 10 to 20%, it gave 15% CAGR returns in the next 5 years.

Over the past 1 year, 78% of small-cap stocks have corrected by more than 30% from their peaks and 25% small cap stocks have fallen more than 50% from the peaks. Going by historical evidence this may provide attractive investment opportunities.


small industrial

Historical data shows that small caps bounce back stronger after underperforming large caps (see the chart below). The relative underperformance of small cap in 2018 has been the most severe in the last 10 years, signalling attractive investment opportunities in this segment now.

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Sharp price cuts improve risk-return trade-off for quality stocks (stocks which deliver strong EPS growth). The price correction in quality small-cap stocks over the past 1 year is likely to improve the risk-reward in their favor.

Why invest in Edelweiss Small Cap Fund?

The fund has a unique portfolio allocation strategy to ensure performance consistency.

The fund manager will invest in 4 different buckets – strategic (core portfolio for buy and hold), tactical (to leverage cyclical opportunities), options (high risk/return) and defensive (to provide stability).

The fund will focus on liquidity (to reduce impact cost), diversification (to manage concentration and liquidity risk) and rigorous quality check (management quality and earnings visibility).

The fund manager (Harish Patwardhan) has a long and successful investment track record. Edelweiss Midcap Fund managed by Mr Patwardhan has outperformed its benchmark index across different time-scales; 23% annualized returns in the last 5 years.

Complete Factsheet of Harish Patwardhan

Download (PDF, 100KB)

The fund manager will follow a process driven investment approach backed by in-depth research capabilities of the AMC.

Who should invest?

Patience: Investors who want to invest for more than 5 years and can be patient during volatile markets.


Risk Appetite: Investors who have higher risk appetite and want aggressive
portfolio allocation.

Asset Allocation: Investors who are looking to invest in small-caps
as a part of asset allocation

Reduce timing risk through STeP :

Though small stocks have corrected sharply over the past 12 months, further corrections cannot be ruled out. Edelweiss’ STeP investment facility available with this NFO will enable you to invest systematically in the fund in staggered based on price and time triggers.

If you opt for STeP, 20% of your subscription amount will be invested in the Small Cap Fund and the balance in the Edelweiss Liquid Fund. The investment in the liquid fund will be transferred to the Small Cap Fund in 4 instalments on monthly dips. Each transfer will be triggered if there is a 3% correction in the small-cap index or the last date of the month if the trigger is not hit during the month. The STeP facility will allow you to take advantage of volatility when investing in a lump sum.

“Investing is the intersection of economics and psychology.” – Seth Klarman


Note: Mutual fund investments are subject to market risks read all scheme related documents carefully.


No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here.

Six mutual fund schemes under watch and downgraded one of these due to their exposures to the special purpose vehicles of IL&FS.

On Tuesday, rating agency Icra placed ratings of six mutual fund schemes under watch and downgraded one of these due to their exposures to the special purpose vehicles of IL&FS.  

A cash flow generating IL&FS SPV has chosen to default. Investors are now worried about more such defaults.

The schemes that were put under ratings watch are HDFC Short Term Debt Fund, HDFC Banking and PSU Debt Fund, UTI Banking and PSU Debt Fund, UTI Bond Fund, UTI Dynamic Bond Fund and Aditya Birla Sun Life Short Term Opportunities Fund. Icra also downgraded Birla Sun Life Short Term Opportunities Fund from AA+mfs to AAmfs.  



UTI MF’s schemes have an exposure of about Rs 559 crore to the secured bonds issued by Jorabat Shillong Expressway (JSEL) as on January 21, 2019. According to debt fund managers, in a normal course, the interpretation is to keep the cash flows within the common pool until the situation settles down, but this interpretation is not applicable to the SPVs.

Fund managers say concern on repayments of IL&FS SPVs stems from another ‘ring-fenced’ SPV of IL&FS Group — Jharkhand Road Projects Implementation (JRPICL) — not paying coupon payments to its bondholders due on January 21. The NCLAT moratorium order on IL&FS and its group entities dated October 15 was cited as a reason for the non-payment.

Among the three fund houses under ratings watch, UTI MF has the largest exposure (as a percentage of its schemes) to IL&FS SPV.

According to Icra note, UTI Banking and PSU Debt Fund, UTI Bond Fund and UTI Dynamic Bond Fund’s exposure to JSEL stood at 6.87 per cent, 5.98 per cent and 6.25 per cent of their respective asset under management (AUM) as on December 31, 2018.

The fund house will value its investments in JSEL at a price based on the fair value principle in the light of recent developments and downgrades of similar structures. The fund house re-iterated JSEL’s capability to service its own debt.


Meanwhile, HDFC MF has decided to take a 25 per cent markdown on its exposures to Hazaribagh Ranchi Expressway (HREL) considering the high likelihood of rating downgrade of HREL to below investment grade.

The exposure of HDFC Short Term Debt Fund to HREL is at 0.55 per cent of its AUM, while HDFC Banking and PSU Debt Fund’s exposure is 0.29 per cent of its AUM to HREL, according to the Icra note.

Birla Sun Life’s Short-Term Opportunities Fund’s exposure to JRPICL is at 1.15 per cent of the scheme’s AUM.

What I have understood

ILFS SPV – Curious case of default: What I’ve understood – given in this thread, The strange case of Jharkhand Road Projects Implementation Co Ltd an SPV of ILFS having cash and yet not paying creditors. The co. receives annuity every quarter from the Jharkhand Govt for roads built.

Rs. 75 crores of int and principal payment were due on 21.1.19. AND NOT PAID. There are currently Rs 450 crores lying in an escrow account out of which the payment was to be made. Usually, for financing such projects, an extra amt is kept in a DSRA account.

This DSRA is a debt servicing account to service debt if the annuity is delayed. With all this, yet the JRPIC chose not to pay Rs75 crores (remember 450 crores is ready to cash lying in the bank/liquid funds).

The annuity payments by the Govt of Jharkhand go to pay maintenance cost of the roads and principal and interest to creditors. What is left goes to the promoters after paying creditors. The revenue stream Is constant. The Jharkhand Govt has been paying regularly.

The company defaulted because of interpretation of an NCLAT order on ILFS and its companies by the current management. The NCLAT order put a moratorium on debt payments of companies and enforcement of assets by creditors.

The moratorium of NCLAT probably meant that creditors could not sell the security for loans of the ILFS companies and not meant to stop debt servicing of these SPVs which were receiving annuities regularly and servicing debt.

Now the management has taken a call that this applies to regular debt even from companies, SPVs that are servicing debt. So the creditors who could easily withdraw from the escrow account now cannot do so.

So curious case the State Govt is paying annuities regularly, there is money lying in the escrow account and the creditors have not received payment. Jharkhand Road Projects Implementation Company Ltd. is one of the SPVs within the IL&FS Group.

New National Pension System ( NPS ) withdrawal rules

The Pension Fund Regulatory and Development Authority (PFRDA)  has relaxed partial withdrawal norms for NPS subscribers. With this, NPS subscribers can withdraw up to 25% of their money from their corpus thrice in their lifetime.

The first withdrawal is now permissible after three years from the date of joining. Earlier, NPS subscribers were allowed to withdraw their corpus after completion of 10 years.

This amount will be tax-free in the hands of subscribers.

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Currently, NPS subscribers can withdraw partially for higher education or marriage of their children, fund their entrepreneurial dream or professional skill development, construction or purchase of first house and treatment of specific ailments like cancer, kidney failure, paralysis etc.

Like NPS, EPFO also allows partial withdrawals. However, since there is no such limit on withdrawals, many people pull out their money from their EPFO account. As a result, many subscribers are left with a small corpus for their post-retirement days defeating the very purpose of EPFO.

Another key development is the choice of a pension fund for central government employees. Now, such employees can choose pension funds including private sector pension funds, with the change of fund being allowed once every year.

Partial withdrawal is permitted under the following conditions

1. For higher education and marriage of children including a legally adopted child.

2. For purchase or construction of a residential house or flat. In case, the subscriber already owns a house other than ancestral property, either individually or in the joint name, no withdrawal is permitted.

3. If the subscriber, their legally wedded spouse, children, including a legally adopted child or dependent parents suffer from any specified illness, which shall require hospitalization and treatment in respect of diseases such as Cancer, Kidney Failure (End Stage Renal Failure), Primary Pulmonary Arterial Hypertension, Multiple Sclerosis; Major Organ Transplant, Coronary Artery Bypass Graft; Aorta Graft Surgery; Heart Valve Surgery; Stroke; Myocardial Infarction; Coma; Total blindness; Paralysis; Accident of serious/ life-threatening nature; Any other critical illness of a life-threatening nature, withdrawal is allowed.

4. To cover expenses by a subscriber for skill development/re-skilling or for any other self-development activities.

5. To cover the expenses by a subscriber for the establishment of own business or any start-ups.

6. To cover medical and incidental expenses arranging out of disability or incapacitation suffered.

Mistakes investors make without an advisor

Easy access to financial information on the internet means that any investor can access a list of top performing schemes. Newer, easy to use online investment platforms have also taken the pain out of the transaction process. So do investors need expert guidance on financial matters?

The answer is a resounding yes. This is because an advisor’s role is not limited to identifying the best performing schemes; he matches client needs to right investments and helps them make wiser investment choices.

Here are seven investment mistakes that clients tend to make without the guidance of an advisor.


Saving but not investing:

Most individuals save a certain portion of their earnings. However, these savings are often lying idle in their bank accounts. Owing to their busy work-schedule, investors may not get time to immediately research and invest their savings.

A financial advisor helps investor channelize his savings into investments. By helping an investor budget his earnings and expenses, he reduces the amount of cash lying idle in the bank. In short, an advisor helps an investor manage his money better and invest more.


Starting late:

Delaying financial planning is quite common among investors. Goals like retirement and financial planning for a family seem far away for a millennial investor. However, many of them forget that time is the best friend of investments. Starting early gives investors more time to accumulate the required corpus. It allows them the flexibility to stop or adjust their investments temporarily in case of an emergency. Starting late can put a financial burden on investors, as they will have to save more to reach their key financial goals such as retirement.

Often people splurge their earnings on items they really don’t need.  Through a discussion on financial goals, an advisor can help the individual visualise the corpus he needs to accumulate to fulfil his financial dreams. This may encourage an individual to invest rather than spend frivolously.


Wrong investment choices:

Wrong investment choices do not just refer to investments made in a Ponzi scheme; it also includes investments made out of line with an investor’s risk-return profile. To elaborate an investor may consider himself to be a risk-taker and invest in high yield bonds. Alternatively, he may invest a majority of his corpus in equities. However, in reality, his personal responsibilities and goals require him to take a more conservative approach. This is an example of a wrong investment choice.

A financial advisor makes a holistic evaluation of the investor’s risk tolerance, liquidity needs, goals and income before recommending an investment. This analytical and exhaustive approach helps advisors recommend the most suitable investment options to their clients. Moreover, an advisor can also help warn you against any investment scam.

New ImageInvesting based on the preconceived notion:

Our friends, family members often influence our investment decisions. For example, a young professional may invest the majority of his money in gold and FDs just like his parents. He may shun equities having seen his relatives lose money in day-trading. However, based on risk profile and age, he may be better off investing in riskier products.

Financial advisors can help clear any investment related misunderstandings from the minds of investors and guide them on making better investment choices.

LIC Jeevan Shikhar Plan : Tax Saver or Loser

Letting behavioural biases influence their decision:

Selling off their investments during a slight market correction, holding on to loss-making investment, ignoring research which does not align with the investor’s view are all examples of behavioural biases influencing investor’s decisions.

Advisors can help investors identify these biases and encourage them to stick to their financial plan rather than acting under the influence of emotions.11111

Taking too much debt:

Many investors dream of building their own home or buying a car. Generally, investors fund these purchases through a loan or EMI. If the amount of debt is not kept in check, it can balloon and become unmanageable. Excess debt may also hurt an investor’s credit score which in turn lead to higher rates on future loans.

By budgeting their income and expenses, advisors help evaluate whether an investor can comfortably service a loan.

More pain seen in NBFC sector in next few months

The 50 largest NBFCs are looking for Rs. 700 billion in just the current month. The sector needs Rs 1.2 trillion in the current quarter and will have to refinance 40 percent of its debt over the next 12 months.

In India, crises move slowly. We’ve known for years that the state-controlled banks that dominate the financial sector were groaning under the weight of bad loans. For years, though, the government successfully kicked the can down the road. All those assets haven’t been accounted for yet, the banks haven’t been fully recapitalized, the bankruptcy process isn’t working to schedule, yet somehow the banks are still chugging along.

Frustrated entrepreneur sleeping on the table with a bomb of financial crisis on his head. Concept of bankruptcy and financial crisis

India’s luck may be about to run out. The country’s shadow banking sector — dominated by what officials call “non-banking financial corporations” or NBFCs faces something of reckoning over the next month. Ever since a leading NBFC  Infrastructure Leasing & Financial Services Ltd., or IL&FS defaulted on some of its debt recently, the entire sector has been starved of funds. The amount shadow banks managed to raise through the sale of commercial paper short-term debt fell by 65 percent in October, according to Edelweiss.

union liquid

cp paper 2IL&FS ran into trouble because it was borrowing short to lend long. Given that such behavior is common throughout the sector, everyone is worried about whether shadow banks will be able to roll over their debt. The 50 largest NBFCs are looking for Rs. 700 billion in just the current month. The sector needs Rs 1.2 trillion in the current quarter and will have to refinance 40 percent of its debt over the next 12 months.

principle ultraSome of the bigger shadow banking players, particularly in housing finance, might find that the liabilities due to be paid are higher than their assets maturing over the same period. The sector is in dangerous territory.

For India and its government, this poses a real problem one that will get worse if a few big NBFCs collapse because there’s insufficient liquidity in the market. While shadow banks account for at most 15 percent of lending in India, they seemed like safe and attractive destinations for the savings of the middle-class. They’ve also become central to infrastructure finance over the past few years. If a lack of funds slows down the real estate and infrastructure sectors and thus construction blue-collar jobs, too, would be lost. This isn’t the sort of thing any government wants just months before an election.

BOI AXAThat’s why all sorts of bailout schemes are being planned. Some of them might be worth trying. Most, though, look like bad ideas.

For instance, India’s largest bank, the State Bank of India, has promised to buy Rs. 450 billion of shadow-banking assets and banks have been allowed to lend more to NBFCs. There’s nothing inherently wrong with a bank buying distressed assets, as long as we can be sure it’s being done in the bank’s best interests and not because bureaucrats in New Delhi think that state-run banks’ money is theirs to command. If people fear that banks aren’t being sufficiently discriminating when buying NBFC assets, they’d have even more reason to worry about the asset quality of those banks. In other words, bailouts could spread contagion, not contain it.

What’s more problematic, perhaps, is the government’s insistence that the Reserve Bank of India opens up a special window to lend money to the sector as it has for banks. Think of this as being something like what the Federal Reserve did during the 2008 crisis when it expanded its historic role and chose to become a lender of last resort even to shadow banks.

dsp creditThe RBI is resisting; it doesn’t think there’s a systemic risk here. It also thinks it can do better than the central banks of the West did in 2008. While the latter may have prevented a crisis, finance got off too easy. The RBI seems convinced that India’s shadow banks need to clean up their act and they won’t if they get access to easy money now. If a firm or three end up going under, so be it. That would be better than using public money to create a dozen more failures such as IL&FS over the next few years.

This is a genuinely brave and praiseworthy stand. One of the great wonders of Indian economic history is that so few firms are allowed to fail in an economy that constantly under-performs expectations. That’s one reason few sectors manage to rise above mediocrity: The market is never really allowed to work.

This crisis may be an opportunity to change that mindset. India needs a vibrant shadow banking sector; there are some things that regular banks just can’t or won’t do. But the country won’t get one by coddling institutions that are borrowing at the wrong tenures and lending to the wrong sectors.

By Bloomberg

Government Cautions People Against Risks in Investing in Virtual ‘Currencies’ ( Bitcoin ); Says VCs are like Ponzi Schemes

The ministry of finance cautioned people against the risks of investing in virtual currencies such as bitcoin which lack government fiat, comparing them with Ponzi schemes.

This follows a crackdown by the South Korean government on trading of bitcoins which led to an 8% drop in its value on Thursday.

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Are We Headed for Another Dot-Com Disaster?


“There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes, which can result in sudden and prolonged crash exposing investors, especially retail consumers, losing their hard-earned money. Consumers need to be alert and extremely cautious as to avoid getting trapped in such Ponzi schemes.”

Bitcoin compared to other bubbles.

The Reserve Bank of India (RBI) has issued three warnings against investments in cryptocurrencies — one each in December 2013, February 2017 and earlier this month. “The government also makes it clear that VCs are not legal tender and such VCs do not have any regulatory permission or protection in India. The investors and other participants, therefore, deal with these VCs entirely at their risk and should best avoid participating therein.”

Be alert Bitcoins are not approved by RBI