Author: Everypennycounts (aka Saurabh S)

Welcome to my personal finance blog! With over 18 years of experience in financial services, I’m here to help you become more money-conscious and take charge of your financial future. I’ve witnessed firsthand how transformative it can be to truly understand and manage your finances. Everyone deserves to feel confident in their financial decisions—whether you’re planning for the future, making smart investments, or managing everyday expenses. My goal is to simplify complex financial concepts, share practical tips, and offer guidance that you can easily apply to your life.

How to Navigate through Market Dips?

Suman: Hi Pradeep, I’ve been saving for two years now, and I’ve accumulated ₹ 3 lakh, which is just sitting in my bank account. I’ve been thinking about investing, but I’m not sure if this is the right time, especially with the recent market dip. The Sensex dropped from 86,000 to around 81,600 after the Gulf wars impacted oil rates. Should I start investing now, or should I wait?

Pradeep: Hi Suman, first of all, it’s great that you’ve been saving diligently. You’ve taken a significant step in securing your financial future. When it comes to investing, there’s no perfect time. The market will always have ups and downs, but the important thing is to start investing sooner rather than waiting for the ‘perfect moment.’

Suman: That makes sense, but the market dip does seem like a good time to start. I’m just worried about investing a large sum all at once.

Pradeep: You’re right to be cautious about putting all your money in at once. Instead of investing the entire ₹ 3 lakh immediately, you could enter the market gradually using a Systematic Investment Plan (SIP). SIPs allow you to invest a fixed amount every month, which helps you smooth out the impact of market fluctuations. This way, you benefit from both market dips and long-term growth.

Suman: So, a SIP would help me invest even when the market is unpredictable?

Pradeep: Exactly. With a SIP, you don’t have to worry about timing the market. Over the long term, time in the market is more important than trying to time the market perfectly. For example, if you start a SIP now with ₹ 5,000 per month and assume an 11% return (here I have taken a conservative number), you could build a corpus of around ₹ 1.57 crore by the time you’re 60. But if you delay by just five years, that amount could shrink to ₹ 88.55 lakh. That’s a huge difference.

Suman: Wow, I had no idea delaying by just a few years could make such a big difference! But before I jump in, I’m not sure what my investment goals should be.

Pradeep: That’s a great question! Before you start, you need to identify whether your goals are short-term, medium-term or long-term in nature. If you’re saving for something like a vacation in the next three years, you should consider safer options like short-term debt funds. But if you’re thinking about m3dium-term like 3 to 5 years you may consider aggressive hybrid funds and for the long-term wealth building, say for retirement or buying a house, you should look at equity funds.

Suman: I see. But I’m a bit nervous about equity funds since I’m just starting out.

Pradeep: I understand, and that’s why a good starting point could be conservative or aggressive hybrid funds. These funds invest in both stocks and bonds, so they give you some exposure to the stock market but also provide stability through debt investments. They tend to fall less during market corrections, which might give you some peace of mind as a first-time investor.

Suman: That sounds like a safer option. But what if I have more money to invest later on?

Pradeep: If you have more funds to invest, like the ₹ 3 lakh you mentioned, you can deploy it gradually over the next 12 to 18 months through a SIP in aggressive hybrid funds. This way, you reduce the risk of entering the market at a high point and benefit more—you will end up buying more units when prices are low and fewer when they’re high, which lowers your overall cost of investment over time.

Suman: That makes a lot of sense. But what about the current dip in the market? Should I be concerned?

Pradeep: Short-term market movements, like the recent dip, are unpredictable. Investment in equity market is subject to market risk. You would have heard this a lot everywhere. What’s important is that over the long term, the market tends to go up. For instance, despite several corrections, the Sensex has delivered an average annual return of around 13%+ over the past 10 years. By investing regularly through a SIP, you can ride out the market’s ups and downs without worrying about daily movements.

Suman: Okay, that sounds reassuring. Is there anything else I should consider before starting?

Pradeep: Yes, before you begin your investment journey, it’s essential to cover a few financial basics. First, create an emergency fund—enough to cover your six months of living expenses or just in case you face a job loss! You can park this in a liquid fund. Then, if you have any financial dependents, make sure you have life insurance, preferably a term insurance plan. At last, get a health insurance policy. Even if you have coverage from your employer, it’s good to have a personal policy for added protection. Also, do remember that the younger you are the better for you to take a health plan as it will be a cheaper proposition for you along with a Super Top Up Plan.

Suman: Thanks, Pradeep. I hadn’t thought about the emergency fund or insurance. I’ll make sure to sort those out before jumping into investments.

Pradeep: Great! Once those are in place, you’ll be well-prepared to start investing and build long-term wealth. Just follow this mantra – it’s all about starting small and being disciplined and consistent.

Navigating Health Insurance Options for Senior Citizens in India

Characters:

Investor: Mr. Mehta
Financial Planner: Mr. Kumar

Scene: Mr. Mehta, a 72-year-old retired government employee, meets with his financial planner, Mr. Kumar, to discuss health insurance options in light of recent government initiatives.

Mr. Mehta: Mr Kumar, I’ve read about the government offering ₹ 5 Lacs health insurance coverage under the “Ayushman Bharat scheme” for senior citizens. Should I cancel my private health insurance and rely solely on this new plan?

Mr. Kumar: That’s an important question indeed! Mr. Mehta. The extension of Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PM-JAY) to all senior citizens above 70 is significant. It provides up to ₹ 5 Lacs annually for inpatient treatments without any premium payments. However, let’s analyze both options before making an informed decision.

Mr. Mehta: I see. My current private policy costs ₹ 60,000 annually and offers ₹ 10 Lacs coverage. How does PM-JAY compare?

Mr. Kumar: Let’s break down the advantages of PM-JAY:

No premiums: Unlike your private insurance, PM-JAY is entirely free!
Universal coverage: Regardless of your income, you’re eligible.
Immediate coverage for pre-existing conditions: Private insurers often impose waiting periods, but PM-JAY covers these from day one.
No co-payments: You won’t have to pay a percentage of the treatment costs.

Mr. Mehta: Those benefits sound appealing. Why shouldn’t I simply switch to PM-JAY?

Mr. Kumar: While PM-JAY offers substantial benefits, it does have its own limitations:

Network restrictions: Treatment is only covered at PM-JAY network hospitals. Your preferred hospitals may not be included!
Accommodation: PM-JAY only covers general ward admissions. Your private policy likely offers private room options.
Outpatient care: PM-JAY focuses on inpatient treatments. Most routine check-ups and consultations aren’t covered.
Potential wait times: Some hospitals might prioritize private insurance patients due to faster, higher reimbursements.

Mr. Mehta: I hadn’t considered those factors. What about the quality of care?

Mr. Kumar: Quality can vary. Private insurance often provides access to a wider range of hospitals, including premium facilities. However, many government and private hospitals under PM-JAY offer good quality care. It’s worth researching the specific hospitals in your area.

Mr. Mehta: Given these pros and cons, what’s your recommendation?

Mr. Kumar: I’d suggest using PM-JAY as a complement to your existing private insurance, rather than a replacement. Here’s why:

Dual coverage: You’ll have a strong safety net with PM-JAY, plus the flexibility of private insurance.
Cost optimization: Use PM-JAY for covered treatments at network hospitals, potentially saving on out-of-pocket expenses.
Choice and comfort: Retain the option for private rooms and preferred hospitals through your private policy.
Comprehensive protection: Your private policy likely covers outpatient care and possibly critical illness benefits, which PM-JAY doesn’t offer.

Mr. Mehta: That makes sense. How would I manage claims with two policies?

Mr. Kumar: Good question. In case of hospitalization:

Check if the hospital is in the PM-JAY network.
If yes, try using PM-JAY coverage first.
If treatment costs exceed ₹ 5 Lacs or you prefer a private room, your private insurance can cover the difference or additional expenses.

Always inform both insurers about the existence of the other policy to ensure smooth claim processing.

Mr. Mehta: Thank you, Mr. Kumar. This approach seems to offer the best of both worlds.

Mr. Kumar: Exactly. You’ll have comprehensive coverage without additional financial strain. Remember to review your options annually, as both government schemes and private insurance offerings may change.

Mr. Mehta: I appreciate your thorough explanation. I feel much more confident about my health insurance strategy now.

Are you in your 40s and still with no Savings? Here is a plan for you

Ramesh: You know, Sweta, most of the investors I meet in their 40s or older start getting really serious about their investments. But people in their early 30s don’t seem as concerned about retirement. They think they have plenty of time to deal with it later.

Sweta: Yeah, I’ve noticed that too. When you’re in your 30s, retirement feels so far away. It’s easy to think you’ve got years before you need to start worrying about it.

Ramesh: Exactly! But that’s one of the biggest mistakes people make. They underestimate the power of compounding. Just imagine if they realized that investing as little as ₹117 per day at age 30 could make them a Crorepati by the time they retire at 60.

Sweta: Wait, seriously? Just ₹117 a day? That doesn’t sound like much at all!

Ramesh: It really isn’t. But the numbers get staggering if you wait. If you start at 40, you’d need to invest ₹381 per day, and if you wait until 50, that jumps to ₹1,522 per day to reach that same ₹1 crore goal.

Sweta: Wow, that’s a huge difference! It really shows how much time plays a critical role in growing your money.

Ramesh: Exactly. The earlier you start, the easier it is. But when people come to me in their early 40s with no savings, it becomes a much more serious conversation. There’s still hope, but the approach has to be more aggressive.

Sweta: What would you recommend for someone in their 40s with no savings?

Ramesh: If they want to retire comfortably in the next 20 years, they need to take some drastic steps. First, they should start investing half their salary in equity mutual funds immediately. No delays.

Sweta: Half their salary? That’s a big commitment.

Ramesh: It is, but it’s necessary at that stage. Let’s take a family of three, with monthly expenses of ₹50,000 and a post-tax salary of ₹1,00,000. If we assume inflation at 6% for the next 20 years and mutual fund returns at 11% annually, they could accumulate around ₹4.67 crores by the time they’re 60.

Sweta: So, this plan could still work for someone starting in their 40s?

Ramesh: Yes, but it’s not easy. It requires a lot of discipline.

Sweta: For those in their 30s, though, the power of compounding can work wonders. They’d only need to invest around 25-28% of their income each month, compared to someone starting at 40, who’d need to invest 50% of their salary.

Ramesh: Exactly, it all comes down to how much of your income you can set aside and how disciplined you are in maintaining that.

Sweta: So, essentially, the earlier you start, the less painful it is, and the more flexibility you have.

Ramesh: Precisely. Time is your greatest asset when it comes to investing. If more people in their 30s understood that, they’d have a much smoother path to retirement.

The SIP Dilemma: Timing the Market vs. Time in the Market

One bright morning, Rohit and Mohan, two old friends, met for their usual coffee catch-up. Both had been hearing about the benefits of SIPs (Systematic Investment Plans) and decided to dive deeper into how SIPs work. Rohit was eager to understand when the “best time” to start an SIP was, while Mohan was more interested in the long-term impact of starting at different points in the market cycle.

Rohit: “Mohan, I’ve been thinking. What if we could predict the exact top or bottom of the stock market? Wouldn’t it be better to start my SIP at the bottom when prices are low?”

Mohan: “Hmm, sounds tempting, but there’s more to it than meets the eye. Let’s assume for a moment that you do have magical powers and can start your SIP at the perfect bottom. I, on the other hand, will start at the top when the market is at its highest. Want to see who ends up with more wealth in the long term?”

Rohit (laughing): “Alright, let’s do it! But it’s pretty obvious that you’d be worse off starting at the top, right?”

Mohan pulled out a notepad and began explaining.

Mohan: “Let’s take an example. Imagine back in January 2008, you started a monthly SIP of ₹10,000 in the BSE Sensex TRI. The market was at its peak then, just before the big crash.”

Rohit: “Ouch, sounds risky.”

Mohan: “True, but bear with me. By July 2024, you would have invested ₹19.9 lakh in total. And guess what? Despite starting at the top, the value of your investment would now be ₹74.7 lakh with an annual return of around 14.4%.”

Rohit (raising an eyebrow): “That’s quite impressive. But what if I had started at the bottom?”

Mohan: “Great question! Now let’s say you began in March 2009, right after the market crashed (The Great Recession). You’d have invested ₹18.5 lakh in total, slightly less than me. However, your investment would now be worth ₹63.8 lakh, with a return of 14.7%.”

Rohit (surprised): “Wait a second! I’d make less, even though I started at the bottom of the market?”

Mohan: “Exactly! While your percentage return is slightly higher, I’ve invested more because I started earlier, so my overall wealth is greater. This is what we call the Cost of Delay. The longer you wait to start, the bigger the gap becomes. Missing out on those early months or years can cost you a lot in the long run.”

Rohit: “But why is there such a big difference?”

Mohan: “It’s simple: compounding. Time is the most powerful tool when it comes to investing. The longer your money stays invested, the more it grows. Even though the market was at its peak when I started, my money had more time to compound. Over time, the highs and lows even out, and the timing becomes less important.”

Rohit: “So, in the long run, it doesn’t really matter if I start at the top or bottom of a market cycle?”

Mohan: “Exactly! Over many years, the difference in returns between starting at the top or bottom becomes almost negligible. The real risk isn’t the market; it’s not starting early enough. The biggest mistake is missing out on the power of compounding.”

Moral of the Story:

Mohan summed it up, “Rohit, it’s not about timing the market, but time in the market. The earlier you start, the more wealth you can create. Waiting for the ‘perfect’ moment can cost you far more than starting at a peak ever will.”

Rohit nodded thoughtfully, realizing that the best day to start his SIP was not tomorrow, but today. So do not waste your time and keep things simple.

The Profit Temptation: Navigating Market Highs with a Long-Term Vision

Last Thursday afternoon, I received a call from one of my investors. His voice was a mix of excitement and uncertainty.

“I’ve made a profit of ₹20 lakhs over the past five years through my SIPs,” he said. “But now the market is soaring, and I’m thinking about booking some of those profits. I still have a long-term goal of investing for another 12 to 15 years, though. What do you think I should do?”

This is quite a common question when markets reach all-time highs. The gains are real, and the numbers in your portfolio look promising, but there’s also that lingering fear of losing it all if the market takes a nosedive tomorrow. It’s the classic struggle: Should I stay, or should I cash out?

The Psychological Dilemma: What Happens If You Sell?

I began by explaining to him the psychological games our mind plays when markets rise and our portfolios grow. Selling your investments during a market high feels like locking in your gains, but it also opens up a set of new challenges:

If you sell and the market continues to rise, you might start to regret your decision. It’s natural to feel like you’ve missed out on even bigger profits. Re-entering the market can feel daunting, as the prices are higher, and you’ll fear buying back at the wrong time.
If you sell and the market goes down, you might feel a sense of satisfaction for having timed it just right. However, this feeling can be misleading. When the market starts dropping, it’s common to wait for it to “bottom out,” but no one can predict when that bottom will come. The fear of re-entering at the wrong moment can make you stay out of the market for too long, missing the eventual recovery.

It’s important to remember that markets are unpredictable. Sometimes they soar higher after hitting new peaks, and at other times they correct sharply. Trying to guess what will happen next is risky and can often lead to emotional decisions that may not align with your long-term goals.

A Journey Through the Market’s Highs and Lows

I reminded him, “You’ve earned this ₹20 lakhs because you stayed invested through both good and bad times. Think back to the periods when the Sensex was highly volatile, dropping more than 5% in a week. Those were tough moments, but because you remained patient and kept your SIPs running, you’re now seeing these impressive gains.”

The point here is simple: staying invested has rewarded you in the past, and there’s no reason why it wouldn’t continue to do so. It’s the steady, disciplined approach that leads to long-term wealth creation. The market will always have highs and lows, but a long-term investor learns to weather those storms, not run away from them.

Managing Anxiety: Adjust, Don’t Panic

If market highs are making you anxious, there’s no need to rush into selling your investments. Instead, consider rebalancing your portfolio. Here’s what I suggested to him:

If you need cash for short-term goals, such as buying a house, funding your child’s education, or any other near-term commitments, it’s wise to move some of your gains into safer, fixed-income options like bonds or debt funds. This ensures that if the market does fall, you’ve protected the portion of your money that you’ll need soon.

If your goals are long-term, like retirement, stick to your SIPs. Equity markets are volatile in the short term, but over longer periods, they tend to smooth out. Trying to time the market perfectly is nearly impossible, and most successful investors are those who stay invested, not those who constantly try to jump in and out.

The Value of Asset Allocation

To further ease his mind, I brought up asset allocation. A well-thought-out allocation between equity, debt, and other assets (like gold or real estate) helps manage risk while keeping your portfolio aligned with your financial goals.

Here’s the beauty of it: a solid asset allocation strategy allows you to book profits periodically without the stress of making huge decisions during market highs. For example, if your equity portfolio has grown significantly due to the recent bull run, you could sell a portion and shift it into a safer asset class to rebalance your portfolio. This way, you lock in some gains but still stay invested for the long run.

Final Thoughts

I closed our conversation with this advice: “The key to successful investing is not in trying to perfectly time the markets, but in staying disciplined and sticking to your long-term plan. The market will have its ups and downs, but as long as you stay focused on your goals, you’ll continue to see your wealth grow.”

He listened carefully, then thanked me for the advice. By the end of the call, he had decided to stay the course and trust the process that had already brought him this far.

That’s the thing about investing. It’s a marathon, not a sprint. The markets will rise, and they will fall. But if you keep your eye on your long-term goals, stick to your asset allocation, and avoid being swayed by emotions, the rewards will follow.

And sometimes, the best decision you can make is to simply stay invested.

The Tale of Two Investors: Simplicity V/s. Complexity in Wealth Building

Today, let me take you through the story of two friends, Aryan and Sameer.

Both friends had inherited inherited ₹ 15 million from a long-lost relative. Both had the same goal: invest wisely and grow their wealth over the next 15 years. However, their investment journeys were poles apart, shaped by the choices they made and the advice they followed.

Chapter 1: The Advice Dilemma

Aryan, eager to make the most of this once-in-a-lifetime opportunity, turned to an online Question and Answer forum on a social media for advice. He had heard about index funds—specifically, those from a US based Investment company —and was inclined to invest in a few, sit tight, and watch his wealth grow. His goal was simple: he didn’t need the money for the next 15 years and wanted to grow it safely without much hassle.

But as Aryan scrolled through the responses, the sheer number of suggestions overwhelmed him. One set of Gurus argued passionately for buying properties, citing rental income and capital appreciation. Equity traders recommended actively managing a stock portfolio for higher returns, while hedge fund advocates touted complex strategies that promised outsized gains. And, of course, the gold enthusiasts warned of economic collapses, urging Aryan to convert his fortune into precious metals.

Sameer, on the other hand, consulted a private banker. The banker presented a glossy portfolio filled with sophisticated products: alternative investments, structured notes, and even a fund promising returns based on rare whiskey investments. It all sounded impressive, and Sameer, intrigued by the exclusivity, signed up for the services.

Chapter 2: A Matter of Simplicity

Aryan, however, found himself at a crossroads. After reading a diverse range of opinions, he attended a webinar on goal-based investing. The presenter’s message was simple but timeless: “Investments should be aligned with your financial goals, match your investment horizon, beat inflation by a reasonable margin, have the liquidity you need, and come with low costs.”

The simplicity of this approach resonated with Aryan. His goal was to grow his wealth for the long term, so a 15-year investment period made sense. He didn’t need the money now, so he could afford to invest in assets that would appreciate steadily. The advice about keeping costs low and beating inflation also clicked. Aryan chose to stick to his original plan of investing in low-cost index funds, which offered broad market exposure and minimal management fees. He saw this as the most prudent way to beat inflation over time and achieve long-term growth.

Sameer, meanwhile, was excited by the exclusivity of his investments. His private banker assured him that these unique strategies would outperform the market, offering much higher returns than the “boring” index funds Aryan had chosen.

Chapter 3: The Path of Patience vs. The Trap of Complexity

As the years rolled by, Aryan’s simple, goal-based investment strategy began to bear fruit. The low-cost funds provided steady returns, benefiting from the overall growth of the global economy. The power of compounding worked its magic. Aryan didn’t have to monitor the market obsessively or make sudden moves when the economy dipped; he trusted his 15-year horizon and his original plan.

On the other hand, Sameer’s complex investments started to unravel. The private banker had charged significant fees for managing the exclusive portfolio, eating into Sameer’s returns. Some of the exotic products didn’t perform as promised, and the volatility of hedge funds and alternative investments caused anxiety during market downturns. Sameer found himself checking his portfolio more frequently and making impulsive decisions to switch investments based on the banker’s suggestions. The costs of active management and the underperformance of several products left Sameer disillusioned.

Chapter 4: The Lesson of Simplicity

By the end of 15 years, Aryan had more than doubled his wealth, thanks to his disciplined, goal-oriented approach. His funds had not only outpaced inflation but also delivered healthy returns, all with minimal stress and effort.

Sameer, despite starting with the same amount, found that his complex portfolio had barely kept pace with inflation. The high fees, the underperformance of exotic investments, and the constant switching had eroded his gains.

Reflecting on their respective journeys, Aryan realized that the simplest approach had been the best. His initial instincts, backed by solid principles of goal-based investing, low costs, and long-term focus, had led him to success. Sameer, meanwhile, regretted falling into the trap of complexity, exclusivity, and high fees.

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Conclusion: The Fundamentals Remain the Same

Aryan’s story is a powerful reminder that the fundamentals of investing never change. Your investments should always align with your financial goals, (REFER to my earlier Blogs posted in Aug 2024) and the period should match your needs. It should beat inflation, have the liquidity you might require, and, most importantly, come at a low cost. Amid all the noise of various financial products and strategies, sometimes the simplest route—funds, patience, and discipline—is the wisest.

And so, Aryan and Sameer’s tale ends with a lesson for all investors: don’t be swayed by the allure of complexity or exclusivity. Instead, focus on the timeless principles of investing, and you’ll set yourself up for success.

The Tale of the Golden Opportunity (SGB) – Should You Seize It Now?

In a small town nestled between rolling hills – Shimla, there lived a wise old jeweler named Dhaniram. For decades, he had been the go-to person for anyone seeking advice on gold—whether it was for a wedding, an investment, or a special gift. His shop, filled with the glitter of gold and the stories of the past, was a hub for the townsfolk who believed in the timeless value of this precious metal.

One beautiful morning in the foothills of Shimla, a young couple, Anjali and Raj, entered Dhaniram’s shop. They had recently heard about something called Sovereign Gold Bonds (SGBs) and were curious to know if they should invest in them.

“Dhaniram Ji, we’ve always bought gold jewelry for our savings, but now we’re hearing a lot about these gold bonds. Should we consider them?” asked Raj.

Dhaniram, with a gentle smile, motioned for them to sit down. He began to share a story, knowing it would help them understand the nuances of SGBs better.

“Many years ago,” Dhaniram began, “the government decided to introduce a way for people to invest in gold without actually buying the physical metal. They called it the Sovereign Gold Bond. It was a brilliant idea—imagine holding the value of gold, earning interest on it, and not having to worry about storing it safely.”

Anjali’s eyes lit up. “So, it’s like having gold without the hassle?”

“Exactly,” said Dhaniram. “SGBs offer many benefits. You get a fixed interest of 2.5% per year, paid out every six months. Plus, when you sell the bonds after eight years, you get the market value of gold at that time. If gold prices rise, you benefit, and there’s no long-term capital gains tax if you hold it until maturity.”

“But here’s the thing,” Dhaniram continued with a thoughtful look. “Recently, the government hasn’t been issuing new SGBs as frequently as before. The last batch was in February 2024, and there are whispers that these bonds might become a thing of the past. Why? Because the cost to the government has risen.

Gold prices have soared due to global economic uncertainties, and the returns on these bonds are now higher than what the government anticipated.”

Raj furrowed his brow. “So, does that mean it’s not a good time to buy?”

“Not necessarily,” Dhaniram replied. “In the past, many investors found SGBs at a discount in the secondary market. But now, with fewer new issues, people are buying up the available bonds, sometimes at a premium. If you buy at a higher price, your future returns might be lower.”

Anjali, ever the cautious planner, asked, “So, what should we do? Should we wait?”

Dhaniram leaned forward, his voice gentle but firm. “It depends on your goals. If you’re looking for a long-term, safe investment and believe that gold prices will continue to rise, then SGBs could still be a good option, even at a slightly higher cost. They’re backed by the government, offer steady interest, and protect against inflation. But if you’re focused on getting the best deal, you might want to wait for the market to cool down or explore other forms of gold investment.”

The couple nodded, absorbing the wisdom of the jeweler. Dhaniram story had given them much to think about.

As they left the shop, Raj turned to Anjali and said, “I think Dhaniram is right. Let’s consider our long-term goals and decide accordingly.”

And so, with the jeweler’s advice in mind, they walked into the future, armed with knowledge and the understanding that every golden opportunity must be weighed with care.

Moral of the Story: Sovereign Gold Bonds can be a valuable investment, offering the benefits of gold with the added security of government backing. However, with the current market dynamics, it’s essential to evaluate whether the timing is right for you. Consider your financial goals, the cost of entry, and the potential returns before deciding whether to invest in SGBs now.

From Ancient Rome to Modern Times: The Origins of Life Insurance

Have you ever wondered when life insurance first came into existence? Today, let’s explore some interesting facts about the origins of life insurance through a conversational dialogue between two characters. Any resemblance to real persons or other real-life entities is purely coincidental. All characters and other entities appearing in this work are fictitious

Characters:

Asha: A curious student of history.
Vikram: A seasoned historian.

Asha: Vikram, I’ve been reading about the origins of life insurance, and it’s fascinating! But I didn’t realize how far back it goes. Did it really start in ancient Rome?

Vikram: Yes, it did! The concept of life insurance, as we know it, can be traced back to ancient Rome. It’s quite an interesting story. Have you heard of Caius Marius?

Asha: Marius? Wasn’t he a military leader?

Vikram: That’s right. He was a prominent Roman general who understood the fears his soldiers had—not just of dying in battle, but of what might happen after they were gone. The Romans believed that an improper burial would doom a soul to wander restlessly as an unhappy ghost. It was a deeply held belief, and Marius recognized how important it was for his troops to know they’d be given a proper burial.

Asha: So, what did Marius do?

Vikram: He formed what we might call the first “burial club.” Every soldier in the club contributed to a common fund. If one of them died, the fund would cover the funeral expenses to ensure a dignified burial. Over time, these clubs evolved to also provide financial support to the families of the deceased soldiers.

Asha: That’s such a thoughtful concept. But what happened to these clubs? Why didn’t they continue?

Vikram: The fall of the Roman Empire around 450 A.D. brought about the decline of many such practices, including the burial clubs. The concept of life insurance, as it had been developed, faded away for a long time after that.

Asha: I see. But life insurance didn’t just disappear forever, did it?

Vikram: No, it didn’t. Fast forward several centuries to the late 1600s in London. The city was a hub of trade and commerce, and with that came the need for new forms of insurance. There was a small coffee house on Tower Street—Edward Lloyd’s Coffee House. It became a popular gathering place for ship captains, merchants, and ship owners.

Asha: Wasn’t Lloyd’s famous for something related to insurance?

Vikram: Exactly! The conversations in that coffee house soon turned towards marine insurance, and eventually, it became the birthplace of the modern insurance company. In 1769, a group of professional underwriters broke off to establish New Lloyd’s Coffee House, which grew into what we know today as Lloyd’s of London.

Asha: So, Lloyd’s wasn’t just about life insurance, but insurance in general?

Vikram: Yes, Lloyd’s initially focused on marine insurance, but it set the stage for the insurance industry as a whole. However, the first true life insurance policy was created even earlier, in 1583. It was a term life policy in England that insured a man for a specific period. If he died during that time, his beneficiary would receive a payout.

Asha: That’s the beginning of life insurance as a commercial product, right?

Vikram: Exactly. By the 1700s, life insurance had gained popularity, and in 1706, the Amicable Society for a Perpetual Assurance Office became the first company to offer life insurance in a form we would recognize today.

Asha: But I’m guessing it wasn’t all smooth sailing?

Vikram: No, it wasn’t. The financial panic of 1837 led to a shift towards mutualization in life insurance companies. This meant that policyholders became stakeholders in the companies, which helped build trust and stability during uncertain times.

Asha: That makes sense. It’s like giving people more control over something that’s so important to them.

Vikram: Exactly. And while all of this was happening in Rome and London, across the world in ancient India, the concept of “Yogakshema” was taking root. It was mentioned in the Rig Veda and represented the well-being and security of individuals, laying the philosophical foundation for life insurance in India.

Asha: Wow, that’s incredible! It seems like the desire for security and protection is universal, regardless of time or place.

Vikram: It truly is. From the burial clubs of ancient Rome to the bustling coffee houses of London and the ancient scriptures of India, the story of life insurance is a testament to humanity’s enduring belief in the importance of security and well-being.

Asha: This has been such an enlightening conversation, Vikram. I never realized that life insurance had such deep and diverse roots.

Vikram: I’m glad you found it interesting, Asha. History often holds the key to understanding how our modern practices evolved. Life insurance, in particular, shows how the need to care for our loved ones transcends time and culture.

Protecting Your Loved Ones: How to Calculate the “RIGHT” Life Insurance Cover?

Amit: Hey, Neha! I’ve been thinking about getting life insurance, but I’m really confused about how much coverage I should go for. Any thoughts?

Neha: Hi, Amit! That’s a great question. Deciding on the right amount of life insurance is one of the most important financial decisions you’ll make. It’s not just about how much premium you can afford but about ensuring your family is financially secure if something happens to you.

Amit: That makes sense. But how do I figure out the right amount? I’ve heard there are different methods.

Neha: Exactly! There are two common methods that can help you determine how much coverage you need: the Income Replacement Value and the Human Life Value (HLV). Let’s break them down.

Amit: Sure, let’s start with the Income Replacement Value.

Neha: The Income Replacement Value method is pretty straightforward. It’s based on your current annual income and the number of years left until you retire. You simply multiply your annual income by the number of years you have left to work.

For example, let’s say you earn ₹7,00,000 per year, and you plan to retire in 20 years. Your insurance needs would be ₹7,00,000 multiplied by 20, which equals ₹1.4 crores. This amount would replace your income if you were no longer around to provide for your family.

Amit: That’s easy to understand. But what if my income changes or if I take on a loan?

Neha: Good question! There’s also a variant of the Income Replacement method where you multiply your income by a factor that changes with your age. For example, between 30 and 40, the factor is usually 15-20. So, if you’re in your 30s and earning ₹7,00,000, you might multiply it by 15, giving you ₹1.05 crores as your insurance cover.

Also, if you have any outstanding loans, you should add those amounts to your coverage. You want to ensure that your family isn’t burdened with debts if something happens to you.

Amit: Got it! Now, what about the Human Life Value method?

Neha: The Human Life Value method is a bit more comprehensive. It calculates the present value of all the future income you would have earned for your loved ones. It also considers your liabilities, expenses, and savings.

For example, if your annual income is ₹10 lakhs and you’re 35 years old with plans to retire at 50, you’d calculate your HLV by multiplying your income by the years left until retirement. So, ₹10 lakhs multiplied by 15 years equals ₹1.5 crores. This is the economic value you’d be providing to your family until retirement.

Amit: That sounds more detailed. But what if my family’s needs change over time?

Neha: That’s where the Need-Based method comes in. This approach considers day-to-day expenses, the number of dependents, their needs, any loans, and big future expenses like your children’s education or marriage. It’s a more tailored way of calculating how much insurance you need.

Plus, it’s important to revisit your HLV calculation regularly. As your income, family, and financial responsibilities change, your insurance needs might change too. What you need at 25 when you’re single might be very different at 35 when you’re married with kids.

Amit: Wow, there’s a lot to think about. So, I should aim for coverage that equals my HLV?

Neha: Yes, your HLV gives you a good estimate of the maximum life insurance cover you should consider. It’s about ensuring that if anything happens to you, your family’s financial future is secure.

Amit: Thanks, Neha! This really clears things up. I’ll definitely calculate my HLV and make sure I’m getting the right coverage.

Neha: Anytime, Amit! Remember, it’s not just about having insurance—it’s about having the right amount to protect the ones you love.

The Wisdom of Time and Consistency – Way to become RICH

On a sunny afternoon, little Aarav was playing in the garden when he saw his grandfather, Dadaji, sitting under the shade of an old banyan tree. Dadaji was quietly reading a book, and Aarav, curious as ever, ran to him.

“Dadaji, what are you reading?” Aarav asked, sitting down beside him.

Dadaji smiled, closed his book, and said, “I’m reading about Rahul Dravid, the famous cricketer. Do you know who he is?”

Aarav thought for a moment and then nodded. “Yes, my teacher told us about him. He was called ‘The Wall’ because no one could get him out easily.”

“That’s right, Aarav,” Dadaji said, his eyes twinkling with pride. “But do you know why Dravid was so successful?”

Aarav shook his head, eager to learn more.

“It wasn’t just talent, but his consistency that made him great. He played 164 Test matches and scored more than 13,000 runs, making him one of the top run-scorers in cricket history. He didn’t achieve this overnight; it took years of dedication and hard work.”

Aarav looked impressed. “Wow, Dadaji! That’s a lot of runs! But how does that happen?”

Dadaji chuckled. “It’s all about time and consistency, my boy. Just like Rahul Dravid kept practicing and playing match after match, we need to be consistent in other things we do in life too.”

“Like what, Dadaji?”

“Like investing,” Dadaji said, his tone becoming more serious. “When you start saving and investing regularly, even if it’s just a small amount, over time, it can grow into something big.”

Aarav was confused. “But how does that work?”

Dadaji picked up a small pebble from the ground and said, “Imagine this pebble is your money. If you just leave it here, it stays the same. But if you put it in a place where it can grow, like in a garden, it will become part of something bigger over time.”

“Like planting seeds?” Aarav asked.

“Exactly!” Dadaji said, pleased with the comparison. “When you invest a small amount every month, it’s like planting seeds. Over time, these seeds grow, thanks to something called compounding. It’s like magic, but it’s real. The money you invest earns interest, and then that interest earns more interest, and it keeps growing.”

“But what if I can only save a little bit?” Aarav asked.

“That’s okay,” Dadaji reassured him. “Even if you start with just Rs 500 or Rs 1,000, the important thing is to start. You can do this through something called a Systematic Investment Plan, or SIP.”

“SIP? What’s that?” Aarav was curious.

“It’s a way to invest a fixed amount of money into a mutual fund every month,” Dadaji explained. “Think of it like paying an EMI, but instead of paying off a loan, you’re building your wealth. The best part is, you don’t have to worry about the ups and downs of the market too much. If the market is high, you buy fewer units, and if it’s low, you buy more. Over time, this balances out and helps you grow your money steadily.”

Aarav nodded slowly, understanding the concept. “But what if I get scared and want to stop investing when the market goes down?”

Dadaji smiled and patted Aarav on the shoulder. “That’s natural, but remember, the key is to stay consistent. Markets will go up and down, but if you keep investing regularly for 3 to 5 years, you’ll start to see the benefits. Just like Rahul Dravid didn’t quit when he faced tough bowlers, you shouldn’t stop your SIPs because of market ups and downs.”

Aarav thought about this and asked, “Is that why Warren Buffett is so rich?”

“Yes, Aarav,” Dadaji said with a proud smile. “Warren Buffett started investing when he was young and kept at it for over 70 years. His wealth grew slowly at first, but in the last 30 years, it multiplied more than 20 times because he stayed invested and let his money grow over time.”

“Wow, that’s amazing!” Aarav exclaimed. “So if I start now, I can be like him too?”

“Maybe not exactly like Buffett, but yes, you can build your wealth if you start early and stay consistent. It’s playing a sport – the more you practice, the better you get.

Aarav smiled, feeling inspired. “I’ll remember that, Dadaji. Time and consistency. I want to start investing too!”

Dadaji beamed with pride. “That’s the spirit, my boy! Just remember, it’s not about how much you start with, but how consistently you keep at it. And one day, you’ll see the rewards of your hard work, just like Dravid did on the cricket field.”

As the sun began to set, Aarav and Dadaji sat together under the banyan tree, the wisdom of time and consistency sinking deep into Aarav’s young heart, ready to guide him on the path to building wealth.

Before I end this blog post I would like to mention that in our lives too, we know what we need to do to make better friends. But, we just don’t do it. It’s the biggest struggle that we will all face in our entire lives.

Being consistent on the things that matter to us. Showing up when it matters. Curating the life WE want, and not someone else’s.

But you need to start somewhere right? To give you a small example…I’ve written some 16-odd articles in the past 3 weeks on Simplified Money Talks and I aim to cross 100+ posts by the next 60 days. You might think I have been working day in and day out on creating such blog posts! But, that’s not TRUE!

My 50+ posts are the perfect example of creating something big through daily and weekly actions. My blog posts have just crossed another 1,000+ hits in just 3 weeks. The reason behind this is my consistency. I am trying to post content, day after day.

Similarly, when it comes to investing you have to be consistent just like what Dadaji mentioned above.