Choosing a financial advisor is an important step, for most people, to creating more wealth and financial security. Whether you’re a minor investor who just wants to keep your assets safe or have several thousand dollars to invest so that you can watch them grow, a financial advisor can help you do these things. Remember, a financial advisor is not an insurance salesperson or a stock broker, but is rather a person who will help you create an overall financial plan for your current needs and where you want to go with your finances.

Also Read: 7 Reasons to be Your Own Financial Advisor

Before you choose a financial advisor, read through these ten tips, which will make it easier:

1. Avoid those who charge commissions

Financial advisors who charge a commission are more likely to push you to purchase certain products. They may care less about what’s good for you and more about their own bottom line. If you see that a financial advisor gets even part of his or her income from commissions, look elsewhere for a better advisor.

2. Look for CFP certification

Always go with financial advisors who have a current CFP – Certified Financial Planner – certification. This is the highest-quality certification that can only be earned by pasting the Certified Financial Planner Board of Standards. Plus, to keep the CFP current, financial planners must engage in continuing education, which keeps them up-to-date on the latest developments so that they can help their clients more effectively.

3. Ask for recommendations

As with most things, it’s a good idea to choose a financial planner based at least partially on recommendations. At the very least, getting recommendations can give you a place to start. Your best bet is to ask for recommendations from people who are in a similar life situation to yours, as different financial planners will have different specialties. Start with colleagues at work or friends who have a similar lifestyle to yours.

4. Ask specifics about the pay structure

It’s not enough to know that you want to avoid those who earn money from commission, though this might seem a little cheaper to you up front. You really need to know exactly how the pay structure of a financial planner works. The most common are flat fee, hourly, and percentage-based. At first, it’s probably best to start with a flat fee or hourly rate. At some points, turning over 1% or so of your annual assets to your financial planner can be beneficial, but this may also lead to an advisor who makes decisions based on her own bottom line rather than on what’s best for you.

5. Find a fiduciary planner

A fiduciary financial planner has basically promised to always act in your best interests. Non-fiduciary financial planners usually hold to the sustainability standard, which means they can get you products that are good for you, but aren’t necessarily in your absolute best interest. If your financial planner isn’t going to always, 100% of the time advise you in a way that’s in your best interest, run the other direction.

6. Use a background check

Getting a background check on a potential financial planner is a great idea, particularly if you don’t have recommendations from other long-term customers you know and trust. Also, check to see if the CFP certification for that financial planner is current by finding out who administers the credentials and calling or emailing the administrator to see if the credentials are valid.

7. Avoid those who make too-good-to-be-true claims

If your financial advisor claims to be able to beat the market every time, they’re giving you a too-good-to-be-true promise and they probably aren’t telling the truth. A financial advisor may be able to show evidence of beating the market average often, but no one can guarantee you that this will happen all the time, so if you’re getting guarantees like these, find someone who is more reasonable.

8. Get details about experience

Just because a financial planner has a CFP or another credential doesn’t necessarily mean they have great experience – it just means they studied hard enough to pass the credential test. Before you decide to work with a financial planner, get as many details about that person’s experience – from the planner and from other clients – as possible. You don’t necessarily have to work with someone who has decades of experience (you might not be able to afford this person!) but you do want to leave your finances in the hands of someone who is reasonably experienced at giving sound financial advice.

9. Find a planner who agrees with your basic financial principles

Even if you’re just starting out, you probably have at least some basic financial principles in mind. For instance, you may be willing to take on a little bit of debt, or you might wish to live basically debt free. A financial planner who essentially agrees with the things that are important to you – or who can at least convince you otherwise using well-supported arguments – is your best bet.

Paying for a financial planner

If you can’t pay for a financial planner up front, Ashyia Hill from CreditDonkey says, you could always ask if they’ll take credit card payments. As long as you can charge flat fee or hourly payments to a low interest credit card and pay them off within a few months, you’re better off hiring a financial advisor now than waiting until you have cash in hand.

Whether you’re twenty-five or fifty-five, working with a financial planner can hugely benefit your financial life. This is because financial planners can help you make the best financial choices without your having to spend hours researching the latest developments in various markets.

This is a guest post by Ashyia Hill who writes at CreditDonkey. If you also want to Write for EquiTipz, please read more details here.

For Further Reading:

1. 7 Reasons to be your own Financial Adviser?
2. Financial Plans For Younger People
3. Market Outlook and Tips for 18th August 2009
4. Top 5 Stock Tips for Beginners

Most people get more mental exercise than they want when it comes to dealing with personal budget issues. The problems can range from real nuisances to quite genuinely baffling situations where they may be wondering whether they need a financial adviser or an astrologer. Some things, like home insurance, may be basically simple in themselves, but in combination with other finance issues, can be absolute pests if you don’t know how to manage the combination of expenses.

Image Credit

The basic answer to dealing with personal budget issues is summed up in one word – “Planning”. The best thing you can do for your personal budget is to get ahead of the problems. It is possible to avoid problems entirely simply by navigating around the irritating issues and creating a working cost base oriented to essentials.

It’s ironic that quite a lot of problems people have with their personal budgets aren’t really the result of lack of care or extravagance. They’re much more likely to be the result is simply not understanding some of the issues involved in budget spending, or miscalculation. Personal budgets can be complex, and unless you’re living in a cave, learning to manage budgets can be quite an ordeal.

Also Read: The Importance of Investing

Personal budget basics

The only real way to manage the personal budget is to lock down expenses:

• You really do need to plan your expenses in advance, and as far as possible stick to the budget.
• Saving a bit of money wherever possible is also a good way of making sure that your budget isn’t going to fall to pieces on you. Read: Importance of Long Term Investments
• If at all possible, try and pay unavoidable and essential expenses in advance, preferably including a discount if you can.
• Put aside a little money around for spending and just having fun. This is also useful if you find something you really like that might trash the budget.
• Look for better deals, always. Whatever you buy, whatever you’re paying for, it usually is possible to get things cheaper with a bit of effort.
• Keep credit card spending firmly under control. Credit cards can be like financial ulcers, needing attention all the time and costing you money, usually at the times when you don’t want to be spending anything. Read: 8 Mistakes to Avoid When Using a Credit Card
• Always try to get the best value out of your spending. Bulk buying, buying quality things that will last a long time and similar buying patterns all add up to considerable savings over time.

Dodging the minefield

As you can see, there’s a pattern in personal budgeting – The idea is that all your spending, saving and budgeting is properly integrated. That way you don’t get surprised by expenses, which is the real minefield zone. It’s easy enough to dodge spending by anticipating situations and making provisions in advance and create spare resources. The likely difficulties are when sudden expenses arise, and you do have to be prepared for those.

Savings and squirreling away can provide a useful buffer which prevents the live budget going off the rails. Think of these savings as your personal budget’s “contents insurance.”

For Further Reading:

1. Financial Plans For Younger People
2. 8 Mistakes to Avoid When Using a Credit Card
3. A place for cash
4. 7 warning signs that you have got too much debt

Exchange Traded Funds, or ETFs, have been making big inroads into the mutual market. There’s currently estimated to be over a trillion dollars in fund management around the world, and managed funds are paying a lot of attention to their performance. ETFs are portfolios of funds, with unit prices valued on the basis of the net worth of the fund holding. The ETFs, which are commonly index based, are also traded in real time on the stock market, and have been becoming major trading commodities.

Also Read: 7 Reasons to be your own Financial Adviser?

ETFs as investments

The major benefit of ETFs is that they provide real value while also providing investors and funds with some shielding against the effects of individual stock movements. ETFs usually have quite conservative weightings of holdings in their portfolios, and a single stock taking a hit won’t have wide “collateral damage” to the holdings on that basis.

Conversely, investing on an index basis can provide massive upsides. The commodities markets, tech, aerospace, and other indices are typically prone to big moves, and if an entire index jumps, so does the ETF holding value. You only need to remember the big moves in tech stocks, oil, metals and others to see the major benefits in this sort of holding structure.

The portfolio approach to ETFs

Most investors, even the best, get at least a bit singed on the stock market at some point. Many don’t like or need to be waiting on stock moves to see returns on their investment portfolios. That’s where the ETFs come in. The stock market rat race is fine for day traders and institutions, but for managed funds and private investors, it’s not necessarily the place for peace of mind.

More to the point, it’s also not the best place for making actual money. The 2008 crash vividly defined the limitations of the conventional investment market. It also defined the worries of investors. The ETFs took their own hits, but they also recovered pretty quickly, and in some cases they actually took over as preferred trading entities. Huge numbers of ETFs were traded in the early recovery in 2009, and they’ve maintained a steady rate of growth.

Also Read: Market Fall – How To Recover Losses?

A typical ETF portfolio is based on a “spread”. The portfolio is spread over a range of indices, for example:

• Dow blue chips
• Energy and oil
• Tech stocks
• Mining
• Food
• Gold and precious metals.

As you can see this is strategic investment rather than the conventional form of market investment. The investment in 5 indexes can be made through share trading on the market or by prospectus. Each ETF also pays dividends, and they also do stock splits. (Like normal shares, they have their “X date” for dividends and entitlements.)

If you’re looking for investment options, the ETFs may be exactly what you need. It’s a good idea to research the different funds and get a good level of orientation to how the ETFs operate in the market, and look at relative performance. Talk to your fund manager if you need specific professional guidance in this type of investment.

For Further Reading:

1. Investors beware of Brokerage and taxation!!!
2. Markets Surge: Sensex and Nifty hit new 2009 Highs
3. Download “Markets on Mobile” – Official Moneycontrol.com app for iPhone
4. Tips for Small investors: Don’t buy; don’t sell!

We are often overwhelmed by some unforeseen financial emergency in life and don’t know who to turn for help.  Borrowing from family and friends can indeed be a humiliating thing. At that point of time Payday loan can become a blessing for you.

Note: The Payday loans are something like Personal Loans, available in India. This article is for our readers in UK, Australia, USA and Canada.

What is a Payday loan?

A Payday loan is small, short term and unsecured loan. It is designed to cover your expenses till your next payday. They are provided by cash advance stores with one time fees attached. The borrower usually writes a check for the amount borrowed plus the fee. So it is a loan drawn against a future paycheck to meet urgent needs. Loan amounts can range from a few hundred dollars to $ 1000. The interest charged is usually 15-20% of the amount borrowed.

Payday loans are getting increasingly popular these days. Why?

• Payday loans provide an instant solution to an unexpected financial emergency. They can provide easy and fast access to cash. In case you have an emergency (like a health related problem), Payday loan can act as a quick fix.
• Payday loan involves a hassle free process. It takes only a couple of hours to complete the formalities. You just need some basic documents like identity proof, bank statements etc.
• Within a day the money will be deposited to your bank account.  So you will get the cash within 24 hours. If you need the money quite badly then this aspect of payday loans will appeal greatly to you.
• A good thing about Payday loan is that your financial information remains private. It is for consumers who want anonymity during emergency situations. In case of traditional long term loans things are just the opposite.
• Credit checks are usually not required here. This makes it easy for people with no credit or credit problems to apply for Payday loans.
• It is not hard to qualify for Payday loan. All you need is a steady monthly income and a valid bank account. Even an individual with bad credit rating or a history of bankruptcy can be eligible for Payday loan. Generally people who don’t have access to credit cards and savings account use this kind of loan. Military personnel and immigrants also use them often.
• A Payday loan, as mentioned before, is an unsecured loan. That means even if you fail to repay your loans you won’t have to lose your assets.

Also Read: 7 warning signs that you have got too much debt

A few things to remember while opting for a Payday loan

• Excessive dependence on Payday loans can be a source of trouble. You must remember that Payday loans are an answer to the emergency situations that pop up out of nowhere. If you start relying on them just because you can’t resist the temptation to buy unnecessary stuffs then a lifetime of indebtedness would follow.
• Payday loans have extremely high interest rates. The lenders virtually take advantage of the fact that you desperately need cash. So before going for it make sure that you can afford it.
• Payday loans are usually small loans. So if you need some big bucks then better look elsewhere.

Also Read: What is the right strategy to Combat Debt?

Payday loan stores are all over the place these days. If you still have trouble to locate them then internet can help you. Now that you are familiar with the concept decide for yourself whether it is the best solution for you. Take your decision carefully.

This post is submitted by our Guest Blogger, David Brown. David is the founder of fileyourbankruptcy.org, where he writes articles on Personal Finance. He is also associated with monsterhols.com, quicklyprofit.com and darngoodblogging.com and debtincome.com.

For Further Reading:

1. Should I prepay my loan or Invest the money?
2. Top 8 ways to Build Your Emergency Fund
3. 7 warning signs that you have got too much debt
4. Debt Snowball or Debt Avalanche – What is the right strategy to Combat Debt

The world economy has not yet fully recovered from the damage caused by the global economic depression. As a result underemployment and unemployment are still quite common. Difficult climate demands prudent lifestyle. So you must get control over your finances and look out for the danger signs which indicate that some financial crisis may be approaching. The following are some “omens” which reflects the fact that you are treading along the danger avenue.

Borrowing your way out of debt

Do you borrow from friends, relatives or even resort to payday loans for temporary respite? If yes, then dark clouds of trouble are looming over you. When you are already in a financial mess, further borrowing will only increase your misery. You either need to spend less or you ought to negotiate with your lenders for lower installments if you are already in a debt.

Use of credit cards for everyday expenses

You cannot evade the responsibility to feed your family. However, buying groceries with credit cards just points out that you are in the red zone. You simply do not have adequate money to support yourself and your family. So the wise thing to do here is to bring down your lifestyle.

Also Read: 8 Mistakes to Avoid when using a Credit Card

You work efficiency is affected by economic pressure

Has your performance at the office dropped suddenly? Is financial blues the reason behind it? If the answer is affirmative then better be cautious. It’s surely a sign of excessive debt. Remember that psychological pressure will only lead you to loss of job. That will certainly push you in a deeper hole. Try to focus on what you need to do and that’s your best hope.

Drugs and alcohols are your best friends

Do you really believe that narcotics and alcohol is a sign of a healthy life? If you do then you are mistaken. It just shows, how hopeless you feel and it is only a desperate attempt to escape the brutal realities. Wake up and leave things that would ruin you. Be pragmatic and try hard. You can certainly turn things around before it’s too late.

Living paycheck to paycheck

A drained savings account is not a very assuring thing. In fact, it indicates that you are living on the edge. If an emergency comes up then you might not know who to turn for help. Debt might be the root cause of this situation. To combat it, you should try to build a rainy day fund and contribute to it whatever you can afford to. Even a little contribution will come handy in future

Also Read: 56 Ways to make your money work harder for you

Hiding facts from loved ones

Is your family aware that the monetary situation may not be perfect? Also, how honest are you about your spending? If you have started concealing facts from people who matter to you the most, then things are wrong and you know that yourself. To address the problem, you need to confess everything to your family, seek their advice and put a check on your expenses.

You no longer answer the phone

You stop answering the phone when you realize that it might be your creditors and you haven’t got any answers to their questions. Neither can you take their abuses anymore. The situation is absolutely alarming.

Conclusion

Most of us dream to live a debt free life. However, our dreams often turn into nightmares and we struggle to find a way out. To avoid such a situation, remember what you have read. It will help to you to sense the encroaching danger and can save your neck.

What are your views on this topic? How are you controlling your way out of debt, or to avoid it in the very first place? Do share your views in the comment section below.

Subscribe to our Free Email Newsletter to receive updates on similar topics about your Financial well being.

[Editor's Note: This post is submitted by our Guest Blogger David Brown. David is the founder of  fileyourbankruptcy.org, where he writes articles on Personal Finance. He is also associated with monsterhols.com, quicklyprofit.com and darngoodblogging.com. If you also want to write for EquiTipz, please read the instructions to write a Guest Post.]

For Further Reading:

1. Debt Snowball or Debt Avalanche – What is the right strategy to Combat Debt
2. Is Payday loan the right solution for you?
3. The Importance of Investing
4. Getting through the personal budget minefield, one step at a time

Introduction

Consumer debt is an epidemic to which the materialistic human beings are very susceptible. Multiple debts can indeed make your life a misery but do you know what’s the right way out of this suffocating situation? Financial gurus suggest a number of approaches to eliminate your debt. Among them “Debt Snowball” and “Debt Avalanche” are two popular choices. So, which one is the right strategy for you? Let’s discuss.

A closer look at Debt Snowball

Popularized by the famed financial expert and radio talk show host Dave Ramsey, debt snowball is a process by which you pick the smallest debt to pay off first and gradually move towards the bigger ones. This method requires you to allot as much as possible to the smallest debt while paying the minimums on the rest. As your debts get cleared one by one, the snowball of cash that you can pay to clear your bigger debts gets bigger.

Debt snowball is certainly an effective way to extricate yourself from debt. It is best suited to revolving debt like credit card debt. A debt snowball calculator can help you to manage things better.

Also Read: 8 Mistakes to Avoid When Using a Credit Card

Understanding Debt Avalanche

Financial planners have been using this method for years. Debt avalanche is quite similar to the concept of debt snowball. With debt avalanche you order your debts by interest rate (from the highest to the lowest). You need to throw as much as possible at the debt with highest rate of interest while paying the minimums on the rest. After you succeed in paying off the chosen debt, target the next highest interest debt. Proceed in the same manner till you are a debt free and happy man.

Mathematically speaking, debt avalanche is cheaper and faster way to get out of debt than other similar plans. With debt avalanche you get rid of the most damaging debt first because higher interest rate would mean that eventually you have to pay more. You need to pay the minimum amount of interest if you use this method. So you can start saving and be a winner in the long run.

Debt Avalanche vs Debt Snowball

There has been much debate on which is the best debt reduction method-avalanche or snowball. Debt snowball focuses on the emotional side of human beings. It assumes that paying off the smaller debts will give you a sense of victory. This early success will motivate you to pay off the rest of your debts.

Debt avalanche, on the other hand, has a more rational appeal. If you believe that good financial decisions are rational decisions then avalanche is perhaps the way you should go. It helps you to save more bucks than debt snowball by eliminating the debt with highest interest first. Avalanche has been often criticized as it doesn’t take into consideration the “human element” or “motivation factor” in the debt reduction process. This can be countered by saying that people can always set their own milestones like paying off the first $1000. Reaching that mark would have the same effect on human psychology as paying off the first debt.

What’s the right choice for you?

Debt snowball is suitable for people who prefer quick results, are essentially emotional by nature and want a debt reduction plan that is simple to follow. It can be very effective for people who have a wide range of balances. However, people with an analytical bend of mind would be more benefited by debt avalanche. If you are disciplined enough and have the required patience then debt avalanche can maximize the use of your money. Remember that you have to keep following this plan without expecting any kind of “quick wins”.

You must realize that being debt-free is not just a dream but a distinct possibility. All you need is discipline and a solid financial plan. Both debt snowball and debt avalanche can play an instrumental role to lead you to a debt-free destination. Make sure that you stick to it and remember what Dave Ramsey says- “you can’t go wrong with getting out of debt”.

What are your views on the above two strategies followed to get out of debt. Which one do you prefer and why? Please share your valuable views in the Comments Section below.

[Editor's Note: This post is submitted by our Guest Blogger David Brown. David is the founder of File Your Bankruptcy where he writes articles on Personal Finance. If you also want to write for EquiTipz, please read this.]

For Further Reading:

1. 7 warning signs that you have got too much debt
2. Is Payday loan the right solution for you?
3. 8 Mistakes to Avoid When Using a Credit Card
4. How are the Interest- free days calculated for my credit card?

In this viral era of high spending, today everyone wants to have everything. Is there an actual need for that or not, that is a different story altogether. The irony of the situation is that today people spend much more than what their forefathers ever did.

Rising salaries, the desire to own a property in one’s early twenties, the choice of a huge variety of lifestyles, a growing economy, an ever-increasing number of entrepreneurs joining the race to do something new, new business establishments, etc. are leading to a tremendous amount of money flowing on all sides.

In such scenarios, money flow is a key factor in a progressive economy and this means there is a lot of lending from the institutions. This gives rise to situations in which the maintenance of records for such transactions seems to be the need of the hour. How does one keep a tab on all the credit lent, how does one identify defaulters and refrain from re-lending to them to avoid bad debt? As an answer to these questions, Govt. of India and RBI came together with CIBIL as the solution.

<Image Credit>

Some time back, we informed the readers regarding the Credit Rating system in India as a part of which we highlighted the CIBIL Credit Report being made accessible to the individuals. Now that the system is in place, many of us still do not know about it and are often surprised when they apply for a Credit Card or Loan and the application gets rejected by the bank.

So, I thought that there is a need to make people aware about this and that is what compelled me to write a post on this topic. When we talk about CIBIL Credit Information Report, there are a lot of questions that pop up in the mind. The very first of them being “What is a CIBIL Credit Report?”.

Taking this into account, in this article I am going to provide information about CIBIL and the brief about Credit Information Report. There are many more queries that people have regarding CIBIL like:

How do you come to know if your name is in the CIBIL Defaulter’s list?

How to access your CIBIL Credit Information Report (CIR)?

We will be taking up these in the upcoming posts. You can subscribe to us to receive the future articles in your mailbox.

So, now lets understand the basics about Cibil; What is CIBIL, how is it operated and how is it beneficial and some more things about CIBIL.

What is CIBIL?

CIBIL (Credit Investigation Bureau of India Limited), which is currently the India’s first and the only fully operational credit information bureau, is a huge repository of information, which contains the credit history of commercial and consumer borrowers. CIBIL provides this information to its Members in the form of credit information reports.

How old is CIBIL?

For all those who are not known to this, CIBIL is one of the 4 credit bureaus that have been licensed by the RBI under the Credit Information Companies Regulations Act, 2005 (CICRA). CIBIL, though, is the only one that has been operational for around a decade now and has the credit repayment history of around 14 crore loans and credit cards.

Who is the owner of CIBIL?

As per the information on CIBIL website, CIBIL’s equity share is held by State Bank of India, Housing Development Finance Corporation Limited, Dun & Bradstreet Information Services India Private Limited and Trans Union International Inc. The shareholding pattern is in the proportion of 40:40:10:10 respectively.

Recently, there has been a change in the shareholding pattern, including various categories of Credit Grantors. The distribution is as shown in the chart below:

Who all are the members of CIBIL?

All the Credit Grantors; Banks, Financial Institutions, State Financial Corporations, Non-Banking Financial Companies, Housing Finance Companies and Credit Card Companies are the Members of CIBIL. These members only provide the information about the individuals’ credit history which can later be used by the other institution while taking decisions to lend money to that individual or not.

What is a CIBIL Credit Information Report?

A Credit Information Report (CIR) is a factual record of an individual’s (borrower’s) credit payment history compiled from information received from different credit grantors which are the CIBIL members. It contains all the information about a borrower’s transaction in the past. Its sole purpose is to help credit grantors make informed lending decisions. Slowly and gradually, all the lending agencies have started using the CIBIL Database before they lend money to any person/company.

How would I know if my name is in CIBIL Defaulter’s List?

There is one simple way to know if your name in the defaulter’s list. Whenever you apply for a loan or a Credit Card Application and everything is in place from your side, but your application gets rejected without any reason, then there is a chance that there is something wrong that the bank or the concerned institution found in your CIBIL Record.

As per the RBI guidelines, if something of this sort happens, the concerned bank has to let the consumer know the reason for this rejection. So, you will come to know if something is wrong in your Credit Report.

Or, the other way is to apply for a Credit Information Report directly from CIBIL to see if everything is in the right place in your report. You can even get the report just like that out of curiosity, to see what you have been doing since some years just like I did.

We will discuss about how to get the access to your CIBIL Report in details here on EquiTipz. Subscribe to EquiTipz to keep you updated when we do that.

Can I get a copy of the CIBIL CIR?

YES. CIBIL has, some time back, started offering the CIR through an interim solution. This interim solution is kind of a testing phase and based on the learnings from this interim phase, CIBIL will be able to operationalize the full-fledged Consumer Relations System.

In this interim phase, CIBIL will be manually handling consumer requests for a copy of their credit information report(CIR).  As a future plan (which excite me ), CIBIL is also developing the infrastructure, systems and processes for an automated solution that would be needed to enable an individual direct access to their Credit Reports from CIBIL on-line.  The full-fledged Consumer Relations System will have world-class features that will allow consumers to access their report on-line and banks will be able to respond to errors via an on-line maintenance tool. We will keep you updated about this when this happens. Also, we will take up the topic on how to get your CIBIL Report. Subscribe to our email updates now.

I hope that this article covers almost everything about CIBIL and by now you must have atleast some idea on “What is CIBIL”, please highlight if I missed something. Also, please contact us or comment below if you did not follow anything.

For Further Reading:

1. CIBIL Credit Report; Direct Access by March 2010
2. Should I buy Aqua Logistics IPO? : Angel Broking Report
3. 8 Mistakes to Avoid When Using a Credit Card
4. What is a Virtual Credit Card?

Recently EquiTipz completed one year of its operation. With the year that passed, there were many achievements that we made. The main achievement, that I believe, is the most crucial for the success of EquiTipz is the trust that we were able to build in hunderds of readers like you, with the unique and useful content posted here on EquiTipz.

These readers included people of all ages, from all parts of  the world and with different mindsets. We are continuously moving towards our Mission to spread Financial Literacy among masses so that they Invest Smartly to get Smarter Returns.

Photo Credit Link

I am listing below the articles that were posted on EquiTipz during the last months (since inception). In total, I have chosen 56 articles and I am calling this list as “56 Ways to Make your Money Work Harder For You“. I have been thinking of preparing this list since long but it kept on getting delayed for no reason. So, I thought of doing it on completion of EquiTipz’s one year. This list will be beneficial for those who are either new to EquiTipz or for those readers who missed any of our articles.

To make sure you do not miss any of our useful articles in future, Subscribe to our Free Email Updates now.

With the aim of imparting Financial Awareness to everyone, we promise to keep delivering more unique content for you in the coming years for you.

In the meanwhile do let us know which is your favourite article out of the above list and shower your love by putting in your views in the Comment form below.

For Further Reading:

1. [Video Tutorial] How do Stock Markets Work
2. Top 5 Stock Tips for Beginners
3. Should I prepay my loan or Invest the money?
4. How to Make money by Investing in a Mutual Fund?

Remember the time when you took a Personal loan to fund a requirement for your parents? Or, you had to take a loan for purchasing a vehicle or the loan was for your marriage or any other reason.

The occasion goes through pretty well and now comes the first EMI and you wake up by the SMS on your mobile that Rs.7000 has been debited from your account on account of the Loan Payment amount. Now you realize that EMI is not actually Easy

The 3 alphabets E.M.I. become a nightmare for you. Now, starts the real game when that date comes when you keep getting the chills that you are paying huge sums as interest to the bank. Now, you decide that whenever you are going to get ample money, the first thing you will do is pay your loan.

Sooner or later, comes the great day when you have enough cash in hand with which you can easily get rid of that EMI.
BUT, to prepay the Loan or invest – that is a question most of us have when we have spare cash in hand. Here’s how to take that tough decision.

Let us take up an example here. Gagan bought a re-sale apartment three years back, for which he took a loan of Rs 5 lakh at 8.5 per cent. He pays a monthly installment (EMI) of Rs 5,000. Now, he wants to invest this money in his monthly saving rather than use it to prepay the loan; but is unsure. His monthly income is Rs 50,000.

Gagan could actually do the both – make a part pre-payment of the loan and invest too. Here’s how he can achieve this.

Pre-pay in installments:
Gagan can use a part of his savings in the prepayment of the loan thus, reducing the overall loan tenure which will help him in saving on the interest that he pays to the bank. Since, his loan amount is less troublesome as compared to his monthly income, he can part prepay at regular intervals.

The thumb rule is that loan EMIs should not exceed 30 per cent of monthly income.

In Gagan’s case, he is well within this limit. Here’s what he should do:

Step 1: Set aside 20 per cent of his income for home loan Pre-payment.
Step 2: Accumulate this amount (from Step 1) every three months and make a quarterly prepayment of the loan.
Step 3: Check in advance with the bank if any pre-payment charges are applicable. If yes, he should plan the pre-payment accordingly to avoid these redundant charges. For instance, some banks allow up to 25 per cent of pre-payment without any extra charges.

The only thing to be kept in mind here is that “the prepayment charge” should be considerably less compared to the interest saved otherwise he may end up paying even more to the bank.

Invest smartly:
As far as investing is concerned, he has two got options in his kitty: Equity and Debt. Based on his risk profile and time horizon, he has to make a choice as per his future requirements and fulfil his long term financial goals. For investments longer than 5 years, the best option for Gagan can be equity as investment in equity over a long term has hardly disappointed investors.

For any time frame below this period (less than 5 years), it is better to opt for Debt Instruments as the Equity Markets have generally proved volatile over a short period of time.

Must Read: 4 Golden Rules of Equity Investing

Equity mutual funds also make a great choice for investment when you do not have an in-depth knowledge about investing in Equity directly. But given the volatile nature of the market and the loss experienced by investors in the past months, Gagan should keep his expectations a bit towards the realistic scenario. He must be patient enough and willing to wait it out for at least 10 to 15 years to see an excellent return from equities.

On the debt side, bank deposits have gained more popularity lately, because of the surety that they give on the safety of your money. Nowadays, the concern for the investors has been on the Return of investment rather than Return on investments. So, if Gagan is looking for a safe avenue along with tax benefits, he could lock his money for a five-year term.

This is the case of one Gagan who was in dilemma whether he should pre-pay his loan or invest the same amount to gain more returns on the same amount.

Please add your views below about what one should do in such a scenario. There must be many more Gagans out there who may be benefited by your smart strategy to tackle this situation of dilemma.

For Further Reading:

1. Is Payday loan the right solution for you?
2. Tata Capital NCD: Should you invest?
3. Should you invest in Highest NAV Guarantee ULIPs?
4. Should I invest in L & T Finance NCD Issue?

Dividends matter more than some investors think. Growth-focused investors sometimes treat dividends as the icing on the cake, but they are more important than this. Here are six reasons why investors should care about dividends:

1. Re-investing dividends has a significant impact on the total returns from stock market investments. Thanks to the magical power of compound interest, dividends can make all the difference to even lack-lustre capital returns. Barclays Capital’s 2009 Equity Gilt study showed that $100 invested in the US market in 1925 would have grown to $6,443 by the end of 2008 without re-investing dividends but to $193,687 if dividend income was re-invested throughout the period.

2. At a time of historically low interest rates, high-yield shares can make up for the poor returns on deposit accounts. A year or so ago it was easy to match the 5% yield offered by the MSCI Europe index in a risk-free savings account. Now the income from dividends looks comparatively attractive and the risk to capital of the equity investment is a more acceptable price to pay for the higher yield.

3. Focusing on high-yield stocks can improve your capital returns as well. At the market’s lowest point in March 2003, the average share in the MSCI UK index yielded 4.8% while the 10 highest-yielding shares averaged 11.9%. As the market recovered from its lows, investors benefited not just from the higher initial income but also from the fact that the high-yielders gained 91% over the next year compared to the 49% achieved by the average share. Buying high-yielding shares can offer a “double whammy” – high income and a high capital gain as well.

4. In bull market in which the value of a share is rising at 15 or 20% a year, the addition of 2 or 3% in dividend income is nice to have but no more than a welcome addition to an investor’s return. In a bear market, however, a high dividend yield can offset capital losses and act as a support to shares because the prospect of high and reliable income will bring in marginal buyers. As share prices fall, yields rise, making shares with a decent payout seem attractive compared to other income investments such as bonds.

5. Companies are generally unwilling to cut their dividend unless they really have to, although recent cuts have shown that there is less stigma attached to passing the payout than used to be the case. It reflects badly on a company’s management and cuts tend to be punished in the market. For this reason dividends have tended to be less volatile than both earnings per share and share prices. Dividends smooth some of the ups and downs of investing in the stock market.

6. Steadily-growing dividends are an indication of the health of a company so it is not too surprising that companies that can boast a rising dividend payout have also tended to outperform the rest of the market. Rising dividends are a sign of strong cash-flow, which is the lifeblood of any company. Because of this dividends are not just for income investors.

Read – Earnings per share (EPS) ratio & what it means!

For Further Reading:

1. The Importance of Investing
2. Importance of Long Term Investments
3. Sold the Shares; Do I have to Pay Tax?
4. Reliance Infrastructure Fund: NFO Review & Analysis

You probably know the concept that all your transactions in the stock market are done though a “stockbroker”. A stockbroker earns a commission on whatever transactions you make.

Best of luck! And Happy Investing…

Previous – Inflation and how it eats your money!

For Further Reading:

1. Tips for Small investors: Don’t buy; don’t sell!
2. The ETF effect – How investors can upgrade portfolios and stay out of the rat race on markets?
3. Aqua Logistics IPO Recommended for Long-term investors:Swastika
4. Sold the Shares; Do I have to Pay Tax?

Inflation, is an economic concept. What the cause of inflation is, is not important to us from the point of view of this article. What is important to us is the effect of inflation! The effect of inflation is the prices of everything going up over the years.

A movie ticket was for a few paise in my dad’s time. Now it is worth Rs.150. My dads first salary for the month was Rs.400 and over the years it has now become Rs.75,000. This is what inflation is, the price of everything goes up. Because the price goes up, the salaries go up.

If you really thing about it, inflation makes the worth of money reduce. What you could buy in my dad’s time for Rs.10, now a days you will not be able to buy for Rs.400 also. The worth of money has reduced! If this is still not clear consider this, when my father was a kid, he used to get 50paise pocket money. He used to use this money to go and watch a movie (At that time, even you could watch a movie for 50paise!)

Now, just for the sake of understanding assume that my dad decided in his childhood to save 50paise thinking, that one day when he becomes big, he will go for a movie. Many years pass. The year now is 2006. My dad goes to the theater and asks for a ticket. He offers the ticket-booth-guy at the theater 50paise and asks for a ticket. The ticket booth guy says, “I am sorry sir, the ticket is worth Rs.50. You will not be able to even buy a “paan” with the 50paise!!”

The moral of the story is that, the worth of the 50paise reduced dramatically. 50paise could buy a whole lot when my dad was a kid. Now, 50paise can buy nothing. This is inflation. This tells us two important things.

Firstly: Do not keep your money stagnant. If you just save money by putting it your safe it will loose value over time. If you have Rs.1000 in your safe today and you keep it there for 10years or so, it will be worth a lot less after 10 years. If you can buy something for Rs.1000 today, you will probably require Rs.1500 to buy it 10 years from now. So do not keep money locked up in your safe. Always invest money. If you can’t think where to invest your money, then put it in a bank. Let it grow by gaining interest. But whatever you do, do not just lock your money up in your safe and keep it stagnant. If you do this, you will be loosing money without even knowing it. The more money you keep stagnant the more money you will be loosing.

Secondly: When investing, you have to make sure that the rate of return on your investment is higher than the rate of inflation.

What is the rate of inflation?
As we said earlier, the prices of everything goes up over time and this phenomenon is called inflation. The question is: By how much do the prices go up? At what rate do the prices do up? The rate at which the prices of everything go up is called the “rate of inflation”. For example, if the price of something is Rs.100 this year and next year the price becomes approximately Rs.104 then the rate of inflation is 4%. If the price of something is Rs.80 then after a year with a rate of inflation of 4% the price go up to (80 x 1.04) = 83.2

So, when you make an investment, make sure that your rate of return on the investment is higher than the rate of inflation in your country. In our county India, for the year 2005-2006 the rate of inflation was 4% (Which is really low and amazing!). This rate keeps changing every year. The finance minister generally gives the official statement on the inflation rate of the country for a particular year.

What is the rate of return?
The rate of return is how much you make on an investment. Suppose you invest Rs.100 in the market and over a year, you make Rs.120, then you rate of return is 20%.

If you invest Rs.100 in the market today and you make money at a 3% “rate of return” in one year you will have Rs.103. But now, since the rate of inflation is at 4%, an item costing Rs.100 today will cost Rs.104 a year from now. So what you can buy with today’s Rs.100, you will only be able to buy with Rs.104 a year from now.

But the Rs.100 that you invested has grown only at a 3% rate of return and so it is worth Rs.103. In effect, you are loosing money!

So in conclusion, the rate of return on your investments, have to be higher than the rate of inflation.

From the above paragraphs you can note how silently, inflation eats into your money. You would not even know about it an your money would sit loosing value for no fault of yours. But inflation is not the only thing you should be considering, there are other things too that eat into you money. The first thing is “brokerage” and the second thing is “taxation”.

For Further Reading:

1. Inflation may cross 6% by March 2010: RBI
2. Should I prepay my loan or Invest the money?
3. How to Make money by Investing in a Mutual Fund?
4. How to be safe and smart with your money – A free Workshop by Moneylife Foundation