Normally when you approach a bank or a home finance company for a mortgage loan, they will insist on some margin from your side. That is meant to reduce the financer’s risk and ensure that your own money is also committed to the asset. The margin required may range from 10% to 20% and depends on the age of the customer, the income level and the price of the property. Remember, the home loan value is calculated on the overall cost of the apartment including the cost of the house, cost of interiors, registration and stamp duty. Most banks will fund up to 85% of this value. Some banks travel that extra mile to finance you for your furniture and woodwork within the house. Either ways, the principle should be to reduce the loan to the extent possible by bringing in as much money as you can afford as margin. After all, your home is a lifetime asset and you have to put your best foot forward.
Normally, for a small apartment costing ₹75 lakhs in a metropolitan city in India, your personal margin will be close to ₹10 lakhs. Obviously, nobody carries this kind of liquidity and hence you need home loan down payment assistance.
Here are some ways you can do it with the pros and cons of each one of them:


This is a very smart and intelligent way of planning for your home loan down payment. When you are planning to purchase 5 years down the line with a margin of ₹10 lakhs, then you can start a SIP with around ₹12,000 per month. Instead of taking the risk of an equity fund, you can opt for a balanced fund, which will give you an average return of around 13% per annum. By saving just ₹12,000 per month in this SIP, you invest a total of ₹7.20 lakhs of your money while the balance ₹2.80 lakhs comes in the form of market returns. Of course, you can also get a higher return by opting for an equity fund but then 5 years is not exactly a time frame during which equities will necessarily generate returns as per your expectations. Hence a balanced fund will hedge your risks better. The moral of the story is that when you plan your home purchase well in advance, you can make the power of compounding work in your favor.


This is an option you do have provided you are sitting in the midst of a bull market and are sitting on healthy profits from your equity holdings or your equity mutual funds. The question is whether you should be taking money out of your investments. Remember, buying a home is one of your major lifetime goals and you can always make that exception. Again, we are not suggesting touching the principal amount invested. You can just swipe the profits out and use to pay the margin money.


Not many are aware of this but premature withdrawal from your provident fund is permitted for special purposes and purchasing a home is one of them. The entire process of withdrawal takes about 21 days. While the PF department promises to release the funds in 1-week time, it is always safer to provide for delays since this request will have to be forwarded through your employer. When you plan to use your PF money to pay for the home loan margin, provide for the extra time of 21 days. Also, remember that if your PF has been continuing for more than 5 years only then you can withdraw the money without any tax implications. Else, the withdrawal is treated as an income in your hand and you will have to pay a steep tax on that.


Normally, the bridge loan to finance your home loan margin is given provided you are willing to give some hypothecation against the loan. If you have another property ownership or shares or bonds or even endowment policies with assured surrender value then you can hypothecate these assets with your bank and actually get a much lower rate for the margin loan. Normally, secured loans attract a relatively lower rate of interest compared to unsecured loans. However, in principle you will still be adding to your overall debt and you need to be cautious about that.


Personal loan is an unsecured loan your bank will provide that is based on your credit history. A basic caveat needs to be understood here. Personal loans being unsecured are high cost loans. The average cost of the loan can range from 16-18% and is best avoided unless it is absolutely inevitable. Many home buyers use the personal loan as an interim financing measure till the time other sources of money can be brought in. Here you need to remember that personal loans carry a 6 months lock-in and there is an exit load of up to 5% on these loans for premature closure. All these can substantially add to your costs.
So, in reality there are a variety of ways to finance your home loan margin. But as prudent investors we suggest to use the SIP route to plan your margin well in advance. That way your money also works hard for you.
Source : Angel bee

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7 Things You Need To Stop Doing To Be More Productive, Backed By Science

Working smarter, not harder, is the key to better results

When I was 17 years old, I used to work and study for about 20 hours a day. I went to school, did my homework during breaks and managed a not-for-profit organization at night. At that time, working long hours landed me countless national campaigns, opportunities to work with A-list organizations and a successful career. As I got older, I started to think differently. I realized that working more is not always the right, or only, path to success.

Sometimes, working less can actually produce better resu

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Volatile Markets ? What to do? Read on

Volatility is a part of investing. There is no need to get afraid of it. Volatility acts as small bumps in our investment journey.

  • Control your emotions. Don’t Panic.
  • Call your financial advisor and understand the reason behind the volatility.
  • Don’t listen to the noise in the market. Stay focused on your goals.
  • Look at the big picture:

The most common mistake which an investor does is to think about exiting current investments. Remember that you have invested for fulfilling the dreams of your loved ones and exiting current investments will compromise that objective.

  • Use volatility as the opportunity:

Don’t stop your SIPs or STPs. This is an opportunity to accumulate more units through SIPs or STPs. So, let your SIP or STP run.

  • This is the time to be greedy:

Remember the quote by Warren Buffet – As an investor, it is wise to be “Fearful when others are greedy and greedy when others are fearful.” So, this is the right time to top-up your investments through lumpsum and SIP mode.

And lastly, don’t forget that in the long term, market rewards disciplined and patient investors.

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Season’s Greetings

We have all worked very hard throughout yet another year, and for what? For the love of our jobs, for the love of our ambitions, for the love of our near and dear ones, to fulfil our dreams to travel the world and the list goes on. However, don’t you think it may be also wise to just pause and check if we have done all the necessary provisions and arrangements to take care of our future and the future of our loved ones…..Financially!

Here are some Cardinal Rules for a Happy Financial Life which you may find handy!

Nomination! As morbid as it sounds, it is one of the wisest little things that one can do to make things simple and hassle free for our loved ones in our absence. Ensure that you have a nominee mentioned for all investments – be it in the bank, FDs, Post Office, PPF, MF, Life Insurance, Locker, Health Insurance, etc. Any place including any government agency related (electricity), society where you stay.
Have a large Term Insurance Policy with CI (Critical Illness)riders. Policy should at minimum be equal to your liabilities plus should sustain the lifestyle for your near and dear ones.
Have a good Family Cover Health Care Insurance even if you have some cover from your employer. Get it when you are younger as you save on the premium amount instead doing this when you are close to you retirement.
Invest for your short, medium and long term goals through Mutual Fund. Invest across asset classes Liquid Funds for emergency money needs (3-6 months), Fixed Income Funds for 1-3 years, Hybrid Funds (3-5 years), Equity Funds (5year plus).
We often pay a lot of attention in building a corpus for our car buying, home buying, child’s education when we are young. Save regularly for your Retirement Corpus also as seriously as you are doing the rest.
Purchase Gold etc through the ETF route which is far cheaper than buying physical gold
Ensure that Bank Accounts are linked with all investments and a schedule is kept for when the payments (premium payment or SIP payment) is to be done. Also check if you have any unnecessary and unused bank accounts and demat accounts and close them
Ensure you take a Home Insurance against fire & theft.
Keep an updated Will.
As we come close to the end of 2018, we often say “Ring out the Old and Ring in the New!!” Well, it may also make sense to say in the same breath …” take good care of whatever you already have “! All of the above rules are what makes you financially happy, secure and help you lead a contended life.

Season’s Greetings from Fortunext Investment Advisors to you!

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5 investing insights from Jim O’ Shaughnessy

Jim O’Shaughnessy is the Chairman and Chief Investment Officer of O’Shaughnessy Asset Management (OSAM). A pioneer in quantitative equity research, his interviews, tweets and writings are rich in wisdom. Here are a few insights gleaned from them that will help any investor, be it an amateur or a professional.

1. Design your own strategy. If you want to succeed as an investor, don’t imitate anyone. The “Warren Buffett” of 2038 will have gotten there via a much different road. Read as much as you can. Learn all that you can. Then synthesize all that knowledge into a strategy uniquely your own, so that your investment plan reflects ‘you’. When you create and own your investment strategy, you have many things in your favour. You… Make it easier to stick with it. Avoid playing the victim by blaming others or events. Commit yourself and put skin in the game. Have the leeway to continue to study/learn and adapt as you do so.

2. No one particular ratio has an advantage over a composite of ratios. A lot of people, when they think about value, they think about the P/E or the P/B ratio. Investors should go with a multiple-pronged approach to value which covers the balance sheet from top to bottom and offers a much better assessment. Move from a single ratio to many in a composite. A decade ago, the Citibank stock looked extremely appealing because it had one of the lowest P/Es and a super high dividend yield. But on the overall value composite, it had problems and bad financial strength. This could only be revealed by examining the stock on a variety of variables: price-to-sales, EBITDA to enterprise value, price to earnings, free cash flow to enterprise value, and shareholder yield (dividend yield + buyback yield). By considering all the various composites, one gets a much better sense for the overall attractiveness of the stock than by looking at any one specific variable. That’s because there is no single factor or fundamental piece of data that is the answer or solution to the complicated question of how to pick stocks that outperform. For example, shareholder yield is a good indicator, but performs much better when selected from a group of stocks that are very cheap; have good earnings quality and have a high conviction in their buybacks, as evidenced by percentage of outstanding shares they are buying.

3. Remember that you are prone to the Recency Bias. This simply means that we recall much more easily that fact that we recently came across. This bias in behavioral finance indicates that humans put way too much emphasis on the most recent and available information, which results in us being overly pessimistic or optimistic. And as we pay the greatest attention to what has happened recently, we forecast it into the future. This translates into being drawn towards stocks where we have just read or heard something really positive and away from those where the information was negative. At O’Shaughnessy Capital Management, a game used to be played with a 50-stock portfolio. The analysts would pick the 10 stocks that they think are going to do the best, and the 10 worst. Most often than not, the ones picked as the worst performers ended up being the best; the best potential performers performed poorly. This is human nature; your chances of going with your gut on a stock that has great numbers could backfire.

4. Investors attempting to actively manage their portfolios need the emotional and personality traits necessary for success. Successful investing is hard, but not impossible, if you have the right traits. It is simple, but not easy. The most difficult thing about applying your strategy is having the emotional discipline not to override it, especially when it is underperforming. Stay in your strategy and let it do its work. That is truly the hardest thing to do. Investors (passive or active) face one real point of failure: reacting emotionally to a market selloff and liquidating their holdings, often near a market bottom. Active investors have to watch out for another factor; selling out of an active strategy that is doing worse than its benchmark, often over periods as little as three years. Most importantly, do not fool yourself. If you lack the emotional fortitude to stick with it through thick and thin, you’re probably better off not trying to do it on your own.

5. Arbitrage human nature. Markets change minute-by-minute. Human nature barely changes millennium-by-millennium. Therein lies your edge. The price of a stock is still determined by people. As long as people let fear, greed, hope and ignorance cloud their judgment, they will continue to misprice stocks and provide opportunities to those who rigorously use simple, time-tested strategies to pick stocks. Names change. Industries change. Styles come in and out of fashion, but the underlying characteristics that identify a good or bad investment remain the same. Each era has its own group of stocks that people flock to, usually those with the most intoxicating story: “new era” industries such as radio and movie companies (1921-1929); new technologies (1950s); the dot.coms (late 1990s); and now Bitcoin. Far from being an anomaly, these are predictable ends to long bull markets. A long view of returns is essential because only the fullness of time uncovers basic relationships that short-term gyrations conceal. History never repeats exactly, but the same types of events continue to occur. Investors who had taken this essential message to heart in the last speculative bubble were the ones least hurt in the aftermath. They understand that today’s events and news are mostly noise, and that only longer periods of time deliver the much more accurate signal. The same is true after devastating bear markets. Investors behave as irrationally after protracted bear markets as they do after market manias, leaving the equity markets in droves, usually at or near the market’s bottom. By the time they gather enough courage to venture back into equities, a good portion of the recovery has often already happened. We are always trying to second guess the market, but the facts are clear—there are no market timers on the Forbes 500 list of the richest people, whereas there are many, many investors.

Credit – Content created by Morningstar

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Six Financial Mistakes

How many of us know that the social security net in India is almost non-existent? And that your EPF is a very poor attempt at creating social security. NPS, a slightly improvised version, is yet to gain acceptance, thanks to its complexity and poor taxation structure. In such a scenario, it becomes imperative that we save enough for our retirement.

However, young people who join the workforce, are not geared towards financial prudence and do not start thinking about savings and investment right away. So here is a list of six mistakes one should avoid making early on in their financial life.

1. Delaying the habit of investing

Having spent our college lives on shoestring budgets, when we get that first salary credited to our bank account, we have a tendency to splurge. But hold on for a minute, this urge to spend now can get you into trouble later on.

The chapter on compound interest you had in school was not just theory. It is now time to see that into action. When you make any investment, your returns get compounded every year. The earlier you start investing, the more time your investments have to compound. The more your returns compound, the more you will accumulate.

Take the case of Ajit and Manisha. Both of them started working at the age of 25. While Ajith started investing right away, Manisha waited till she turned 30. Both of them invested similar amounts, Ajit starting with Rs. 10,000 and Manisha with Rs. 15,000. They increased it by Rs. 1000 every year. However, when they turned 60, this is where they both ended up:

Difference in investment value

A delay of five years caused Manisha to fall short by over Rs. 2 crore. So start early to accumulate a sufficient amount.

2. Spending through credit card

As soon as you open a salary account, you will get a call from your bank to get a credit card. Credit card is just the thing a spendthrift needs. You spend without worrying and pile up your credit. You barely manage to pay the minimum amount every month. And very soon, you find yourself paying huge amounts of interest on the accumulated credit.

Credit cards come with very high interest rates, going as high as 42% per year. Spending money you do not have can get you into a debt trap. You will eventually find yourself spending more money paying the accumulated interest, than you spent for yourself.

3. Spending using personal loans

OK, so credit cards are expensive, but what about personal loans and EMI payments? You will be bombarded with ads offering you pre-approved personal loans at rates as low as 14%. They tempt you into buying goods you cannot afford. You may have only Rs. 30,000 in your bank account, but you take a personal loan for Rs. 40,000 to buy the latest Google Pixel phone. You will take another personal loan and go on a Europe trip with your friends.

Spending on luxuries you cannot afford will only eat into your corpus. Instead, plan for the long haul. Start with cheaper gadgets and trips closer home. This will help you save more in the initial stages of your life. As you move up in your career, you will have more opportunities to splurge.

4. Investing without understanding the product

Another mistake which people make is to not spend time understanding where they should invest their money. A young person tends to receive advice from his parents, uncles, senior colleagues, and these days, knowledge sharing social networks. None of these will understand your needs or advice you properly. Investing without understanding the product can land you into trouble, the kind which people got into last year when they invested huge amounts in Bitcoins.

You should neither rush to put your money in banks, nor rush to invest in equities. Nor should you fall into the trap of Ponzi schemes. So take a couple of weekends to think about your investments. Spend some time understanding the products available and the pros and cons of each. Then make an informed decision.

5. Trying to stay away from risks

While there are people who put their money only in banks, there will be people who swear by equities. Neither of the extremes are good. While you should not take too much risk, you should also not be too risk averse.

Equity and equity related products like mutual funds are risky. But they also come with risk premium. There is a reward for taking ther risk and this reward is higher returns. Over a long period of time, even 1-2% return differential can create a huge difference in your corpus.

Here is a comparison of how much a monthly deposit of Rs. 10,000 grows to in 35 years, at various rates of interest:

Value of investment at varying interest rates

If you stay away from risk, you risk missing out on the huge potential of equities.

6. Buying a home too early

We have a great emotional attachment to our homes. Owning a house is also associated with social status and prestige. As a result, as soon as we start earning, we want to have our own apartments. Within a few years, we find ourselves saddled with a huge home loan, zero savings, and only one illiquid asset that is the apartment. The next few years are spent paying the EMI only. By the time we can start saving, we have already missed the early bus.

Don’t be in a hurry to buy a house. Again, after having saved for a few years and after having made some progress in your career, you will be in a much better position to buy a house according to your needs. Taking a home loan early on not only gets you into a financial mess, it also restricts your career choices.

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