Financial Planning Nepal

11/12/2022

We have grown up learning "how to earn money" but "how to manage and grow money" has never been taught.
In this YouTube Channel, you will learn everything about Money and Investments in the most simple and easy way.

Become financially literate and create a strong financial life for yourself.

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In this Video, You will learn about -A. What is Financial Planning and Why it is Important ?B. 4 Simple and Easy steps to do your Financial Planning:1. Know ...

08/07/2022

4

How much Life Insurance Cover do I need? (Part 1)

How you decide - how much life insurance cover I need?

- The amount of premium I am willing to pay or I can pay

- An amount "I think" is sufficient

- A random figure- 5 lacs, 10 lacs, 20 lacs, 50 lacs, 1 Crore etc.

- An amount suggested by my insurance agent

Most of the time people end up taking insufficient cover because of which their family suffers financially after their demise.

Sometimes, people take more than required and end up paying more premium which could otherwise be invested or used for a different financial goal.

Therefore, before understanding the cover amount, it is very crucial to understand why we need insurance?

1. To provide income replacement to my family in case If I die unexpectedly?

2. To meet certain financial goals (like kids education, marriage, buying home etc.) incase I die before fulfilling these goals?

3. To provide financial security to my dependents so that in case I am not there, they don't suffer financially.

4. To take care of my liabilities, in case I die before clearing all debts so that my family doesn't bear the burden.

Life insurance plays a very crucial role in providing financial protection to your loved ones in case of your death. Therefore, it is very crucial to assess your needs before opting for a policy.

If required, talk to an Insurance advisor who can help you to understand your financial needs and suggest a cover which will be sufficient to take care of your dependents in case you are not there for them.

07/07/2022

3

Why to have Life Insurance before you are 30?

Currently, youngsters choose to marry in late 20s and in some cases after they turn 30. They feel they should take insurance only when they have a family - spouse and kids to take care of.

Even if you are single, you still have parents to take care of or outstanding liabilities or you are planning to get married in near future.

There are many reasons to consider to buy insurance before you are 30, however the most important one is -Low Cost of Premiums

The younger you are, lower is the premiums. As you age, you will be at increased risk of developing underlying health conditions, which can result in higher mortality rates and higher life insurance rates.

For example -
You are 29 years old now (or less). You opt for a Term policy of 20 lacs with a term of 30 years for a fixed premium say 7000 p.a.

Let say, you plan to have insurance in your late 30s or 40s, you can now opt for the same policy above of 20 lacs with
- smaller term coverage
- increased premium cost

Therefore, buying insurance before 30 is a SMART decision.
Benefit - Longer coverage, Lower fixed cost, Bigger Financial Protection (Sum Assured ) to your dependents.

Note: A term policy covers you for a specified time period i.e. 5 -30 years for a fixed cost each year, providing death benefit to the nominee in case of death of policy holder during the specified term of the policy.

06/07/2022

2

Have you assessed your insurance needs before opting for a policy ?

Most of the people are aware that they should take a life insurance cover but most of them take a policy amount which is inadequate.

They choose cover amount (Sum Assured ) based on their premium paying capacity or Current income or an amount "they think" is sufficient to cover their financial obligations in future.

However, it is very crucial to assess your situation before opting for a policy and adequate cover.

1. Your current age
2. Financial dependents
3. Your current financial situation
4. Existing Liabilities
5. Future Goals

Have you done the above assessment before buying a policy?

05/07/2022

1

Do I need Life Insurance?

Is it important to understand why you need life insurance cover.

Whether you are married with kids or have parents who depend on you financially, or have liabilities, having life insurance can be important.

A plain term life cover provides money or what is known as a death benefit to your chosen beneficiary after you die.

17/12/2021

DAY 31 - "100 days of Financial Literacy"

Topic - Should you buy a New Car or Used Car ? (Continued....)

Assuming you want to buy an i20. You have 2 options -
1. Buy a New i20 worth 40 lacs
2. Buy a used i20 worth 20lacs.

If you choose 1.
-You buy new i20 with 50% down payment and remaining 50% as car loan (assuming interest of 10% for 7 years)
Pay an EMI of 35K per month (approx.)

After 7 years -
-Total amount paid - 50lakhs (20 lakhs as Down payment + 30 lakhs bank loan)
-Value of i20 - 20 lacs approx. (assuming it was well maintained)

If you choose 2.
-You buy an old i20 with full payment of 20 lacs.
- You decide to invest 35K every month. Assuming an ROI of 12% for 7 years

After 7 years -
-Total amount paid - 20 Lakhs (Initially)
The value of your portfolio will be - 45 lacs (approx.)
-Value of old i20 - 5-10 lacs (depending on how well it was maintained)

There are pros and cons of buying a new car or an old car like -

If you buy a new car -
1. You choose exact specifications you want, full warranty period, no previous history, better features, technology etc.
2. But more Cash outflow and high depreciation.

Whereas if you buy a used car -
1. Less cash outflow
2. But high maintenance cost, Earlier history of car might not be so good etc.

Before you make a decision, evaluate all the point carefully and then take a conscious call.

As per above example, what would have you done?

31/100

15/12/2021

DAY 30 - "100 days of Financial Literacy"

Topic - Should you buy a New Car or Used Car ?

When people start their career, buying a car is usually a short-term goal for many. It could be one of the most considerable expenses one make apart from buying a home.

When it comes to buying a car, you have a number of decisions to make like the make and model of your car, what budget should you buy, whether to buy a new one or used one. Owning a brand-new car has its own charm and advantages like better warranty and the latest technology, but it will be more expensive than a used car and will depreciate faster.

People in Nepal pay exorbitantly high prices when buying a vehicle due to heavy import duty. So, does it make sense to spend 25 - 35 lakhs or even more in a new car at the start of your career? (Cost is for a low end budget car)

-What have you done when you bought your 1st car?
-When did you buy it?
-Did you buy a new one or used one?

Will share in the next post whether one should buy a new car or used car. Stay Tuned!

30/100

14/12/2021

DAY 29 - "100 days of Financial Literacy"

Topic - Investment

How can you invest in Real Estate?

1. Buy Land and Properties (Non Rental)
2. Buy Rental Properties
3. Real Estate Investment Trusts (REITs)
4. Real Estate Investment Groups (REIGs)
5. Real Estate Funds
6. House Flipping

A. Ways you can generate income from Real estate Investment -
1. Value Appreciation - When a property rises in value due to a change in the real estate market or change in the property itself and you make a profit at the time of sale.
2. Rental Income - When you buy a real estate property and put it on rent, you start receiving rental income from the property.
3. Return from investing in Real Estate Funds/Trusts - There are Real Estate specific funds/Trusts in many countries which invest in Real estate industry and generate returns.

B. Why one should choose to Invest in Real Estate -

1. Leverage - Unlike other investments, one can buy a property using leverage, paying a portion of its total cost upfront, then paying off the balance over time or arranging loan.
For example, if you have 10 Lakhs to invest
a. You can buy just 10 lakhs worth of stock or FD and other investment whereas
b. In case of Real Estate, you can buy a Real estate property of bigger value say 50 lakhs by making a 20% down payment and rest by arranging a loan (provided you are eligible).

2. Diversification - Real Estate investment has a low correlation with conventional equity investments, therefore it provides a good diversification to your portfolio.

3. Return On Investment (ROI) - In the long run, you can expect to generate better ROIs from these investment for two simple facts - 1. The supply of land is limited and 2. The population is increasing. So the demand will continue to grow and returns from real estate will continue to yield great returns in the long term.

Have you invested in Real Estate (apart from your own home)?

29/100

13/12/2021

DAY 28 - "100 days of Financial Literacy"

Topic - How to choose a ?

You can invest in different Mutual Funds with an objective to create wealth or meet different life-stage goals like retirement planning, children’s higher education and marriage, vacation planning or buying an asset etc.

Before you choose the right fund, it is imperative to KNOW YOURSELF -

1. Financial Goals:
Defining different financial goals is most important step of preparing an investment plan and making the investments.
-What is your Goal?
-How much money you need to achieve that goal?
-When do you need to fulfill that goal?
Once these are clear, select mutual funds which helps in fulfilling these objectives.

2. Risk profile:
What stage of life you are in? How is your current financial situation?
What is your risk taking and bearing capabilities? If you can assess yourself well, you will know how to pick a mutual fund basis your risk profile.

3. Asset Allocation:
Different Asset classes have different risk profiles e.g. debt funds usually have lower risk than equity funds. Asset allocation aims to balance risk and return in achieving your financial goals. Therefore, financial goal and risk profile will help you achieve optimum asset allocation.

How to choose right Mutual Fund?

1. Goal based selection - When you know what you want to achieve out of the investment, your selection becomes easy. Equity linked portfolios are best suited for Investors with long term horizons or high risk taking capabilities of the investors. Debt funds are for short term to medium term timeframes or low to moderate risk taking investor profiles.

2. Fund Management - Mutual funds are managed by a fund manager who plays a key role in determining the performance of the mutual fund schemes. Therefore knowing about the fund manager can play a key role in selecting the fund. This includes the number of years he/she has worked in this role, his/her past records and success rates etc.

3. Fees - Most mutual fund schemes charge a fee which consists of the expense ratio, entry load and exit load.
- A fund’s expense ratio is the percentage of invested capital that the mutual fund house charges the investor to meet the day-to-day expenses related to managing the fund.
- An entry load fee is paid at the initial stage itself when an investor buys units in the fund. (Most of the MF does not take entry load)
- An exit load fee is usually charged if an investor redeems the units before a particular period.

Other factors like Fund Performance vis-à-vis its peers and index, its total Asset under management (AUM) etc should also be taken into consideration.

And last but not the least, Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

How did you choose your Mutual Fund Investment?

28/100

12/12/2021

DAY 27 - "100 days of Financial Literacy"

Topic - Direct Equity Vs Equity Mutual Funds.

Direct Equity
Direct equity is when you invest directly in the stock market. All you need is open a Demat and a Trading account and buy and sell shares directly from the stock exchange.

Equity Mutual Fund
An Equity Fund is a Mutual Fund Scheme that invests predominantly in shares/stocks of companies on behalf of the investors. The stocks are selected by the Fund Manager of the scheme who constantly monitor the fund performance and buy and sell stocks keeping risk and return in control.

Let us look at the differences between investing in mutual funds vis-à-vis direct investments in equities.

a. Control: Under Direct Equity (DE), you have complete control over your investments whereas in Equity Mutual Funds (EMF), the Fund Managers controls the Fund.

b. Selection of Individual Stocks: Under DE, you can select Individual stocks, whereas in EMF you don't have the luxury to pick up stocks as per your choice.

c. Entry or exit from single stock: Possible in direct equity investments only.

d. Speculation: DE allows speculation whereas in EMF, speculation cannot be done as the stocks are selected by the Fund Managers after doing proper research and analysis.

e. Exit Load - When you invest in Direct Equity, there is no charges levied for exit, however depending on the schemes there are exit load charges on the fund.

f. Small investment: EMF allows exposure to multiple stocks with a small amount also whereas to invest directly into multiple stocks you will require a bigger corpus.

g. Professional guidance: EMF is managed by professionals who have knowledge on how to invest in stock market whereas individuals buying directly may or may not have that knowledge and expertise about the various nitty gritty of stock market.

If you’re wondering which one is a better investment avenue for you, Answer the following questions to take an informed decision-

1. Are you new to stock market? Yes/No
2. Do you have required knowledge and expertise to evaluate the stock of a company? Yes/No
3. Are you aware of equity research tools like technical and fundamental analysis? Yes/No
3. Do you have sufficient time to look after your investment portfolio? Yes/No
5. Can you effectively manage the risk when the stock market is volatile? Yes/No

If answers to most of the question is a NO, you might want to start investing in equity via a Mutual Fund scheme.

Takeaway-

- There is no right or wrong when it comes to investing, and it is the selection of the right stocks or funds based on the investor’s financial objective, investment horizon and risk tolerance levels etc.
- Both are subject to volatility, and one should do proper research and analysis before making any investments.

What Equity Investment have you chosen?

27/100