Rediff Personal Finance, ELSS and everything else

I seem to be gravitating heavily towards Rediff recently. I discovered that their articles, especially the ones from Personalfn.com, seems to be direct, to the point and very common sensical. Good work guys keep it up. I do have a few rejoinders to their articles and my blog helps me post those ideas pretty easily.

Today I found an article on ELSS, how does it help the common man due to the 80C tax savings rule but goes even further to understand how to pick out of the whole bunch of ELSS funds that is currently available in the market and makes specific suggestions on how to go about doing it.

Do not put all your funds into a single scheme; have a mix of fund houses as well as schemes.

[Via rediff: Personal Finance]

Now I have some amount of personal experience with ELSS that I wanted to share with all of you. I have been a regular investor in ELSS schemes from 2002 and so come 2005, I had the ability to actually pull my money out since the three year lockin was complete.
Now here is the interesting part - I had actually chosen 3 years ago to use the dividend option with dividend reinvestment so over the three years the fund had reinvested all the earned dividends back into the fund. The only problem is that when I tried to sell all my holding, I was told that I cannot do it since the dividends were invested at a later point in time and those units cannot be withdrawn now and that they need to go through the three year lock in period. That does make sense when we look at it but 3 years ago when ELSS was a blip in investor's radar, the people who were selling it didn't think up of this problem and neither did I.

The flip side is that I did withdraw a significant portion of the money at the beginning of 2005 and now the remaining money has grown a lot better than the money I withdrew thanks to the spectacular performance of the ELSS funds over the one year boom in the Indian stock market.

So the moral of the story folks is that opt for the "GROWTH" option if you don't want to keep track of all the pesky dividends which will pay dividends which will pay dividends etc., for ever (hopefully)

Funds during an emergency - how do we get it?

We all need emergency funds in our life. We never know when we need it but we all know that we need it some time or other. There was a detailed post on CNN some time back on how to get hold of emergency funds when we need them. I have adapted it to the Indian context since a lot of avenues that we have a are very specific to personal financing in India. So without much ado here is my list.

1. Tap emergency funds : You did save for the rainy day somewhere didn't you? This would be the right time to start using it. If you have not started doing this as a habit. It might be worth doing something like this after you get out of this crisis. So what is next, let us look forward.
   
2. Sell long term equity investments : Long term equity investments are investments over a year's timeframe. They have most probably given you handsome returns given that stock market has done well for quite some time now. So far the sources of emergency funds that we have looked at were
3. Ask parents for a gift : If your parents were planning to give you a gift in cash / money, this would be a good time to do it. Gifts from parents wont be taxable and would help you tide over the current crisis.
   
4. break into a FD : Fixed deposits can provide the next level of quick access to money that comes with some penal interest for early withdrawal. You probably wont lose the principal but definitely a large portion of the interest when you do this one.
   
5. Take a loan on Jewels : Jewel loans are not a pawn broker domain anymore. Many banks will help you with a jewel loan. All that jewelery you have lying around in a locker can actually come in handy. Talk to your bank and close the transaction right there from your locker to the banker's locker. Gold has in recent times appreciated well so this option makes it even more worthwhile.
   
6. Borrow on your PPF : Your public provident fund could be a good source of income from the third year onwards of establishing the account. The loan amount
   should not exceed 25 per cent of the balance in your PPF account at the end
   of the preceding financial year.
7. Loan against shares : This is an option that comes with specific risks. If the stock under lien goes down in value, the institution providing the loan will automatically liquidate it and you will be responsible for tax implications on the same. This option also has a higher cost associated with it as compared to some of the previous options.
   
8. Loan against property : If you hold property that is not in lien already , then you can go for a loan against property. This is low on our options list since this option is probably going to take some time to work and not exactly going to help in an emergency situation.
   
9. Personal loan : The ubiquitous personal loans with their so called low rates are your next best option if you have reached down so far in selecting a source for your funds. There are quite a few options available but none of them can be qualified as cheap. The costs are just "structured" well so you can never find them :)
   
10. Cash advance on your credit card : You got to be kidding right? This is really not a real option given the cost of this loan.
    

Hope this helped you in coming to an easy conclusion on what are your sources of money. Good luck.

Keeping track of things - Personal financial calendar

Keeping track of one's financial events always a good thing and my challenge has always been remembering dates - as a teen I couldn't remember a single girl's birthday and now as an adult, I cannot remember the maturity dates of my FMPs and my bond expiry dates. Given this, I decided to institute an universal distributed calendar on Google where I can have all key financial events entered in there. I picked google calendar since it allows for a centralized calendar, allows addition of tasks from remote software clients and also integrates with Outlook. So here is my setup and how I use it. YMMW.

1. Mozilla Sunbird at home with remote google calendar configured at home
2. Outlook calendar at work synced to google calendar one way (I dont want my work events to get into this calendar) using Google calendar sync
   

This setup allows me to have all personal events uploaded by me or the family into google calendar and they appear in my outlook and further google calendar can also send SMS messages as alerts to events prior to the actual date based on configuration. We are further able to use Mozilla sunbird as a good solid client on our home computer to be able to add events to the google calendar. So enough about technology - how do we use this setup you may ask. Well here is what my calendar contains today

1. Repeated Events
1. Credit card payment reminders
2. School fees and other such stuff
3. Reminders of events at school (I never said you have to use it only for finance !)
4. Insurance payments
   
2. One off Events
1. FD maturity dates
2. Other long term investment maturity
3. Completion of any investment plans (STP/SIP etc.,)
4. PPF event dates (5 years, 7 years etc.,)
5. Other key events that you want to remember

This is a big relief off our minds as a family since all important actvities are being tracked by an external system and I get a sync up of the data on my outlook and my wife gets SMS alerts of events. The idea stems from GTD to get things out of our collective minds and have a system to track it.