Ghalla Bhansali Learning Academy

THREE GIFTS FROM THE MUTUAL FUND INDUSTRY – SIP , STP, SWP

(Gujarati Midday Article Column Money Plant written by MR. Mukesh Dedhia dated August 13, 2017)

India is far behind the world in case of ‘ Ease of doing business’. One of the priorities of the present government under the leadership of our prime minister Shri Narendrabhai Modi has been to remove the number of permissions required to start a business. India has jumped in its world ranking from 142 to 130, but still lot of hardships and corruption exists. The first goal is to be at least in the top 100. And if businesses are not setup, at least in the SME & the MSME sector, then jobs cannot be created and required thrust to the GDP will not be possible.
Post computerized trading with the advent of the National Stock Exchange of India and dematerialization of shares with the setting up of NSDL and CDSL, we are seeing a lot of ease in investing in stock market. Trading cycles have reduced from fifteen days to one day, bad delivery of shares and the fake share issues are of the past now. With the setup of Clearing Corporations counter trades are now guaranteed. Because of all these factors and a growing economy , FIIs ( Foreign Institutional Investors ) have started to invest in India aggressively.
However the retail investor was still missing the party. He does not have the required knowledge to identify and do research on stocks. He had to depend on the so called tips from friends and neighbours and would invariably burn hands. Also he was not able to diversify his portfolio because of his small investible amount. It was very difficult to find the right broker and/or the advisor. And then entered the private sector in the Mutual Funds industry in the year 1993 and that set the ball rolling for some serious players to enter this arena. This changed the whole perspective for Capital markets. People now saw it with investing angle rather than a trading den. What changed for the investors was ‘ EASE of INVESTING’ and a professional approach to investing. Now professional fund managers were managing their money through reputed and well regulated ( by SEBI ) entities.
Mutual fund houses brought concepts which were very popular in the developed countries. They understand that investors do not have a lump sum amount to invest all the time. He would rather save a portion , say every month, out of his salary or regular income. They introduced a concept of Systematic Investment Plan now popularly called as SIP where in you invest a fixed amount every month or quarter. This is called as ‘ dollar cost averaging’ in USA or ‘ rupee cost averaging ‘ in India. It is so called because your purchases get averaged out because of purchases at different points of time. The advantage of this system is you do not get committed at one single stage of the market . Also more units will be allotted for the same amount in case of a falling market. This will bring down your average purchase price and hence can increase your profits.
Another concept is called ‘Systematic Transfer Plan’ (popularly called STP). This works very much like a SIP. The difference here is that you invest a lumpsum in a safe scheme like a Liquid fund and then you transfer a fixed amount from the Liquid Fund to an Equity Scheme or a Balanced Fund over a period of time. Rather than keeping money in a savings account you invest in a liquid fund which would give you at least fifty percent more returns than a normal savings account. And overall you get similar benefits like a SIP of rupee cost averaging.
The third concept which can be very effectively used by retired people is the ‘Systematic Withdrawal Plan’ or popularly called as SWP. Here you give instructions to withdraw a fixed amount of money every month from your investments. This can work like a pension or an annuity plan. If this withdrawals are made after a year and from equity or balanced funds, then there is NO TAX. However pension or annuities from Pension schemes are taxable. Care should be taken to decide how much money to be withdrawn.
According to me, SIP, STP and SWP are like gifts given by God to the retail investors. Please understand them properly with your advisor and use them effectively to give you maximum benefits!

" નારી તુ નારાચણી "
(Ghalla Bhansali Foundation Article by Mr. Ritesh Arvind Poladia)

"બાળકોને બચત કરતા શીખવો"
(An article from the Book Money Plant written by Mr. Mukesh Dedhia, Director Ghalla Bhansali)

Its time to make your child money savvy!
(An article from the Book Money Plant written by Mr. Mukesh Dedhia, Director Ghalla Bhansali)
We all have piggy banks gifted by our parents or grand parents when we were young! We gifted this the same way to our children. But how many of us preserve the piggy bank after the age of 10? I doubt! Rather after being an adult we find it all the more difficult to save. So I would insist educate your child right from his younger days about how money is earned, spent, saved & invested! Just as mastering a new language is easier when you are young, so is financial education.
So this one is dedicated to all the minors, who always wanted to touch, feel and understand money, but were afraid to start. Before the parents decide to move on to the next article, my advice to them is wait for a moment: Your kids need your help. Some parents may argue that they never needed to learn about stocks and shares till they started earning, so why should their children? The answer is, times have changed, exposure has increased and children are being targeted for their money power earlier than ever before. It only makes sense to arm them to deal with the financial world and its possibilities.
Today kids know ATMs and are bombarded with ads for financial products like credit cards, from a very young age. They leave home to study elsewhere much earlier than their parents ever did; they also start earning earlier through internships and summer jobs. Despite all this, they are sadly ignorant of the basics of money management.
I understand that it is unreasonable to expect five-year-olds to calculate compound interest or nine-year-olds to understand taxation policies. But to give five-year-olds the building blocks of financial language, experiences and values is to give them tools on which they can build, year after year. Today the most important part in our life is the education of our children. But, is the current education system enough to teach them how to live a purposeful life. No it isn’t. So what do you think your child is missing out on? Many things! One of them is “HOW TO MANAGE MONEY!” Yes this is the one thing that needs to be there with you at each and every stage of life. So don’t you want your children to learn something about it?
Explain to your children that money is earned by working, and that you can only spend what you earn. To help them understand what it's like to get paid on a schedule, begin paying pocket money on the basis of help they provide in the house. Then help them set goals for how they spend and save their allowance. Experts differ on whether or not allowances should be tied to household chores. Although many people say children will learn more about personal responsibility if they are NOT paid for pitching in around the home, others feel it teaches them valuable lessons about working and earning. You might consider paying your children for chores outside of daily duties, such as helping to garden or wash the family car. It's important, however, to make sure that you stick to the payment schedule; otherwise the lesson may be lost.
You can teach your child about the basics like how to save money? How to reduce down on costs? & so on…. in the way that he/she is comfortable in learning. You don’t have to be strict with them, just be like a friend to them. You can start with the most simple and common thing that all of us have been doing from ages and will continue the same for ages i.e. saving some money in the ‘Piggy Bank’, as I mentioned earlier. This is one of the best ways as we save not only what we decide to save but also the extra amount that is left over from some or the other expenses. This not only helps them to save some money, but also can help when they are in need of some cash for purchasing something that they have been wanting for a long time or for purchasing gifts for their friends.
Whatever they want can’t be always given to them & this is a good thing which will tempt them to save some more apart from what they generally do. Suppose if your child wants to buy a new cell phone and you say no to him, he will save more & more from his pocket money & also cut down his small-small costs.
You can also take them with you when you go to banks for normal transactions like depositing money, withdrawals, etc. This will give them a bit of exposure to how the banks work and what they have to do when they want to deposit money, withdraw cash, etc. When in the bank you can ask them to fill in the ‘Deposit Slip’ or ask them to check the deposit rates, this will give them an exposure to what returns they tend to get on the deposits they have made over a period of time. Like the ‘Piggy Bank’ you can also ask them to save some money from their pocket money in the banks in an FD, and tell them about the benefits that they will get at the time of maturity.
And once all this is running in a flow you should be happy as you have made them aware of the basics of saving from what they have in their hands. Once they get a hold of this you can go a step further, you can show them the budget that is required by you to handle the current household, and this will give them an exposure on how much spending is required by you to handle the house & other expenses related to it. This might make them realize the unwanted expenses that they are doing and might make them understand to cut them down or to stop such silly expenses.
After these become a part of their daily schedule, you can teach them about various financial instruments like Mutual Funds, Insurance, etc. This might seem them to be a bit tedious thing but once they understand these instruments they tend to get interested in them. These financial instruments are not only interesting but also are flexible for investment purpose. Ask them to start an SIP by saving a portion of their pocket money. Let us take an example, suppose if the pocket money of your child is Rs 1000 pm, he can save Rs 100 out of these Rs 1000 and start an SIP in any of the Mutual Fund Schemes that is providing him with the facility of Rs 100 as SIP. This way he is not only saving some amount but also investing the same that is likely to grow at the time when he requires. But make sure that he does this saving for a longer period of time & invests regularly.
In this way you will help your children to know what they are going to face when they grow-up. And at that point of time they would be quite happy with the knowledge that they have at back of their mind and this will be all because of you. Not only the knowledge but also the investments made by them in their younger days will be of great help to them when they are ready to face the real world.
So what are you waiting for? With the vacations coming up, you have all the opportunity to teach them about handling their finances & making them understand why to start investing? Learning to manage money is one of the easiest ways to give children a set of life skills that will serve them throughout the challenges of life.
Below are some financial skills that every child needs.
1. How to earn?
2. How to keep a track of money?
3. How to live on budget?
4. How to spend wisely?
5. How to save?
6. How to invest?
It is never too early to encourage long-term savings.
- Ron Lewis

See what our director Mr. Mukesh Dedhia has to say to " A Monthly Income Plan(MIP) is a kind of a Debt Fund. Why does it's offer document show High/Medium Risk?" under the EXPERT SPEAK column of Hindustan Times, Page 9, dated 30/08/2016.

"MAKE YOUR DAUGHTER’S LIFE GRAND, WHY ONLY HER WEDDING....!!!!" Gujarati & English Version
(An article from the Book Money Plant written by Ghalla Bhansali director Mr. Mukesh Dedhia)

This article was published on 21st Feb 2009; it is written as per the situation at that time.

Daughter - The closest to a father’s heart. The relationship between a father & his little girl is very unique & special. All through the growing years father takes special care that his daughter gets the best of what she wants. While doing this he doesn’t even realize when his little princess turns to be young enough to be married to her prince charming.

But having a daughter get married can be a little traumatic. After all some young man is taking your place as the most important male in your daughter’s life. The emotional trauma is in expressible.

On the other hand, if we see the financial impact, it is something which a father thinks about since the birth of his daughter. As a father he starts accumulating little by little for the D-day. It is every father’s dream to make his daughter’s wedding into a GRAND CELEBRATION.

As per his ability, the celebration of daughter’s wedding goes on for a day, three days, even a week long or more than that. He ensures the best of clothing, jewellery, décor, caterers, Invitation cards, photography………etc

But have you realized the bigger the celebration, bigger gets the HOLE of your pocket. People will come, celebrate, comment and go. How long will they remember the marriage…? The next day someone else will come up with a GRANDER CELEBRATION and your daughter’s wedding will be forgotten.

Here you will argue that I have been saving all these years only for my daughter, because I want to give her the best. I agree, but what ever you have been saving goes by the wind in just a few days. Pardon me for being practical, but spare a minute and think about it. Instead of having such a show off kind of wedding, why not invest that extra amount of money and give a better future to your daughter.

Let’s illustrate using actual numbers.

On an average a wedding costs around Rs. 10,00,000 to 15,00,000. This cost includes costly clothes, jewellery etc….
I am not telling don’t celebrate the wedding, but cut down on the expenses wherever possible. We can cut down on unwanted expenses like costliest of caterers, invitation cards…etc & do away with unnecessary formalities.
Suppose by cutting on these expenses, even if you save around Rs.3 lakhs & invest this amount in a conservative way, say at around 8% p.a. interest. This one time investment during the wedding can grow to more than Rs.30 lakhs in a period of 30 years. Isn’t it a pretty decent amount…?
It is just an example; you can invest as per your capability, at a higher rate & start investing even before her marriage, for her better future.

GOD forbid but if she gets into a financial trouble, this very investment can bail her out. She won’t have to ask for help from anybody. Even if thankfully such need does not arise, she can always have financial security throughout her life. This money can mean a lot during her older age.

Traditionally bride’s family paid for the wedding costs, but with the average cost of weddings sky rocketing, this cost can be shared by both the families. Due to these the burden on a father to marry his daughter nearly halves & this extra half can be invested for a wonderful financial future of his daughter. REMEMBER THIS INVESTMENT IS ONLY A GIFT TO YOUR DAUGHTER, NOT FOR SON-IN-LAW OR HIS FAMILY (This should not be misunderstood as a Dowry).

I just want the society to understand that we need change with changing surroundings. Marriage is an important phase for a daughter don’t commercialize it by showing off your money. Don’t be materialistic, be real & be wise…!!!!

"વર્તમાન સાહસિકો માટે ઈ- કોમર્સ એ એક ગૅમ ચેન્જર " Ghalla Bhansali Foundation Article August 2016 by Mr. Ritesh Arvind Poladia!

"How to gift your daughter a happy and a smooth life?" Gujarati Version
(An article from the Book Money Plant written by Mr. Mukesh Dedhia)

"Pocket Money for Elderly Parents" Gujarati & English Version
(An article from the Book Money Plant written by Ghalla Bhansali director Mr. Mukesh Dedhia)

This article was published on 17th May 2008; it is written as per the situation at that time.

With the start of a new month, the milkman, newspaper vendor, washer man, housemaid and many others will come to collect their dues. Even children will demand their pocket money.
Today we will discuss on pocket money for elderly parents and not for children. Children by hook or by crook are successful in demanding their desired pocket money, but elderly retired parents’ wishes are very rarely heard. Even they need pocket money to fulfill their wishes. This is many a times knowingly or unknowingly overlooked by their children.
Pocket money for elderly parents
In India, when a young son starts earning, at the same time his father heads towards retirement. This brings us to a fact that a young boy is provided with pocket money by his father till he starts earning, but a father is never provided with pocket money after his retirement. Has anyone ever thought of providing pocket money to their parents? If not, do think.
While reading this, you may have many questions like-
• What is the link between financial management and parent’s pocket money?
• They are provided with basic needs like clothes, food etc. then why they need additional money?
• While we are struggling to maintain expenses, how to provide them with additional funds?
• If they are not asking for it, then why should I provide them the money?
If you are diverted to this thought, then look at the past and realize how they have stretched themselves throughout their life for your wishes and better education. They worked hard to give their children a better living, now it’s your turn to give them back all the happiness they deserve.
When a family is considered as an extended family
There is a sad truth in our culture that as a child starts earning and settles down in his life, his world changes. Where a family was defined as me, my mother and my father, it suddenly gets converted into me, my wife and my children. Parents are started to be considered as an extended family. Children spend on movies and hotels but when parents seek money for donation or pilgrimage, they are given reasons like financial crisis. One should balance their entire family’s needs.
Value is, when given without having asked for it
My intention is not to generalize that children do not take care of their parents. Many argue that when our parents express their desire for any activity like going for pilgrimage or donation, we always provide them with money. But one should understand that after a certain age, how many parents are able to express their desires without any hitch? Rather than giving money when asked, if we provide it to them even before they ask, I am sure they will feel very loved and happy.
Mediclaim and pocket money
Elderly people should have a medical cover. Medical emergency may pop up anytime. Hence mediclaim should be taken at an early age and its renewal should be paid diligently. If it gets lapsed, it is difficult to take a new cover. Even as per Income Tax Rules, the deduction for mediclaim is high for senior citizens.
Considering the needs of all members of the family, if one distributes his/her income properly to be spent for all, it will make a happy family. If possible, every month one should provide their parents with pocket money on his own. Older generation is always better at saving than the current generation. This will ensure that their part of money is not utilized by you. Second option is to invest some money in their name in postal schemes or other reasonable return providing options. Invest in such a way that their pocket money is received as return on the investments. With this, principal is saved, pocket money is received regularly and they are self dependent. How much to invest depends upon family’s needs and circumstances. If children’s financial stability is in danger, this amount invested in fixed deposit can be used for parent’s medical aid.
Your children are your future and your parents are your present. We should always be thankful to them. We are what we are because of them, thus we should always be obliged to them, they are the most important people in our life who have made a difference in our life.

" તમે જ તમારા ગડવૈયા " Ghalla Bhansali Foundation Article July 2016 by Ghalla Bhansali Director Mr. Ritesh Arvind Poladia!

Book by Mr. Mukesh Dedhia

It’s all About Loving Your Parents…..
(An article from the Book Money Plant written by Mr. Mukesh Dedhia)

One young academically smart person went to apply for a managerial position in a big company. He passed the initial rounds; the director did the last interview and made the last decision. The director discovered from the CV, that the youth's academic result was excellent all the way, from the secondary school to postgraduate research. He never had a year he did not score high marks.

The director asked, "Did you obtain any scholarships in school?" And the youth answered "none". The director asked, "Is it your father who paid your school fees?" The youth answered, "My father passed away when I was one year old, it is my mother who paid for my school fees." The director asked, "Where did your mother work?" The youth answered, "My mother worked as a cloth cleaner."

The director requested the youth to show his hands, the youth showed a pair of hands that looked smooth and perfect to the director. The director asked, "Did you ever help your mother wash clothes before?" The youth answered, "Never. My mother always wanted me to study hard and read more books. Furthermore, my mother can wash clothes faster than me." The director said, I have a request, when you go back today, go and help to clean your mother's hands, and then see me tomorrow morning.

The youth felt that his chance of landing the job was high. When he went back home, he happily wanted to clean his mother's hands. His mother felt strange and happy but had mixed feelings. She showed her hands to the boy.

The youth cleaned his mother's hands gently, his tears streamed down his cheeks as he cleaned them. That was the very first time that he noticed that his mother's hands were so wrinkled, and that there were so many cuts in her hands. Some of the cuts and bruises were so deep that they caused her a lot of pain when he gently cleaned them with water. This is the first time the youth had realized and experienced how very hard his mother had worked with her pair of hands...the hands that washed clothes everyday to earn enough money to put him through school over the years. That was the ultimate price that his mother had paid so willingly for his entire education...his academic excellence and probably his future.

After finishing cleaning his mother’s hands, the youth quietly cleaned all remaining clothes for his mother. That night, mother and son talked for a very long time. Next morning, the youth went to the director's office.

The director noticed the tears in the youth's eyes, and asked him: "Can you please tell me what exactly you did when you went home yesterday and what lessons you have learned from the work you did?"

The youth answered:" I cleaned my mother's hands, and only then I realized how hard she had worked to put me through school all these years. Those hands were so pale and wrinkled and had deep cuts. Some of those cuts were bleeding when I gently washed them. I then told my mother to sit down while I washed the remaining clothes. I was ashamed of myself for not helping my mother with the house work all these years. I truly love my mother for being there for me. She sacrificed her life for me and now it is my turn to look after her and I am going to do that until the day I leave this world." He was obviously hired later & did well in the job.

This episode reminds me of one of my client Mr. Ramesh Shah (Name changed), aged 58. He stays in Mumbai along with his wife & two sons. Both his sons are also married. They all stay together in a joint family. Mr. Shah & family have garnered decent wealth with a middle class standard of living. Mr. Shah has his own business, which he manages on his own. His elder son is into another business and doing it on his own. Unfortunately the earnings in his business are limited and so is the scope to expand. According to Mr.Ramesh, there is scope to increase his business if there is a helping hand from his son. The younger son is an engineer. He is employed with an MNC with a good yearly package.

Mr. Shah, being a typical Indian soft hearted parent, had not asked his children to share the daily household expenses. Hence, whatever he would be able to make out of the business, would be spent for managing the household expenses. The crux of his problem was in spite of having a good Networth; he could not manage to have a surplus. The issue was of liquidity in his hands. Though being a businessman, complete retirement was not what was going to happen. But, having worked throughout his life, now he wished to slow down a bit

When Mr. Shah came to me with his concern, I suggested him to ask for contribution by his children in the household expenses. Since we believe in the joint family system, so let everything be literally JOINT. Initially Mr. Shah hesitated, but after me explaining him the practicalities, he agreed to discuss the issue with his family.

After a few days when we had a meeting, he seemed to be in a different mood. His family had gleefully accepted the idea of sharing the expenses. He was pleasantly surprised by the daughter-in-laws’ reaction to the idea. They had been more supportive. Hence his emotional thought of being unjust to them was relaxed.

I even suggested him to convince the elder son to join his (Ramesh’s) business. So that son’s enthusiasm & Ramesh’s experience can take the venture to heights. Finally he was able to convince his elder son to join the family business. Today Ramesh & his wife get enough time & have enough money to enjoy their quasi retired life.

In the above case, may be I have not directly added to their wealth. But have tried giving them a solution beyond money. So we as financial planners not only plan one’s finances but also act as their family guide & that is where the core of our profession is.

As parents if we are protective, did we love the kid or destroy the kid?

You can let your kid live in a big house, eat a good meal, learn piano, watch a big screen TV. But when you are cutting grass, please let them experience it. After a meal, let them wash their plate and bowl together with their brothers and sisters. It is not because you do not have money to hire a maid, but it is because you want to love them in a right way. You want them to understand, no matter how rich their parents are, they have to be prepared for the big thing called LIFE. They have to learn to take the responsibilities when the time comes.

And as a child to our parents, we should realize the amount of hard work & sacrifice they have done for us. Once the child starts earning, the financial burden should be gradually taken away from the parents.

How many of us have actually gone to our parents, taken their hands in our hand, cleaned them, kissed them & actually thanked them saying, “THANKS FOR BEING THERE! IF IT WAS NOT FOR YOU I WOULD NOT HAVE MADE IT BIG IN LIFE!” & then promised them, that “YOU HAVE WORKED ENOUGH, NOW ITS OUR TURN TO WORK, YOU SIT BACK & RELAX, HUM HAI NA….!” If not done, let’s do it today.