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Corona Pandemic – Life and Health Insurance

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Greetings from PenguWIN,

                                            The corona pandemic has impacted lives of everyone of us. It has made us sit back and seriously think about the welfare of our dependents. Forget creating wealth for them, their livelihood will be affected if proper planning is not done, especially young families where the spouses have (or one of them) a comfortable salary and their family would be dependent on this. Lives of young people were taken away. The official count itself is 4 Lakhs and this number is always disputed (expected to be higher)

Providing a safety net to our beloved ones is not a humongous task and can be done with 3 simple tools:

Life – pays a lump-sum or periodic payments to dependents on death of the insured,

Heath – when you or your family members are sick and hospitalised which happened to many during the pandemic and

Critical illness – when you get diagnosed with serious ailments that require huge expenses like Cancer, Chronic Liver or Kidney or Lung diseases, Coma, Parkinson.

Most of you might already have some or all of these through the companies that you are employed (group insurance). Professionals and small and micro entrepreneurs who are not formally employed and on their own will have to ensure that they have these in place.

People who already have all the three, life, health and critical need to review their adequacy of coverage. Without going into the calculation of coverage, a life insurance cover for a young family of  30 years old bread winner who makes a lakh per month, spouse who is a home maker and small kids, 50 lakhs cover will be too less, if the children need to be provided for studies upto a bachelor’s degree.

Similarly, a middle management employee who has been provided 5 lakhs of floater health cover by their company would have struggled if any of their family members would have been hospitalized for over a week due to Corona as the bill would run to a lakh of rupees per day in a Grade A hospital.

In health insurance you have an option of taking a super top-up, where the basic coverage will be done by your main insurer and anything over and above will be taken up by the top-up provider. Say, your Corona bill had run to 8 lakhs and your company health insurance has a limit of 5L, the first 5 lakhs of the bill would be taken by the company provided insurer and the additional 3 L will be taken up by the top-up provider. If the claim was only 5L or less then there is no claim for the top-up insurer and hence this policy works out cheaper than a overall base policy of say, 8 Lakhs.

Please make sure that elderly people (50+) buy a cover at the earliest as the insurance premium goes up with the age (and risk premium is higher with age) and in case of lifestyle diseases like BP, Diabetes, Heart problem, some insurers can even refuse providing insurance cover.

If you have any questions, please feel free to reach out to me.

Of Blogs and Tweets

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Greetings from PenguWIN!

                            Some of our investors have asked why I have stopped writing blogs. I have also been asked as why I am not in tweeter. The story goes like this.

” I have been subscribing to a magazine called Value research for over 10 years now. Every year they publish an annual edition too. During the initial years or more than the first 5 years, I used to anxiously wait for the magazine to come and there are certain fund reviews and portfolio changes that I used to eagerly read. In the past 3 years, during the first 2 years I used to glance through the articles and in the last year, I have only opened it and seen the contents. It’s happened with the Monday edition of Economic Times and Business Line too.

Reason, nothing new that I could gain and it’s grinding the same flour “Aracha Mava Araikirathu” like we say in Tamil. So, if I talk about the same funds, financial freedom, market reactions, it’s becoming too much like changing the screen play but tell the same story again and again. Obviously, I can gauge the pulse of the audience through the interactions.

There are tons of Tamil movies (am sure in other languages too) where the story is about love between 2, fighting among themselves, others like family coming in to object and finally get happily married or both die or director leaves it incomplete for us to decide. A bit of comedy scenes here and there.

Of course, some of the new investors will definitely find it interesting (blog, I am least bothered about the movie)

There are areas like international investments, funding start-ups, estate planning that I try to read but don’t have enough competence to write an article.

Direct equity investing, analyzing company’s balance sheet, market share, management capability… has never fascinated me and I don’t spend time with that. Also, every fund house has a large army of analysts to rip these apart and I don’t intend to be smarter than them.

As far as tweeter goes, I guess I got influenced by Dr. Rajan, whom I have very high regards. When a reporter asked him (more than 2 or 3 years ago) as why he is not in tweeter, his response was, I can never articulate anything in such a small sentence – forgot the exact words. My writings are a little verbose and I thought I will find it difficult to express something concrete in twitter unless I start tweeting like ” I had an excellent meeting with x fund manager”, “Had Paradise Biryani for lunch 222 good”. “Met 3 clients today, hectic day”

So, what?

Some of the tweets in personal finance domain goes like this

“Warren Buffet created 84% of his wealth after turning 60!”

“Save for the rainy day!”

“Market is hot. Invest with caution”

” Start investing early and try to achieve financial freedom before 50″

“Bonds are for storing wealth and equities are for creating wealth:”

” Keep your expenses lower than your income”

“Being Debt Free is the best thing that can happen to you”

“Don’t be a trader. Be an investor”

“Don’t invest too much in real estate. Financial assets are the way to go”

I don’t want to comment on any of the above tweets and leave it to your judgement on the quality or benefit of these. But an hour ago, 2 financial advisors were fighting saying if you have taken my tweets, atleast give me the credit. I failed to understand any IP in the tweets and claiming credit. I normally don’t get into twitter – my mobile does not have the twitter app installed but a friend of mine pulled me into twitter, and when I was reading his message, I got to experience the feud.

A very happy weekend to you!

Market Exuberance

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Greetings from PenguWIN,

The stock markets are rising every day and Sensex closed today, 11th Dec 2020 at 46,099. From the low of 25,981 on 23rd Mar 2020, this is an increase of 77.4%. The worrying factor is that the fundamentals of profit, sales and GDP are not in tune with it.

Foreign Institutional Investors (FIIs) have been flooding our markets with huge amount of money. This money is going into select Large Cap companies in the Index, Sensex and Nifty. The speed at which it is flowing is abnormally high in business that deliver growth. The flow is not the same across all companies as some are expected to do better without any surprises in earnings growth.

While I am happy seeing the portfolio go up and up, I do worry at the back of my mind as its irrational.

In equity investment we have to be prepared for the long haul and not get carried away by highs and lows, until we reach the long-term objectives.

Retirement, one of the most important goals for every investor (creating a good corpus to retire peacefully) may be 20 or 10 or even less than 5 years away and depending on the time frame, it’s extremely important to make sure that the corpus allocation is right rather than being too conservative or too aggressive. The farther away the retirement, the more the risk tolerance.

Please feel reach out to me if you have any questions.