Use your gold when you are in a financial crisis

Use your gold if you are in a financial crisis

Have you been in a money crunch or desperate to raise some cash to get out of a personal financial crisis? If you own some gold, this might be an opportunity when you can actually realize the glittering quality of gold. Did you know that you can use..

Use your gold if you are in a financial crisis

How can you use gold if you are financially strained?

Loans against gold:
Did you know that you can take a loan against your gold jewellery and ornaments. Many banks and non-banking companies like Muthoot and Mannapuram can offer you loans almost instantaneously if you take a loan from them and offer your gold as a security...

Sell your physical gold or gold ETFs:

Many families buy gold as a store of value that they can encash on a rainy day. Whether you own gold in physical form (jewellery, bars) or in paper form (ETFs), if you need to raise cash, you can consider selling your gold. The advantage of selling gold is that its a market that is very liquid, which is...

Gold deposit schemes:

Just like you can deposit cash into a Fixed Deposit and earn interest on it, you can also deposit your gold coins, jewellery into a gold deposit and earn interest income on it. Some banks like SBI offer this service. Your gold will be converted into bars and you will get a certificate to the effect.

Leasing your gold jewellery:

Leasing your gold jewellery is not yet done in the organised market, but there are certain places where you can lease out your gold jewellery for other people's wedding. This is often practiced by retailers and beauty shops who provide wedding dresses. You can earn "rent" on your jewellery...
So the next time you are in a tight financial situation, be creative and see if you can use your existing gold. Rather than it sitting idle in a locker somewhere, use it to get out of your financial crisis

What are MIP's?

Monthly Income Plans, or MIPs, are hybrid instruments that invest a small part of their portfolio (around 5-25 %) in equities and the remaining (75-95%) in debt and money market instruments. Their portfolio is essentially biased towards debt, but a small exposure to equity is added as a kicker. MIPs aim to give a monthly income to investors. The investor can decide the periodicity at which he wants dividends, which could be monthly, quarterly, half-yearly or annually. In addition to this, a growth option is also available, where gains come in the form of capital appreciation.


MIP returns are market-driven. That means, the fund manager is under no obligation to declare a monthly dividend, though most fund houses try their level best to declare dividends regularly. This is the main difference between MIPs and fixed deposits (FDs) that offer assured interests. However, compared with FDs, MIPs are tax-efficient as dividends declared under MIPs are tax-free.

Typically, retired people or those nearing retirement (in their late 50s) can opt for MIPs as they can generate an adequate income flow that can help them meet their monthly expenses. However, investors should remember that dividends are not guaranteed. If the stock market runs into rough weather, the fund manager may not declare dividends for that period. This is a risk the investor should be able to factor in. In short, MIPs can only be an additional source of income to the regular income form pension, annuity and so on.

Apart from retirees, novices to the market who wish to take a small exposure to equity can also consider investing in equity. The modest equity exposure will generate extra income, while the debt portion will preserve the capital. They can also pocket extra returns, thanks to the stocks in the portfolio. However, always remember that equity is a risky investment option, despite the fund manager’s best effort it could underperform in certain periods due to bad market conditions.

Do you know what is inflation?

What Is Inflation? Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every rupee you own buys a smaller percentage of a good or service. The value of a rupee does not stay constant when there is inflation. The value of a rupee is observed in terms of purchasing power, which is the real, tangible goods that money can buy. When inflation goes up, there is a decline in the purchasing power of money. For example, if the inflation rate is 6% annually, then theoretically a Rs1 pack of gum will cost Rs1.06 in a year. After inflation, your rupee can't buy the same goods it could beforehand. There are several variations on inflation:


• Deflation is when the general level of prices is falling. This is the opposite of inflation.

• Hyperinflation is unusually rapid inflation. In extreme cases, this can lead to the breakdown of a nation's monetary system. One of the most notable examples of hyperinflation occurred in Germany in 1923, when prices rose 2,500% in one month!

• Stagflation is the combination of high unemployment and economic stagnation with inflation. This happened in industrialized countries during the 1970s, when a bad economy was combined with OPEC raising oil prices.

In recent years, most developed countries have attempted to sustain an inflation rate of 2-3%. Causes of Inflation Economists wake up in the morning hoping for a chance to debate the causes of inflation. There is no one cause that's universally agreed upon, but at least two theories are generally accepted: Demand-Pull Inflation - This theory can be summarized as "too much money chasing too few goods". In other words, if demand is growing faster than supply, prices will increase. This usually occurs in growing economies. Cost-Push Inflation - When companies' costs go up, they need to increase prices to maintain their profit margins. Increased costs can include things such as wages, taxes, or increased costs of imports.


Costs of Inflation
Almost everyone thinks inflation is evil, but it isn't necessarily so. Inflation affects different people in different ways. It also depends on whether inflation is anticipated or unanticipated. If the inflation rate corresponds to what the majority of people are expecting (anticipated inflation), then we can compensate and the cost isn't high. For example, banks can vary their interest rates and workers can negotiate contracts that include automatic wage hikes as the price level goes up. Problems arise when there is unanticipated inflation:

• Creditors lose and debtors gain if the lender does not anticipate inflation correctly. For those who borrow, this is similar to getting an interest-free loan.

• Uncertainty about what will happen next makes corporations and consumers less likely to spend. This hurts economic output in the long run.

• People living off a fixed-income, such as retirees, see a decline in their purchasing power and, consequently, their standard of living.

• The entire economy must absorb repricing costs ("menu costs") as price lists, labels, menus and more have to be updated.

• If the inflation rate is greater than that of other countries, domestic products become less competitive.

People like to complain about prices going up, but they often ignore the fact that wages should be rising as well. The question shouldn't be whether inflation is rising, but whether it's rising at a quicker pace than your wages. Finally, inflation is a sign that an economy is growing. In some situations, little inflation (or even deflation) can be just as bad as high inflation. The lack of inflation may be an indication that the economy is weakening. As you can see, it's not so easy to label inflation as either good or bad - it depends on the overall economy as well as your personal situation.

How Is It Measured?

Measuring inflation is a difficult problem for government statisticians. To do this, a number of goods that are representative of the economy are put together into what is referred to as a "market basket." The cost of this basket is then compared over time. This results in a price index, which is the cost of the market basket today as a percentage of the cost of that identical basket in the starting year

Real Estate Industry- A study Delhi NCR

Authored by: Ajit Panicker

Real estate industry is the next big thing, it is a revolution, was the belief which everyone in the financial market, economic stardoms of the country, and various trade pundits had in the year 2007-08. The last week's article in one of the leading newspapers in india claimed that the 77% of the project due to be given possession to the investors in 2012-2013, are not yet ready and near possibilities of that happening is also dim.
Is this an after effect of the recessionary movements in the economy or for that matter even at the global level, my understanding and for that matter any layman can understand that this is purely a misjudgement by many and wrong decisions taken by major stakeholders in the real estate industry, including the reatil investors.
No product in the market can sell till the buyers are there, and as basic understanding of economics says that the excessive demand will lead to shortage of supply, is a misnomer here. Misleading excessive demand lead to the flocks of retail investors to invest, a marketing gimmick and which has finally lead to a condition where there is an excessive supply.Many projects conceptualized are not able to start because funds are not available with builders and the credit reputation of the builder is not allowing the banks to grant funds.
what will happen next?
The middle class group of people who have majorly invested in these projects are at a crossroad where they can neither move forward nor backwards , it is a loss-loss situation. if they get the possession late, they will have to pay the bank' emi's and the interest and would be in a loss, and deciding to go back on their decisions would be too late.
so what is the solution?
Read the next post

What are Mutual funds: An introduction, advantages and disadvantages

Written by: Ajit Panicker
Inputs taken from notes by: Warren Buffet

Mutual funds are nowdays a sought after investment options by large number of investors. The investors include all types- small and big investors. Most feel that  investing in stocks and shares is not a very great idea as the time, skills and knowledge required to invest through stocks is not available with everyone. But if someone wants to take the advantage of the high returns which the share market offers at a much lesser and reduced risk, the easiest option available is mutual funds.
But are mutual funds, simply a tool of investment or do we need to understand a little bit more about it.
Mutual funds are, a pool of sourced money from a group of investors which is invested in a selected number of stocks with exposure to different industries and with a mix of debt,equity and bonds well distributed.

A mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund.

One can make money from a mutual fund in three ways:
1) Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all of the income it receives over the year to fund owners in the form of a distribution.
2) If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution.
3) If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit.

Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares.

Advantages of Mutual Funds
• Professional Management - The primary advantage of funds is the professional management of your money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolios. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments.

• Diversification - By owning shares in a mutual fund instead of owning individual stocks or bonds, your risk is spread out. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. In other words, the more stocks and bonds you own, the less any one of them can hurt you (think about Enron). Large mutual funds typically own hundreds of different stocks in many different industries. It wouldn't be possible for an investor to build this kind of a portfolio with a small amount of money.

• Economies of Scale - Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than what an individual would pay for securities transactions.

• Liquidity - Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time.

• Simplicity - Buying a mutual fund is easy! Pretty well any bank has its own line of mutual funds, and the minimum investment is small. Most companies also have automatic purchase plans whereby as little as Rs 500 can be invested on a monthly basis.

Disadvantages of Mutual Funds
• Professional Management - Many investors debate whether or not the professionals are any better than you or I at picking stocks. Management is by no means infallible, and, even if the fund loses money, the manager still gets paid.
• Costs - Creating, distributing, and running a mutual fund is an expensive proposition. Everything from the manager’s salary to the investors’ statements cost money. Those expenses are passed on to the investors. Since fees vary widely from fund to fund, failing to pay attention to the fees can have negative long-term consequences. Remember, every Rupee spend on fees is a rupee that has no opportunity to grow over time.
• Dilution - It's possible to have too much diversification. Because funds have small holdings in so many different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.

• Taxes - When a fund manager sells a security, a capital-gains tax is triggered. Investors who are concerned about the impact of taxes need to keep those concerns in mind when investing in mutual funds. Taxes can be mitigated by investing in tax-sensitive funds or by holding non-tax sensitive mutual fund in a tax-deferred account.

How to avoid a financial disaster?

What conditions can be classified as a financial disaster? Are your spending habits taking you towards one? How can you avoid a financial disaster without being too harsh on yourself?


The definition of a personal finance crisis might differ from person to person. The balance between your desires and your spending ability is what determines your financial health. It is essential to identify common financial problems that you may face and plan for them so that you sidestep potential financial crises.

Does this mean that you give up today’s enjoyment for tomorrow’s security? Certainly not. It just means that you take a realistic view of your circumstances and decide upon spending limits giving due consideration to your needs and your income, and accommodating your desires to a certain extent. Here are some simple ways to avoid a financial disaster:
Draw up a priority list for expenses, make a budget that will accommodate both needs and reasonable desires and spend accordingly. You should also plan for emergencies, and invest in proportion to your income.

Investments are provisions for your future; make them wisely. Diversify your portfolio to minimize your risks. Of course not all sectors on your portfolio will bring in similar returns but it is a safe practice to spread your money over different sectors.

As far as expenses go, you should be level headed while spending. Limit your credit card use, say, in emergency situations when you need to buy essentials and are caught without cash. It is easy to indulge oneself buying stuff with a credit card, but do spare a thought for the bill that will reach you later. It can be quite a sobering thought. Control over credit card usage can make a tangible difference in personal finance.

Banish the ‘enjoy now, pay later’ concept from your life. This will give you a realistic view of your spending abilities. The peace gained from a debt-free situation is sure to outweigh any disappointment that you feel from not having indulged all your spending whims.

Can savings and investments happen regardless of levels of income? Can the very rich head for financial crises due to unwise spending?

Benefit from flexibility of multi-cap funds

When you put your money in an equity mutual fund, do you also tell the fund manager which stocks to buy? No, and yes. While investors don't give any instructions, a fund with a fixed investment mandate picks only those type of stocks.


For instance, a large-cap fund will invest only in index-based heavyweights and other blue chips. You won't find a small-cap company in its portfolio. This is why large-cap funds tend to move slowly and surely compared with other categories. Similarly, a small-cap fund will focus on smaller companies, forever hoping to zero in on the next Infosys that will turn it into a multibagger.

On the other hand, multi-cap funds invest across the entire spectrum of stocks, starting from large-caps all the way down to small-caps. They have a flexible mandate, which helps them pick winners from across market capitalisations.

"Wealth creation happens when the fund management process has flexibility. Multi-cap funds have an in-built mandate to capture the upside across the market spectrum," says Om Ahuja, head of private wealth management and strategy at Emkay Global Financial Services .

The performance of multi-cap diversified equity funds bears this out. In the past three and five years, this category has given higher returns than those from other categories of diversified funds (see table). As companies belonging to different market segments demonstrate different levels of volatility and returns, it is best for investors to hold stocks of varying market capitalisations.

"Multi-cap funds provide the investors with the offer to build a diversified portfolio by giving them access to all kinds of equities," says KN Sivasubramanian, chief investment officer, Franklin Templeton Investments .

For instance, in the past one year, mid- and small-cap funds have done exceedingly well, but in the long-term, multi-cap funds have consistently outperformed the other categories. "Multi-cap funds are the best investment option for creating wealth in the long term," points out Ahuja.

Work in all market conditions
The flexible mandate of multi-cap funds gives them access to greener pastures in all market conditions. At the beginning of a bullish phase, it is usually the large-cap bellwether stocks that do well. Midway through the bull run, these large-cap stocks reach high valuations and the focus of the investing community shifts to mid-cap and then finally small-cap stocks.

"Retail investors cannot gauge which part of the market will perform well-large-caps, mid-cap or small caps. By investing in multi-cap funds, they can gain in all market conditions," says Saurabh Jain, associate vice-president, retail equities research, SMC Global Securities .

The 'go anywhere' strategy works well during downturns as well. "While a given set of conditions may not benefit one part of the multi-cap fund portfolio, it could benefit the other, thereby creating a counter-balance effect that generates long-term results," says Maneesh Kumar, managing director, Burgeon Wealth Advisors. When the bears are on the prowl, small-cap and mid-cap stocks fall harder than large-caps. Multi-cap funds are able to cushion themselves better than funds which are focused only on these vulnerable segments.

A deft fund manager can realign the fund's portfolio rapidly and thus benefit from the changing market mood. "Besides, in a black swan kind of a scenario, such as the financial crisis that we experienced in 2008, a multi-cap fund will be able to bear redemption pressures better compared with a mid- and small-cap fund as it is likely to be more liquid," adds Kumar

SELLING INSURANCE IS A NOBLE PROFESSION

Authored by: Ajit Panicker

 

Insurance is one highly paid job and one of the biggest income generating business for all those who are directly or indirectly involved with this profession. Talking about this profession and even having worked in this trade my experience has been really good as a salaried employee and at the same time now a practioner and self employed in financial planning, this give me the following every single day and one attribute in my personality get added because of it:

1.New Professional relationships

2.Excellent professsion of socializing

3.Great Netwoking business

4.New ideas and thought process gets ignited everyday

5.After becoming a regular visitor to the client , i get involved in making them take small decisions, so become an influencer.

6. Trust worthy friendship

7.New type of meals at different clients residence or office.

8.New learnings in varied industries, 

9.Learnings about the national, international scenarios on different topics.

These are the few attributes which i add on a daily basis, many apart from these have not been discussed as the blog would fall short to write all advantages, what i basically want to express, is that the insurance agents, managers and officers are not DO NOT COME NEAR ME beings, they are all humans and believe in doing social service .

They are helping you understand the importance of insurance, which is , that the insurance need is not for the person who is living , it is for the people who would be left behind when the bread earner of the family has gone.

So friends let's welcome the people involved in insurance as social workers involved in a noble profession, because they are insuring your lives against probable unseen risk.

Two Types of Financial planner

Authored by: Ajit Panicker
Date:16.02.2012

Financial planning is an ongoing process. it does not end once when you have created a plan for the client and implemented the plan.It is the review and the client's major or minor financing decisions related to his asset allocation which matters most.
During my initial days of career as a banker, while interacting with clients and observing my colleagues or other bankers interact and deal with the clients, i always found something missing.That something missing was the valued "customer service after we have left the gates of the client, and picked up the deal".
There are two types of  executives in the sales and marketing field in any industry, be it banking, telecom, fmcg etc.
one is the guy who is into push sales and once the deal is closed and the sales done , he forgets the client forever, at least till such times when he needs him again to push his sales or meet his targets.

The other type is a slow and less aggressive and may not push huge numbers in sales, may not be ranked among the  best in the region for the sales, but has an immense connect with his clients. He is empathetic, pull-force driven , which means he pulls the client towards himself by his self worth, his knowledge, his goodwill in the market and then most importantly, serves him THE BEST after the sales is over.
so friends the same goes in the financial planning arena, till the time one is product driven and not services( i mean quality services- remember the pull factor), he will keep making clients and losing them.
My recommendation as a practising Independent financial advisor and planner is to believe in service ,which will help you reap the benefits.
Authored by:
Ajit Panicker

Warren Buffet: The investment you think is "safe" is actually the rsikiest in the world

Warren buffet has published a preview of his annual letter in fortune.

In the preview, he does one of the many things he does best: Explains basic investing concepts and history in a way that no one else can.
In the first section of the article, for example, Buffett explains why most investors' concepts of "risk" and "safety" are completely bass-ackwards.
Over the long haul, Buffett explains, the asset class that most investors consider the "riskiest"—stocks—is actually the safest.
The asset class that most investors consider the "safest," meanwhile—cash—is actually extremely risky.

Why?Inflation.
Thanks to even moderate rates of inflation, cash is basically guaranteed to lose huge amounts of value over time.

Credit Suisse

In the past century, for example, the value of $1.00 has fallen to 3.8 cents (see chart at right).
Stocks, meanwhile, have appreciated to the tune of ~10 percent per year.
Even since 1965, the year before I was born, the value of the dollar has plummeted 85 percent. It takes $7 now to buy what $1 bought then. Meanwhile, the DOW is up 13X.
Sure, there were stock-market crashes along the way. Stocks are "high beta," meaning that their prices fluctuate wildly. Most people, including most Wall Street investors, describe this beta as "risk." As Buffett points out, however, it isn't risk. It's beta. It's price-fluctuation. Actual risk, Buffett observes, is the risk that your investment will lose purchasing power.
Over time, investments in currency have lost a devastating amount of purchasing power.
Investments in stocks, meanwhile, have gained purchasing power. And this is true even after the lousy stock-market performance of the past decade.
Now, cash does have its place in a portfolio. What cash provides, Buffett further observes, is liquidity—a.k.a., flexibility. The future is unpredictable, and you'll never know when you need cash. And you also never want to be forced to sell long-term investments to raise cash when the long-term investments might be experiencing temporary price fluctuations to the downside. So you have to keep some cash, even it's an extremely dangerous long-term investment.
Buffett, for example, keeps $20 billion of cash on hand ($10 billion minimum). He knows he's going to get a horrible long-term return on that cash, but the flexibility and liquidity is worth it to him. Meanwhile, the rest of his portfolio is invested in equity.
Here's W.E.B.:

Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as "safe." In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge.

Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as these holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur. Governments determine the ultimate value of money, and systemic forces will sometimes cause them to gravitate to policies that produce inflation. From time to time such policies spin out of control.

Even in the U.S., where the wish for a stable currency is strong, the dollar has fallen a staggering 86 percent in value since 1965, when I took over management of Berkshire. It takes no less than $7 today to buy what $1 did at that time. Consequently, a tax-free institution would have needed 4.3 percent interest annually from bond investments over that period to simply maintain its purchasing power. Its managers would have been kidding themselves if they thought of any portion of that interest as "income."

For taxpaying investors like you and me, the picture has been far worse. During the same 47-year period, continuous rolling of U.S. Treasury bills produced 5.7 percent annually. That sounds satisfactory. But if an individual investor paid personal income taxes at a rate averaging 25 percent, this 5.7 percent return would have yielded nothing in the way of real income. This investor's visible income tax would have stripped him of 1.4 points of the stated yield, and the invisible inflation tax would have devoured the remaining 4.3 points. It's noteworthy that the implicit inflation "tax" was more than triple the explicit income tax that our investor probably thought of as his main burden. "In God We Trust" may be imprinted on our currency, but the hand that activates our government's printing press has been all too human.

High interest rates, of course, can compensate purchasers for the inflation risk they face with currency-based investments — and indeed, rates in the early 1980s did that job nicely. Current rates, however, do not come close to offsetting the purchasing-power risk that investors assume. Right now bonds should come with a warning label.

Indis'a saving culture is it's saving grace

 

India has been traditionally a nation of savers. We ave managed to spend less than our income and save the maximum possible amount out of regular income for securing our future. This has also meant postponement of current consumption for a better future.

Maybe, we have not learnt to invest our savings wisely, over the years — as the bank deposits figures will tell us. But all the same, we have been doing reasonably well, post retirement, mainly because of this savings “culture”.

The big question that faces all of us now is: Whether this savings culture is changing? Recently, I addressed a group of fresh recruits of officers in a public sector oil marketing company. I was explaining the virtues of investments and how to plan for meeting the various life goals from a young age.
The group comprised very enthusiastic men and women in the age group of 25-30 years. They appreciated the presentation but one gentleman asked this very important question: “Why are you advising us to save from our salary and invest? What is wrong if we spent our salary on luxuries of life? Why should we not borrow money through credit cards and banks to buy cars and bigger houses and enjoy our life to the fullest at this young age, just like the Americans do?”

I have more than two decades of expeience in advising all age groups of individuals on savings, investments and financial planning but I have never come across a question like this. This is clearly the way the young Indian generation is thinking.
I have been collecting personal information regarding the present state of income and expenditure, assets and liabilities from clients to advise them on financial planning. Of late, I find that the middle aged corporate managers/executives, in the age group of 35-45 years, have very fat pay cheques — much fatter than what thay used to get a few years ago. The unfortunate part is more than 60% of the post-tax salary income, in several cases, is used to pay EMIs on home loans, car loans, consumer durable loans among a host of other loans.
The question raised by the young man as well as the EMI fixation of middle-aged salary earners is setting an alarming trend. Not very long ago, during October 2008 to March 2009, these same middle-aged executives were scared of their future because of the economic downturn and were selling assets to bring down their EMI commitments.

We all learn from history and we also know that history repeats itself. It is nice to be aggressive. There are no arguments against having a decent life with almost all luxuries at a young age. India is proud of its domestic consumption story.
India needs its people to spend. All the same, we should not be carried away by the easy spending consumer culture of the West. One look at the so called “developed economies” will convince us about the virtue of savings “culture” of our country.

In many developed countries “social security” for a senior citizen lies only on paper. The ground reality is that people in the advanced age of 70-75 work in malls at cash registers, airports cleaning the wash rooms, rent-a-car companies, transporting people to and from airports and so on. The Indian middle class may not enjoy a great standard of living but the savings culture definitely ensures that they need not slog at the age of 70 and 80.
Let us stick to our culture

Celebrity endorsements still push product

Celebrity Endorsements Still Push Product

Why, in the Era of Social Media, the Rewards Continue to Outweigh the Risks

by Dean Crutchfield

"Everybody lives by selling something," wrote Robert Louis Stevenson, author of "Treasure Island." Agents, CMOs and deal makers will always get starry-eyed by the big names of "celebrity" because brands love endorsements, and consumers buy into "celebrity." Questions remain, however, as to whether the international obloquy related to the Tiger Woods crisis dealt a devastating blow to celebrity endorsement. In light of the risks, is the celebrity endorsement deal still worth it?

MTV
Even C-listers like Nicole 'Snooki' Polizzi of 'Jersey Shore' can lead to little marketing triumphs. Companies know there's risk when they choose a celebrity-endorsement approach. Many have learned the hard way that it becomes a reflection of themselves; just ask Coca-Cola, with its speedy capitulation of its Michael Vick sponsorship. If you put a face to a name, the more likely you'll remember it, and marketers know the same goes with hitching celebrities to their brands.
Recent studies of hundreds of endorsements have indicated that sales for some brands increased up to 20% upon commencing an endorsement deal. According to Anita Elberse, associate professor at Harvard Business School, some companies have seen their stock increase by .25% on the day the deal was announced.

There is the issue of overexposure to consider. We receive more than 3,000 commercial images a day; our subconscious absorbs more than 150 images and roughly 30 reach our conscious mind. Therefore, practice has it that if you use a celebrity-endorsement strategy, you dramatically accelerate the potential for your brand to reach the conscious mind of the consumer, especially given research from Weber Shandwick that finds peer endorsement trumps advertising.

So if word-of-mouth is the No. 1 purchase decision-maker, why are some CMOs displaying recalcitrance toward big names that can create so much brand buzz and peer recommendation? Are we witnessing the decline and fall of "celebrity"? It's true that not every brand needs a celebrity -- it has to be relevant to the brand and the consumer. More important, if there were a face for every brand out there, it would be a calamity.
On the upside, celebrity endorsement has the power to instigate and inspire, enlighten and enrage, entertain and edify the consumer. Its inherent benefits are that it can be leveraged across multiple channel experiences (and potentially services), cuts through advertising clutter, creates a brand narrative and allows for channel-specific optimization. Ultimately, celebrity endorsement is always worth investing in if you have the right person. It's an expensive but easy option for companies, but it should be treated like a marriage with added creature comforts that make the partnership invaluable:
The opportunity to create new markets and/or tap into an activation base of fans. Such was the strategy behind Patrick Dempsey's Unscripted men's perfume for Avon.
The ability to spark sales by enticing consumers to learn more about the brand. LeBron James is one of the top three paid athletes in the world and generates a brand halo.

The means to promote a unique, relevant and sustainable brand attribute that might be hard to attain otherwise. Nike's rapid success in the golf category was chiefly because golfers wanted to lay claim to the number-one golfer in the world.

The option to build reciprocity into the partnership by supporting the celebrity endorser's brand. Lady Gaga knows how to sell, and business publications praise her business smarts as she masters social media and expands her brand beyond music.
The grounds for innovating the product/service offering. Rihanna's "Umbrella" song hit big at the Grammys, and her designs for Totes' umbrellas hit big at the retailer.

The challenge to a preconceived notion. Givenchy used Justin Timberlake's endorsement for the women's perfume Play for Her.

The collaboration that can impact the business model of the partnership. A noteworthy example is Sean Combs taking a 50/50 ownership in Diageo's ailing grape vodka, Ciroc.

All are sound criteria for a celebrity endorsement strategy, but the split over the Tiger Woods affair conflicts with an otherwise inviolable marketing convention: using celebrities to market the offer instead of featuring the product or service's value for consumers and the value that underpins their manufacture.

And what about the role and risks of social media? Celebrity endorsement is often stymied by constraints and contractual limitations; does leveraging social media represent the next evolution for celebrity endorsement and brand advocacy? 95% of social-media users believe a company should have a presence in social media, which can get the brand into the conversation because social media enables consumers to adopt new behaviors.

And CMOs need to incorporate these new behaviors into celebrity-endorsement strategies because social networks make up marketing's most powerful media: recommendation. Though fraught with danger, social media's potential for making celebrity endorsement a multi-platform juggernaut rests not with what happens inside it, but what it makes occur outside of it.

Horror and probes over the last 18 months demonstrate that celebrity-endorsement strategies are a scary, inherently unstable but essential marketing activity, as brand share is too strong an incentive to keep celebrity endorsement down. An estimated $50 billion is invested globally on corporate sponsorships and endorsements. While a majority of that is spent on sports marketing, "celebrity" plays a dynamic role.

However, the machinations over value and values are the debate of the industry. The bottom line: The more problematic high-profile celebrity endorsers, the better bargaining power for CMOs.

CMOs understand the value of owning celebrity endorsement and using it to bolster the customer relationship. CMOs know that few brand-building strategies can deliver on the bottom line as much as celebrities, simply because the product will sell better. Newer forces are also fortuitously propping up the celebrity endorsement boom with B-, C- and reality-TV-listers constantly seeking new ways to blur the lines between commercial and entertainment worlds. Even C-listers like Nicole "Snooki" Polizzi of "Jersey Shore" can lead to little marketing triumphs.

U.S. celebrities show up in more than 15% of advertisements, according to Millward Brown, and the number is far higher in markets such as India (24%) and Taiwan (45%). So before we shoot a golf ball through celebrity endorsements, let's recognize that they've never gone out of vogue nor will they, because the rewards of relying on an endorser can far outweigh the risks.

What we search for in celebrities is not so far from what we search for in our friends. The secret is to never trust an animal no matter how many legs it has.

ABOUT THE AUTHOR
Dean Crutchfield is chief engagement officer at Method, a brand experience agency with offices in New York, San Francisco and London

How to avoid paying taxes on interest income- The right way

Do you wonder why interest earned from your FDs or interest bearing securities like bonds gets reduced due to tax deducted at source?

Does it irritate you that tax has been charged even though you aren't eligible to pay taxes? Here, we tell you about why TDS applied and ways to avoid this tax deduction if you meet certain criteria.

Why should I know this?

If you are like most Indians, chances are the bulk of your liquid savings are in a bank account or in an FD. Some of us are invested in bonds. While these fixed income instruments are good for guaranteed returns, they are relatively tax inefficient instruments because you end up paying taxes on the interest income that you earn.

This tax is usually deducted at source, and there might be a situation where tax is being deducted even though you are not eligible for paying taxes. This could result in a cash flow problem because your tax outflow is today, but your refund might take many months to arrive.

How much is the TDS on interest from deposits and securities?

The tax on interest income is deducted at source, i.e., at the bank where you hold your deposit, or from the issuer of the bond who pays you interest. The rate of this TDS is a flat 10% if your interest income exceeds a certain limit. Unlike salary income where TDS is according to your tax slab, the TDS on your interest income is irrespective of the tax slab applicable to you.

Lets understand the above by way of an example. Radha, a 27-year-old woman, is employed and also has an FD at a bank. The following is her income and taxability situation.

Salary income: Rs. 1.40 lakhs per annum

FD interest income: Rs. 30,000 per annum

Statutory exemption limit for women: Rs. 1.90 lakhs annually

As Radha earns more than Rs. 10,000, she will be liable to a tax deduction at source. However, as we can see, Radha's total income (salary + interest income) is below the annual exemption of Rs. 1.90 lakhs available to women. Nevertheless, taxes will be deducted from her interest income at the bank where she holds her FD.

As you can imagine, this can cause some cashflow problems for Radha if she is going to get lesser cash in hand, even though she should never have been taxed on the interest.

How can I avoid undue deduction from interest income?

If your analysis shows that your total income is below the taxable slab, then there are provisions in the Income Tax Act under which you legally avoid having tax deducted from your interest earned on your FDs and bonds.

You will need to furnish a declaration using the prescribed form to the bank or entity responsible for deducting tax. This declaration needs to state that no tax deduction is required because the income level does not fall into the taxable slab.

What are these prescribed forms?

Different forms are used for different sources of income and types of taxpayers.

Form 15G: Applicable for a resident individual, other than a senior citizen

Form 15H: Applicable for a senior citizen (These forms can be downloaded online)

What incomes can be declared in the above forms?

The declaration in Forms 15G and 15H can be furnished mainly if the taxpayer has income from:

Interest on securities

Interest other than interest on securities, like FDs

What should I take care of while using these forms?

1. The declaration should be filed only if tax on total estimated income for the relevant year is nil.

2. Delivery of the form to the entity deducting your TDS must be made any time before receiving the income either directly or by credit to the account.

3. The entity to whom the declaration is given must file one copy of the declaration with Commissioner Income Tax before 7th day of the next month.

4. A false declaration is liable to prosecution and fine.

Retirement is our right and we should decide when to retire

Retirement is one phase of life though everyone wants to get in, but the phase being so morose without any excitement and no cash surpluses to enjoy , that each individual tries to postpone his retirement by 5-15 years, according to many government organizations the retirement age varies form 58-62 years, but people would still go in for another stint of work for say 10 years, the reasons are many, responsibilities are still left, nothing left after providing education for children and getting their jobs settled and also their marriage in many cases.
Do we really realize, that life has a right to be spend by your name for your personal recreation also , at least in the retirement. Now the problem arises because we do not have the retirement fund available with us, enough to even feed us the way we used to when in job, how can one think of recreation , long holidays or playing golf.
Here comes in the responsibility of a well read Financial planner who, creates a retirement corpus for you and actually plans and starts this when probably you got into your first job, because the corpus needs to be such that you are able to spend with same expenditure as you were able to  when in job, live upto the same expenses, for this there are various plans available in forms of NPS(new pension scheme), pension plans like Retiresurance from idbi fortis, ICICI pru lifetime pension maxima,icici pru lifestage pension advantage,LIC new jeevan dhara-1, and good annuity plans. The calculation of the retirement corpus is done taking into consideration your current monthly household expenses, inflation @8%, also that the increment in your salary or income every year to be 10% atleast.
Pls consult a well read and experienced financial planner

Financial Planning with villagers

On a recent visit to a village adjoining NOIDA, i found people there are better off than people in urban cities, in many ways and at the same time they are not upto a level where they can match the amenities and facilities which urbaners can access easily.
This is  in context to the management of their own personal finance, there has been a practice that whenver a big renowned builder comes to develop a project he buys the land from the authorities which is sold to them by the villagers, out of the settlement or compensation amount which the villagers receive, the amount being huge, there comes a rush of scavengers like insurance agents, property agents, mutusl fund agents and many bankers as well.
Now as the villagers have received a huge mount which they do not know where to put, the competition within insurers, AMC's  start, and the one who manages to get the amount invested, in plans which usually do not give them which they could have easily received if it would have been planned by a dutiful Financial doctor( financial planner) , who understands where to get it invested with least risk and reasonably good amount of return.
An awareness need to be created about the importance of financial planning , investment planning, in each and every familiy of our societies.

Debt planning as essential as breathing air

Debt planning is as important and essential as breathing air.there is a very common trend of using credit through credit cards and loans availed from banks, but as a layman, an individual usually tries to revolve credit by paying minimum amount due on it and keeping the actual principal debt as it is and end up paying around 42% interest on the total credit outstanding in a year.


The practice which i have usually seen in a lot of young professionals and gradutes who get into new jobs, get into the trap of taking easy credit by getting around 5-6 credit cards and then exhausting the complete credit limit and end up not even paying the minimum amount due after some time.

when the outstanding become unmamangeable and cannnot be paid from regular earnings they take personal loans from banks or private financers and end paying 17-19% interest which as in emi form becomes a liablity for the number of years the loan is taken.

There is where the individual become a debt owner.

please avoid this situation, and we take care of this through debt planning.

Consult a good experienced and well read financial planner.

FINANCIAL PLANNING to a better future

FINANCIAL PLANNING to a better future

 Usually people and their family members tend to spend according to their needs, but their is no understanding what is the actual need and where the scissors can be taken and the unnecessary expenses can be cut down on regular basis, here is where we take care and create a contingency fund out of that on a regular basis, by continuosuly monitoring your expenses

Financial planning is all about taking an individual clients from where he is at present( his current net worth) to where he wants to be( projected net worth), and this is easily possible through a well read and experienced financial planner who takes care of each and every detail when designing your financial plan.

The financial plan should usually include the following sub plannings- consumption and savings planning, debt planning, insurance planning, investment planning, retirement planning, tax planning and estate plannning. People belong from different strata of society and working in much diverse group of industries, and thus many would not understand the difference of investing even in insurance with insurance needs or fill up the appetite of completing the tax saving formalities at the near end of financial year.

please consult the best FINANCIAL PLANNER

What is Financial Planning?

Financial planning in most simplest terms means , that a well qualified and empathetic financial planner would sit with a person, couple or a family and design their financial objectives.
The financial objectives would be based on the short term, mid term and long term goal which a family wants to achieve.
The resources available would be noted down by the financial planner in form of a questionnaire which would be given to the family to fill ,before the financial planner sit with the family, to start the discussion.
The questionnaire would consist of the income from salary or business, expenses- fixed and variable, inevestment  done till date, protection plans taken to protect the family of any financial risk, will of the estate written, income taxes status,and retirement surplus status.
Along with this there would be a risk questionnaire also given which would help the financial planner understand the risk in the family.
once this initial meeting is done, the details would be analysed and a financial plan would be created. A copy of that would be send as an e-mailer to the family, so that it can review it before the final financial plan is created.
Once given a confirmation by the family, the financial plan is implemented, and is reviewd every 6 months and required if any big financial decisions have been taken in the family.

To be rich with money is one thing and to be wealthy with money,happiness and health is one which i strive for every moment- Ajit Panicker