- Chellamuthu Kuppusamy
Not really sure if many are following the market and hoping for a recovery or repeat of what we saw in 2003-2007. Beginning of bull runs are normally marked with underpriced public offers by the government. Maruti IPO in 2003 was a classical example that heralded a magical bull run.
If that is anything to go by, lukewarm response for the public offer of two state owned companies is paining. Retail portion for NTPC follow-on offer was subscribed 0.16 times and REC 0.22 times.
This is quite a contrast against the overwhelming response for NTPC’s IPO at Rs 62 back in 2004. If we go by the school of thought that low prices quality IPO are the indication of market revival we have miles to travel. Market, on the other hand, keeps everyone guessing.
Wednesday, February 24, 2010
Tuesday, February 09, 2010
Wealth Plus - Guarantees highest NAV value
- Chellamuthu Kuppusamy
People have been wary about the market fluctuations and that has caused the NAV values of most of the unit linked plans shrinking in the last couple of years. Those making periodic systematic contributions were not affected with this scenario. In fact, they benefitted as market correction provided an opportunity to average their purchase and consolidate a long term portfolio without much effort. Market fluctuation is a friend for those who make periodic investments in market related products.
Nonetheless, the problem is for those who have not averaged out after having made one time investment at the peak. For people who are worried to see NAV value going down, companies have come out with plan that guarantees highest NAV value irrespective of the market condition at the time maturity.
Country’s most profitable and successful insurer LIC of India has introduced a new plan in this direction. It is called ‘Wealth Plus’, a unit linked product with highest NAV value reached when the plan is in force.
Payment option: 1) One time 2) equal payment for 3 years (yearly, half-yearly, quarterly or monthly)
LIC has said in a press release, “This plan will be available for sale for a limited period”
People have been wary about the market fluctuations and that has caused the NAV values of most of the unit linked plans shrinking in the last couple of years. Those making periodic systematic contributions were not affected with this scenario. In fact, they benefitted as market correction provided an opportunity to average their purchase and consolidate a long term portfolio without much effort. Market fluctuation is a friend for those who make periodic investments in market related products.
Nonetheless, the problem is for those who have not averaged out after having made one time investment at the peak. For people who are worried to see NAV value going down, companies have come out with plan that guarantees highest NAV value irrespective of the market condition at the time maturity.
Country’s most profitable and successful insurer LIC of India has introduced a new plan in this direction. It is called ‘Wealth Plus’, a unit linked product with highest NAV value reached when the plan is in force.
Payment option: 1) One time 2) equal payment for 3 years (yearly, half-yearly, quarterly or monthly)
LIC has said in a press release, “This plan will be available for sale for a limited period”
Tuesday, February 02, 2010
CFP - Perhaps a must for Financial Professionals !!
- Chellamuthu Kuppusamy
Financial Planning and investment service is one that needs a lot of professionalism, ethics and financial literacy. Ability to make potential client understand their financial needs, both short team and long term, and suggest – not sell - various options available in front of them is one of the most important traits an investment consultant should not only possess but also exhibit.
Most of the self-styled ‘financial advisors’ are merely agents. They are rarely equipped to offer advice and confront the queries. Thanks to IRDA’s initiatives in the recent past that anyone aspiring to become an insurance agent (both life & general) should sit for an exam and obtain license. To some extent this has helped the agent community at large obtain insurance literacy. Trust me, I know an agent for 19 years and he is yet to process/sell a term insurance plan.
Well, going forward, professionalism and knowledge would be key for the survival of not only insurance agent, but for anyone in the field of financial service. CFP is one such a step in that director. Certified Financial Planner is offered by Financial Planning Standard Board (FPSB) of India. One can attend the course from any of the Authorized Educational Providers and appear in the examination conducted by NSE IT.
Financial market is like an ocean that employs millions of people. Currently there are only 920 CFPs in India as per FPSB website. This number is expected to surge in the years to come as it offers high level of professionalism, job & business opportunities and international recognition.
Who knows, it might even become a statutory requirement . . .
Financial Planning and investment service is one that needs a lot of professionalism, ethics and financial literacy. Ability to make potential client understand their financial needs, both short team and long term, and suggest – not sell - various options available in front of them is one of the most important traits an investment consultant should not only possess but also exhibit.
Most of the self-styled ‘financial advisors’ are merely agents. They are rarely equipped to offer advice and confront the queries. Thanks to IRDA’s initiatives in the recent past that anyone aspiring to become an insurance agent (both life & general) should sit for an exam and obtain license. To some extent this has helped the agent community at large obtain insurance literacy. Trust me, I know an agent for 19 years and he is yet to process/sell a term insurance plan.
Well, going forward, professionalism and knowledge would be key for the survival of not only insurance agent, but for anyone in the field of financial service. CFP is one such a step in that director. Certified Financial Planner is offered by Financial Planning Standard Board (FPSB) of India. One can attend the course from any of the Authorized Educational Providers and appear in the examination conducted by NSE IT.
Financial market is like an ocean that employs millions of people. Currently there are only 920 CFPs in India as per FPSB website. This number is expected to surge in the years to come as it offers high level of professionalism, job & business opportunities and international recognition.
Who knows, it might even become a statutory requirement . . .
Sunday, November 22, 2009
Term Vs Endowment Plans
- Chellamuthu Kuppusamy
In response to the previous post "Jeevan Anand - Unique insurance plan" Vinod has commented:
"My experience on this:
Policy is good.
Since this is mainly life insurance, the cover to premium required ratio did not fit me well.
Since I was looking at life cover that could substitute my income (to a good extent) so financially my family is not in the woods to pay up all the emi's and liabilities. The premium required was too high. For those who can afford the premium this policy is great.
I have now decided to go for term policy for covering life and with the rest of money invest wisely (as much as possible ;) )
Best regards,
Vinod
********************************
Follow up communication:
Hi Vinod,
I am glad you said this. That is precisely how one should view insurance. But in India insurance is not considered as an instrument for life cover alone. People tend to ask, “What do I get back after paying my premium?” A reply that their family is protected against the financial loss due to an unlikely ecent of their sudden demise does not suffice.
That’s why penetration of term insurance plans are very very low in our country. Data reviels that only 26 per cent are insured in India. That too the average sum assured per policy is just over Rs 90,000. This is never going to be sufficient.
As you said, premium to sum assured ratio is high in India, because we rarely have term insurance policies. Invariably every policy holder expects a maturity value. This leave the insurers with no choice but to promote emdowment plans.
For instance, in one of LIC’s term assurance plans Anmol Jeevan – I, I would have to pay just Rs. 2,762 per year for a life cover of Rs 10 lakhs. In Amulya Jeevan, I would pay just Rs 5,850 per year for a life cover of Rs 25 lakhs.
Whereas as in Jeevan Saral (an Endowment plan), I would only get a coverage of Rs 1.25 lakhs for an annual premium of Rs 6,000.
But as everybody says, endowment plans gives back a maturity benefit which is not the case with term assurance plans. That does not matter if you are a streetsmart investor.
In response to the previous post "Jeevan Anand - Unique insurance plan" Vinod has commented:
"My experience on this:
Policy is good.
Since this is mainly life insurance, the cover to premium required ratio did not fit me well.
Since I was looking at life cover that could substitute my income (to a good extent) so financially my family is not in the woods to pay up all the emi's and liabilities. The premium required was too high. For those who can afford the premium this policy is great.
I have now decided to go for term policy for covering life and with the rest of money invest wisely (as much as possible ;) )
Best regards,
Vinod
********************************
Follow up communication:
Hi Vinod,
I am glad you said this. That is precisely how one should view insurance. But in India insurance is not considered as an instrument for life cover alone. People tend to ask, “What do I get back after paying my premium?” A reply that their family is protected against the financial loss due to an unlikely ecent of their sudden demise does not suffice.
That’s why penetration of term insurance plans are very very low in our country. Data reviels that only 26 per cent are insured in India. That too the average sum assured per policy is just over Rs 90,000. This is never going to be sufficient.
As you said, premium to sum assured ratio is high in India, because we rarely have term insurance policies. Invariably every policy holder expects a maturity value. This leave the insurers with no choice but to promote emdowment plans.
For instance, in one of LIC’s term assurance plans Anmol Jeevan – I, I would have to pay just Rs. 2,762 per year for a life cover of Rs 10 lakhs. In Amulya Jeevan, I would pay just Rs 5,850 per year for a life cover of Rs 25 lakhs.
Whereas as in Jeevan Saral (an Endowment plan), I would only get a coverage of Rs 1.25 lakhs for an annual premium of Rs 6,000.
But as everybody says, endowment plans gives back a maturity benefit which is not the case with term assurance plans. That does not matter if you are a streetsmart investor.
Friday, November 20, 2009
Jeevan Anand - Unique insurance plan
Difference between term insurance and endowment plans:
Term insurance plans are like the insurance for motor vehicle and mediclaim. Insurance company pays full Sum Assured when risk occurs. Otherwise premium paid will be with the insurer.
Two important term assurance plans offered by LIC are"
a) Anmol Jeevan – 1 (Plan 164)
b) Amulya Jeevan – 1 (Plan 190)
In India life insurance is treated more as a saving instrument than being viewed from pure insurance point of view. Therefore, though plans are designed to provide risk cover when the policy is in force, they also give a big chunk at the time of maturity.
Such plans are called endowment plans. Most of the insurance plans in India are endowment plans. For a given sum assured, premium of endowment plan is more than any term assurance plan because they cover the risk of death as well as survival benifit.
At the time of maturity for endowment plans LIC pays the following
• Sum Assured
• Bonus
• Final Additional Bonus (for certain policies)
• Guaranteed additions (for certain policies)
• Loyalty Bonus (for certain policies)
As per IRDA regulation all insurance companies have to distribute 90 % of their profit to the policyholders in the form of bonus. LIC gives 95 % of its profit to the policyholders. Unlike private insurance companies, LIC invests the money in secured avenues and its marketing cost is much lower when compared with private players.
Now let me brief a popular endowment plan and their unique features.
Jeevan Anand (Plan 149)
Example:
Age 32
Sum assured Rs 5,00,000
Term 16 years
Scenario 2:
Insured person lives through policy period of 16 years. At the time of maturity he gets sum Assured Rs 5 lakhs + bonus
In other plans, life cover ends with the maturity. In Jeevan Anand, life cover continues even after the maturity period when the policyholder will not be paying any premium at all.
If death occurs in at the age of 49 years or 70 years or 95 years, nominee will get Rs 5,00,000. If death is caused by accident, nominee will get Rs 10,00,000. (age limit for double accidental benifit is 70 years)
Term insurance plans are like the insurance for motor vehicle and mediclaim. Insurance company pays full Sum Assured when risk occurs. Otherwise premium paid will be with the insurer.
Two important term assurance plans offered by LIC are"
a) Anmol Jeevan – 1 (Plan 164)
b) Amulya Jeevan – 1 (Plan 190)
In India life insurance is treated more as a saving instrument than being viewed from pure insurance point of view. Therefore, though plans are designed to provide risk cover when the policy is in force, they also give a big chunk at the time of maturity.
Such plans are called endowment plans. Most of the insurance plans in India are endowment plans. For a given sum assured, premium of endowment plan is more than any term assurance plan because they cover the risk of death as well as survival benifit.
At the time of maturity for endowment plans LIC pays the following
• Sum Assured
• Bonus
• Final Additional Bonus (for certain policies)
• Guaranteed additions (for certain policies)
• Loyalty Bonus (for certain policies)
As per IRDA regulation all insurance companies have to distribute 90 % of their profit to the policyholders in the form of bonus. LIC gives 95 % of its profit to the policyholders. Unlike private insurance companies, LIC invests the money in secured avenues and its marketing cost is much lower when compared with private players.
Now let me brief a popular endowment plan and their unique features.
Jeevan Anand (Plan 149)
Example:
Age 32
Sum assured Rs 5,00,000
Term 16 years
Scenario 1:
If death occurs between 32 & 48 years of age, nominee gets Rs 5 lakhs + bonus. If the death was caused by an accident, nominee gets Rs 10 lakhs + bonusScenario 2:
Insured person lives through policy period of 16 years. At the time of maturity he gets sum Assured Rs 5 lakhs + bonus
In other plans, life cover ends with the maturity. In Jeevan Anand, life cover continues even after the maturity period when the policyholder will not be paying any premium at all.
If death occurs in at the age of 49 years or 70 years or 95 years, nominee will get Rs 5,00,000. If death is caused by accident, nominee will get Rs 10,00,000. (age limit for double accidental benifit is 70 years)
Uniqueness about Jeevan Anand is that it is a combination of whole life and end assurance plans.
or
call 9941924240 / 9941258394
Friday, October 16, 2009
The bottom line is . . .
- Chellamuthu Kuppusamy
What do you think is the objective of companies across the globe? Is it customer service, employee satisfaction, social responsibility? May be yes - may be no. Yes, because they are the means to achieve the primary objective and no, because they are the objectives on their own. Well, what could be the primary objective, if not only objective?
Let me borrow a line from Wikipedia to answer this question: “Businesses are formed to earn profit that will increase the wealth of its owners and grow the business itself” Every action and transaction (and of course inaction) has a financial implication. Ultimately everything boils down and sums up to greenback.
Balance sheet and Operating Margin are believed to be the touchstones – perhaps millstones if not managed properly - of any organization. Trial balance, inventory turnover, top line, bottom line, ROI, sequential growth etc are some of the commonly used terms in our daily life. The extent to which these buzzwords are fathomed is subject to debate. Therefore, we make a small attempt here to give a brief introduction to those terms and Financial Accounting concepts.
Firstly, every transaction and activity that has a financial implication is recorded. Such transactions are entered in two accounts at a time. This practice, known as ‘Double-entry bookkeeping system’, requires a debit entry in one of the accounts and a corresponding credit entry in another account.
For instance, an employee buys raw material with cash. This transaction needs to be recorded in two accounts, namely, cash and raw material accounts. In the cash account you make credit entry and a debit entry in the raw material accounts. This sounds good, but how do we determine what to debit and credit? How do we ensure we don’t debit an account that should indeed be credited? This is where golden rules of accounting come in handy.
Golden Rules of accounting:
Real accounts are for real things that can either be seen, felt and touched – an exception being goodwill. In other words these represent assets.
Nominal account represents expenses, losses, incomes and gains.
With accounting entries are maintained for each and every transaction, they are used to arrive at the Final Accounts which comprises of P&L (Profit and Loss) account and Balance sheet at the end of the accounting period, which is normally a quarter.
Balance sheet is a snapshot of company’s assets and liabilities at the end of the period. P&L, on the other hand, is the summary of profit or loss the company has made for the entire period. You might have read items sounding like ‘assets stand at Rs 2,000 crore on 31-03-2009 and profit for the FY 08-09 was Rs 120 crores’. First one reflects balance sheet position on a given day and the latter draws reference from P&L statement for entire financial year.
While preparing Final Accounts at the end of accounting period, all account values should either be transferred to the balance sheet or to the P&L statement. Account that represent assets (such as inventories, investments, receivables etc) and liabilities (such as payables, owner’s equity, earning & surplus - liability from company’s point of view to its owners/share holder) – are transferred to balance sheet.
Lesser the expenses more the profitability or the ability to convert top-line into bottom-line is. Operating Margin is the ratio of the bottom-line (normally it is the operating income excluding other incomes/expenses and tax) to the top-line. A company reporting 30 % OPM saves Rs 30 as a profit by doing business for Rs 100 after meeting an expense of Rs 70.
Operating margin directly affects the profit. After all, it is the bottom-line that finally matters in business.
What do you think is the objective of companies across the globe? Is it customer service, employee satisfaction, social responsibility? May be yes - may be no. Yes, because they are the means to achieve the primary objective and no, because they are the objectives on their own. Well, what could be the primary objective, if not only objective?
Let me borrow a line from Wikipedia to answer this question: “Businesses are formed to earn profit that will increase the wealth of its owners and grow the business itself” Every action and transaction (and of course inaction) has a financial implication. Ultimately everything boils down and sums up to greenback.
Balance sheet and Operating Margin are believed to be the touchstones – perhaps millstones if not managed properly - of any organization. Trial balance, inventory turnover, top line, bottom line, ROI, sequential growth etc are some of the commonly used terms in our daily life. The extent to which these buzzwords are fathomed is subject to debate. Therefore, we make a small attempt here to give a brief introduction to those terms and Financial Accounting concepts.
For instance, an employee buys raw material with cash. This transaction needs to be recorded in two accounts, namely, cash and raw material accounts. In the cash account you make credit entry and a debit entry in the raw material accounts. This sounds good, but how do we determine what to debit and credit? How do we ensure we don’t debit an account that should indeed be credited? This is where golden rules of accounting come in handy.
Golden Rules of accounting:
- 'Personal Account': Debit the Receiver & Credit the Giver
- 'Real Account': Debit what comes in, Credit what goes out
- 'Nominal Account': Debit all expenses / losses, credit all Incomes / Gains
Personal accounts are accounts maintained for individuals and organization with whom the company does business with
Real accounts are for real things that can either be seen, felt and touched – an exception being goodwill. In other words these represent assets.
Nominal account represents expenses, losses, incomes and gains.
In our case, cash as well as raw material accounts are real accounts. When the company buys raw material by paying cash, cash goes out and raw material comes in and hence they are credited and debited respectively.
As all transactions are equally recorded on debit and credit sides, sum of all debit sides values and credit side values of all the account put together would be equal at any given point in time. Such an exercise is known as Trial Balance which serves as a tool to detect errors, which can result in the totals not being equal.
With accounting entries are maintained for each and every transaction, they are used to arrive at the Final Accounts which comprises of P&L (Profit and Loss) account and Balance sheet at the end of the accounting period, which is normally a quarter.
Balance sheet is a snapshot of company’s assets and liabilities at the end of the period. P&L, on the other hand, is the summary of profit or loss the company has made for the entire period. You might have read items sounding like ‘assets stand at Rs 2,000 crore on 31-03-2009 and profit for the FY 08-09 was Rs 120 crores’. First one reflects balance sheet position on a given day and the latter draws reference from P&L statement for entire financial year.
While preparing Final Accounts at the end of accounting period, all account values should either be transferred to the balance sheet or to the P&L statement. Account that represent assets (such as inventories, investments, receivables etc) and liabilities (such as payables, owner’s equity, earning & surplus - liability from company’s point of view to its owners/share holder) – are transferred to balance sheet.
All others accounts, which can be classified under expenses, losses, incomes and gains, are transferred to P&L statement. Sales volume or revenue or gross profit comes at the top. Expenses, interest and tax are deducted from this to arrive at the net profit or earnings. Revenue, which appears on the top, is referred as top-line and the net profit, which appears at the bottom, is referred as bottom-line.
Lesser the expenses more the profitability or the ability to convert top-line into bottom-line is. Operating Margin is the ratio of the bottom-line (normally it is the operating income excluding other incomes/expenses and tax) to the top-line. A company reporting 30 % OPM saves Rs 30 as a profit by doing business for Rs 100 after meeting an expense of Rs 70.
Operating margin directly affects the profit. After all, it is the bottom-line that finally matters in business.
Wednesday, July 08, 2009
(Book) Prabhakaran - The Story of his struggle for Eelam
He is - perhaps was - a designated terrorist for some and an uncompromising freedom fighter for some. For the rest he was somewhere in between. Yes, I am talking about V. Prabhakaran, leader of the LTTE.
The story of his prolonged resistance and fierce confrontation with the Sri Lanka armed forces, nonetheless, ought to be studied, rather historically. Similarly, Indian involvement in the ethinic conflict and its consequences warrant a special mention.
I have made a sincere attempt to view these things objectively and retrospectively through the book 'Prabhakaran - The Story of his struggle for Eelam', in English. Though this is the English version of his biography 'Prabhakaran - A life' (பிரபாகரன் - ஒரு வாழ்க்கை) authored by me in Tamil, English version contains more information relevant to non-Tamil speaking people in India and international community.
It can be ordered online.
The story of his prolonged resistance and fierce confrontation with the Sri Lanka armed forces, nonetheless, ought to be studied, rather historically. Similarly, Indian involvement in the ethinic conflict and its consequences warrant a special mention.
I have made a sincere attempt to view these things objectively and retrospectively through the book 'Prabhakaran - The Story of his struggle for Eelam', in English. Though this is the English version of his biography 'Prabhakaran - A life' (பிரபாகரன் - ஒரு வாழ்க்கை) authored by me in Tamil, English version contains more information relevant to non-Tamil speaking people in India and international community.
It can be ordered online.
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