Question

What is an example of a SMART annual objective for say a huge publicly traded high market cap bank?

Answer 1

All investments should be done with specific financial goals in mind. This is why one of the smart money moves is to use the services of a qualified financial planner. Unlike a salesperson who palms off unsuitable investments and financial products to investors, a financial planner will take a holistic view of the individual’s needs and resources. He will help you set financial goals and give you an accurate idea of how much you need to put away for each goal. Mind you, a financial planner is not a salesman. A fee-based planner who does not earn a commission from products will offer objective advice and suggest suitable products. Believe us, it will be money well spent.

A) TRAIN KIDS, WORKERS TO GO CASHLESS:-

After demonetization, this has become even more important.

As the government pushes ahead with digitization of currency, you would do well to acquaint yourself with the emerging modes of cashless transactions in 2017. But learning should not stop there. Teach your children and even those who work for you (housemaid, driver, watchman, milkman, gardener, newspaper vendor) on how to go cashless. Let them start with simple payment apps and e-wallets so that they learn the ropes without taking too much risk. It’s equally important to teach them about the perils of online frauds and identity thefts. An online survey conducted by ET Wealth shows that not many people are aware of the safety measures they ought to take and the risks of digital transactions. Once your children and staff get the hang of cashless transactions using the safer modes, they can graduate to debit cards and mobile banking.

(B) LINK AADHAAR WITH BANK A/C, INVESTMENTS:-

Will ensure seamless verification across instruments.
Even before the Aadhaar payment app was launched, the 12-digit number was playing an important role in your finances. It acts as a one-stop KYC authentication for all your investments and accounts. Already, you can open an NPS account using the Aadhaar. You can also buy an insurance policy completely online if you have an Aadhaar-linked account. The Employees’ Provident Fund Organisation has also made it mandatory for Aadhaar to be linked to the subscriber’s account. If you have not already done so, link your Aadhaar to your bank account. It will make your financial life easy and allow seamless verification of your identity for all instruments. In the future, when the RBI introduces bank account portability, the linking of the Aadhaar number will prove critical.

OPEN NPS ACCOUNT TO GAIN FROM LOW CHARGES:-

Even after recent hike, NPS funds charge less than mutual funds.

With each passing year, the National Pension System (NPS) gets more attractive. The 2015 Budget had offered an additional deduction of Rs 50,000 for investment in the NPS. In 2016, 40% of the NPS corpus was made tax free. Maybe this year’s Budget will offer some more tax benefits to NPS investors. Given the tax benefits, the ultra-low-cost NPS has become a compelling investment option. NPS funds have done better than even direct plans of mutual funds. What’s more, the investment mandate has been liberalized to allow greater freedom to the pension fund managers.

One big grouse with the NPS is that investors have to compulsorily buy an annuity with 40% of the corpus. Planners say this is restrictive because annuity rates are based on the interest rates prevailing at that time. PFRDA has now allowed investors to defer the purchase for up to three years. They can buy annuities until the age of 63. This is a good move. If the annuity rates are low, they can wait for some time for the rates to improve. The regulator is even considering suggestions that investors should be allowed to invest the maturity corpus in other instruments.

SHIFT LOAN FROM BASE RATE TO MCLR:-

MCLR rates are down and could reduce your borrowing costs.

Many home loan customers are paying a higher interest as their loans are either linked to the base rate or the benchmark/retail prime lending rate. They can reduce their home loan EMI by switching to the marginal cost of lending rate (MCLR). Switching to MCLR is recommended if the difference between your existing rate and the new rate is more than 50-60 basis points. With banks flush with demonetized deposits, the MCLR will only fall further. Though you will pay a conversion fees, you will recover that cost due to a lower EMI. Those with a long outstanding tenure should actively consider this move in the new year.