Is Financial Planning Expensive?

Nowadays, financial planning has become a very important factor when you want to achieve any financial goal. No matter whether it is a short-term or long-term goal, financial planning enables people to meet their financial goals by planning. It does so by taking savings and allowing them to invest in several financial instruments. You should know that investors don't have enough resources that will allow them to get deep financial knowledge so that the securities can be analyzed. Besides, they don't have enough time to analyze securities. 

So, what you can do is consult a financial advisor. The advisors generally charge fees for their advisory services. Therefore, it is essential to have a deep knowledge regarding financial advisor fees. Now, dig into the article to know whether financial planning is expensive or not.

Who is a Financial Advisor?

Financial advisors are those specialists who usually offer financial advice to investors so that they can achieve their goals in life. Hence, they need to conduct financial preparation, a process that allows the people to achieve the target via proper financial management.

They can have different types of goals like purchasing a home, investing money for child education, estate or retirement planning. The major role of an advisor is to make customers feel relaxed and give them some confidence. The advisors must keep up with the current events of business. Besides, they need to offer the customers impartial advice.

What Is The Cost of a Financial Advisor?

The service type you want, the portfolio size, and the compensation structure are the factors that need to be considered while determining the cost of a financial advisor. However, you will not find any standard cost that is applicable to financial advisors. A few advisors charge depending on the credentials and certifications. For instance, a financial coach can charge less than a CFP or certified financial planner.

Try to find such an advisor who can fulfil your requirements, such as making a suitable financial plan at a budget-friendly price range. But it never indicates that you need to choose the cheapest advisor. However, if you want, you can go with ones who charge higher fees and can provide an in-depth and detailed look at your finances.

You should ask the advisor about their fee structure, how to give their payments, what is included in their price range, before settling on an advisor.

How Are Financial Advisors Paid?

You should know that all advisors aren't paid in the same way. However, the payment structures depend on a few factors, including flat fees, commissions, or percentage of assets.

Fee-only:

This type of advisor can earn money when you give them payment for their services, and the fees may be hourly or flat. However, they can take the charges as a percentage of assets they are managing for you. But there are advantages when you work with this kind of advisor, i.e., the advisors are fiduciaries. In this case, you should know that a financial advisor who is working under fiduciary duty is needed by law for putting the best interest of the clients above their own. When you hire advisors, they may recommend some financial plans and products. Advisors should recommend such plans to the clients that suit their clients best instead of pushing them by those plans which can allow the advisors to earn them a commission.

Commissions:

There are some advisors working on commission. They earn money through sales commissions from third parties. But there are a few advisors who advertise themselves that they are "free" advisors. It indicates that they are not charging any money for their advice. But the money is earned actually through the commission.

Therefore, if you are going with a commission-based financial advisor, it's vital to proceed with cautions. Remember that these kinds of advisors are not fiduciary like the fee-only type. These advisors are salespeople with whom you should consult mainly for insurance brokerages & investment. They will not recommend their clients the best product as per the customers' needs.

But you should know that all commission-based financial advisors are not reliable. A few products are sold under a commission model, like life insurance. So, you must remember that they aren't held to the same care level as fee-only financial advisors.

Percentage of Assets:

Advisors can also charge their payments based on a percentage of the assets which they are managing. The average percentage is around 1% per year. For Robo-advisors, the charge is near about 0.25% to 0.5%. You will get more benefits if you have a large amount of assets as they need to pay less percentage rates compared to those who have a small amount of assets.

Should You Use a Robo-advisor?

These automated software platforms help to simplify investing. You can get these services at a much lower cost than in-person advisors. If you are going to use the robo-advisor due to the reasonable fees, you need to remember these have caveats.

These programs help to manage the money. But these software programs will not tailor a financial plan that is specific to the requirements of the clients. If someone is going to use this platform, he Or she will be asked several questions such as the present state of the finances, overall risk tolerance of the client, their financial goal, and so on. Based on the answer of the questions, the platform will give a pre-made portfolio.

There are a few robo-advisors that give an option that allows the users to add personalized financial services. But it charges extra fees for that.

How to Find a Financial Advisor:

When you start working with a financial advisor, it may happen that you have no idea from where you should start your search. Several professional financial planning associations give free databases. Here, we are going to mention a few professional financial planning association names. Let's check it.

• NAPFA (National Association of Personal Financial Advisors) 
• Garrett Planning Network 
• XY Planning Network ACP (Alliance of Comprehensive Planners)
• Ensure that you understand the services, the fees, and the costs charged by the financial advisor, before you settle on a particular advisor.

The bottom line:

Sometimes, you may find that hiring a financial advisor is an unnecessary expense. But you should remember that they can save money in the long run. Therefore, when you hire a financial advisor, before you sign, ensure that the advisors have transparent fees. You should generally go with such an advisor whose fee is less compared to the amount of money they save for you. You can verify any financial advisor via the government website before you sign documents or hand over the money. Is Financial Planning Expensive? What Is the Average Cost of a Financial Advisor? Is this question bothering you? Then you should know that In the year 2021, as per the Research of an Advisory HQ News Corp, the average fee of a financial advisor was 1.02% of AUM annually for a $1 million account.

Personal Finance Management Key Aspects

Personal Finance Management is all about managing expenses monthly or daily and saving a reasonable amount for the future. Every single person should do this management for healthy and quality living. To effectively organize your money for future needs, consider some of the significant components of your finances.

In this personal finance blog post, we are going to discuss five significant vital aspects of personal finance. So, read the post till the end to draw a better picture of your finances. 

 Components of Personal Finance

These are the five key components of personal finance:

• Insurance for emergency 
• Tax Planning 
• Expense Management 
• Savings are essential 
• Investment

Let's dig in deeper and study these major aspects thoroughly:

#1 Insurance for Emergency

One can do financial protection via insurance to get over hard times. But people don't appreciate this option. Many people don't believe in health insurance or basic insurance. Insurance is an essential element to sail you and your family from difficult times or events. These are the insurances which we all need, these are:

• Term Insurance 
• Property Insurance 
• Health Insurance 
• Personal Accidental Insurance etc.

#2 Tax Planning

Tax planning is another factor that needs to be considered, as some take it for granted. With the right approach, we can minimize our taxes. Pay attention to how much you are spending, over expenses, etc. To grow your money, you can put money in tax-advantaged investment accounts and reduce your unnecessary expenses. One can easily reduce taxable income via tax deductions and exceptions. The most popular sections related to it are Section 80C and Section 80D.

#3 Expense Management

We should track our expenses, whether day-to-day expenses or unforeseen ones. One can fix and keep aside some amount for these unexpected expenses. You can even create funds for vacation, travel, etc. By keeping a track record of all your expenses, you can maintain a decent balance in life. 

 #4 Savings are Essential

Saving is the left money after allocating money for our monthly or essential expenses. It is well said that no matter how small your income is, one must save some portion from it. Make it a habit, and it will benefit you in hard times or for long-term investments. Do savings, and in this way, you can build a safe and secure future.

#5 Investing

Many people think investing and saving are similar, but that's not correct. Saving and investing are different components. Investing is like getting money, i.e., stock, mutual funds, etc., to make your money increase. Investing is generating money from money. One of the best investing options is mutual funds. And some other options are fixed deposits, real estate, stocks, etc.

Final Verdict

To build a safe and robust future, all these aspects are must to consider. With these, one can draw a perfect picture of a financial future. Do personal finance now to make better plans and decisions for the future. A correct balance between expense, income, saving, and investment is necessary to optimize a person's financial management.

Personal Finance Tips to Get Your Money Grow

When it comes to managing money things don’t have to be complicated. Nor do you require to be an accounting genius to know how to manage your finances. All you do need is money to manage and a strict approach to managing, that you stick to no matter what. In this post we’ll be looking at some personal finance tips to know to better managing your money. With these tips in mind you’ll well be on your road to recovering from any money related problems. Yes it won’t be easy nor is it going to be fast. But it’s going to be the first step in getting out of your money problems. So without wasting anymore time let’s look at these personal finance tips shall we?

Personal Finance Tips-Spending less than you earn: 

This may sound as an easy one but you can’t overemphasize the importance of this personal finance tip. If you keep spending more than you earn you’ll always be in debt. It’s as simple as that. The point is easy on paper than actual practice. However if you want to avoid living hand to mouth then you have to put this tip into practice.

To spend less than you earn its’ a simple case of knowing how much you spend. You can do this by starting to trace where you spend your money. Take the trouble of checking your expenditures and start avoid paying for anything unnecessary. You should be able to justify any cost you incur. I mean really justify.

Another easy yet important one- Budgeting: 

This is another no brainier. When it comes to managing finance, budgeting isn’t far behind. Any blog, any personal finance tips will all deal with budgeting. This does not mean that you have to shy away from it thinking it’s well out of your league. It’s actually quite simple to do.

Budgeting is a simple matter of knowing what you earn less what you spend. What you spend is what is necessary. By doing this you know just what to spend your money on and you stick to it. In the end you may be leftover with something to actually pay off some debts or maybe even save.

When it comes to budgeting a rule of thumb is the 50/20/30 rule. This rule states that you get to spend 50% on your necessities, 20% goes into savings and the rest 30% is yours for the pickings. But of course this depends person to person and paycheck to paycheck. But it is still a rule to strive for achieving.

Personal Finance Tips- Know your Incomes and Expenses: 

This personal finance tip is part and parcel of budgeting. To budget you need to know your incomes and expenses. Many of us already know our incomes but expenses is another matter altogether. To know your expenses you can always check what you spent in the last month. Take out all your bills including the ones you paid by card and ask yourself whether all those expenses were really necessary.

At the end of this draw out a plan and follow it.

This is how the Bloomberg Terminal is becoming the backbone to financial businesses of the future

Bloomberg Terminal – Precise & Quick Delivery

Calculating the next movement considering the volatility of market all across the world seems to be a difficult task. It seems a challenge for those working in the finance segment in maintaining out-sized profits for their investors. For topmost financial professionals such as CEOs, CXOs, and CIOs together with high level executives, they require access to the news on the market movement and analytics in order to remain completive.

Bloomberg Terminal is beneficial in this competition to get exclusive statistics, analytics together with breaking news with regards to financial market and in-depth study from experts in the finance segments, all with a click of the mouse. Most of the financial experts can acquire the information from Bloomberg Terminal. For several years, Bloomberg Terminal had a status for its quick and precise delivery of unparalleled market information over various benefit modules. The portal supports businesses in catering to several types of tools like custom desktop applications, market alerts, portfolio monitors, together with charting potentials which could optimize the workflow of the user.

Accommodated Niche-Investors & Financial Experts

The Bloomberg Terminal had hit the market in December 1982 and is different from the PC or Mac. It has always accommodated niche-investors and the other finance experts. Presently, the Bloomberg Terminal is a service which is considered as Bloomberg It has been professional catering to over 325,000 subscribers, right from array of information pertaining to financial issues to chat system to the possibility of actually executing trades.

The strange thing regarding `Bloomberg Terminal’, is that people generally refer to the Bloomberg Terminal, as the Bloomberg Professional service, as commented at the Bloomberg website. Each day it tends to process 60 billion sections of information from the market. Bloomberg Terminal is a controlling platform meant for important technology requirements like the Order and Execution Management, Financial Data Management, Data and Content, Integration and Distribution.

Valuable Statistics

The Bloomberg Terminal has been developed to provide valued statistics right from equities execution – EMSX to fixed income trading, FIT to electronic foreign exchange trading, FXGO computer system has the potential of providing information necessary over various asset segment. The device also has the capabilities of delivering most of the trade and order management. It also supports in bringing about transparency regarding financial markets bringing together in a rising community of over 320,000, the most significant resolution makers in the world. The device now has the potentials of making the most of the order and trade management.

Suitably All-inclusive Suit of Solutions 

 

The OMS solutions of the Bloomberg Terminal had been developed in such a manner that it has been pre-integrated with the total enterprise service of Bloomberg. Owing to this the system is capable of offering a suitably all-inclusive suit of solutions from back to front office. Besides this it also tends to cover the buying and selling side, where its Assetand Investment Manager for the buy-side firms offers solutions like global, , multi-asset solutions of the management portfolio, compliance, trading and operations.

Moreover, it also includes Bloomberg’s Sell-Side Execution together with Order Management Solutions. – SSEOMS. Data is considered to be one of the most valuable assets for most of the financial companies. Handling high-value, high-volume data with precise intelligence is needed for the success of any business. The device collects all the details needed to stay forward namely as data utility, surveillance tools and supervision, cutting-edge investigative functionality, advanced reporting, record keeping and immutable storage.

Should We be worried about our Pensions

Pension Scheme – Attention on Health of Final Salary Pension

The efforts of BHS together with its pension scheme have drawn attention on the health of final salary pensions. Over the years, 20,462 members of BHS staff right from shop workers to executives have paid into the BHS final salary pension scheme and now will receive less during retirement than they had expected. The scheme which is said to be like a black hole or deficit of £571m is presently in the hands of the Pension Protection Fund – PPF, which is a lifeboat organisation that tends to step in when companies seem to be ruined.

The BHS scheme is considered to be only one of thousands of final salary pension schemes linked to companies all over UK, schemes that guarantee to pay retirement income depending on certain percentage of the ultimate salary each year for the rest of your life. Latest figure of the PPF portrays that UK final salary pension schemes tend to have a collective deficit of £302bn and there are 4,891 schemes in deficit when compared with 1,054 in excess. It is a bit doubtful that some may be struggling. Joe Dabrowski from the Pensions and Lifetime Savings Association – PLSA which is the trade body for pension schemes has stated that schemes are facing challenging times.

Calum Cooper of pension consultancy Hymans Robertson portrays a bleak picture. He states that there are between 600 and 1,000 final salary pension schemes at risk of not being capable of paying the pension of their members at the time of their retirement and this is a very substantial number which puts over a million pensions as well as the jobs at risk.

Experts agree that there seems to be two main causes of the black hole in final salary pension schemes. The first is comparatively simple; people are living for longer period which makes pensions more expensive for companies since they are paying the pensioners for a longer period. The second main issue is the uncertain economic position wherein pension schemes tend to depend on the contributions from employees being invented successfully. Long period of low interest rates together with volatile markets have made it difficult in making money from investing.

Pension Schemes Related to Performance & Strength of Parent Company

Mr Cooper states that the final salary schemes pushed in £30bn in the last year in an attempt to make up for poor returns though it has not gone more than a fraction of the way in ensuring things are evened up. Senior partner at actuarial consultants Lane, Clark and Peacock, Bob Scott informed that another problem is `over-regulation’. He stated that this added to the problems for businesses attempting to keep schemes in good health.

According to Tom McPhail, head of retirement policy at investment company Hargreaves Lansdown informs that there is a wider threat considering the design of final salary schemes. He states that were there many more schemes to get into trouble, they would seem to be very expensive to rescue.

He adds that the challenge is whether it is accepted that there will be these constant failures maybe ultimately putting the subsidy of the PPF itself under pressure. Pension schemes are related to the performance and strength of their parent company as pointed out by Mr Cooper, deficits of some schemes tend to be larger than the actual business supporting them.

Too Much Dividend can be a Turnoff, say Investors

European Companies – Highest Amount of Dividends

European companies have been paying the highest amount of their earning by way of dividends in over 40 years fuelling fear among analyst on whether such kinds of pay-outs are viable. Investors have for a long time dealt with queries of what companies need to do with the escalating cash load, to return it to shareholders or spend it on technology, research and development, top staff or bolting on new business for the future growth.

For the past five years income-hungry investors received dividends from the European firms and the pay-outs offered a solution to the combination of sluggish economic growth, aggressive central bank policy, enabling what had pushed bond yields to record lows and changing stock markets.

However, the growing cut off between earnings as well as dividends together with worries which companies would be adding debt to fund the shortfall was urging a reconsideration of this proposal. Senior research manager at S&P Global Market Intelligence Julien Jarmoszko stated that they were seeing a lot of companies trapped into their dividend policy.As per Thomson Reuters’ data, almost 60% of Europe Inc.’s earnings per share had been returned to the shareholders as dividends.

Cautionary Sign to Companies – Investors to Stop Rewarding Capital Returns

Companies’ partiality regarding dividends is in no small amount fuelled by investors encouraging companies to part with cash due to restricted opportunities for capital spending. However a shift is in progress. Last month’s Bank of America-Merrill Lynch survey of global fund managers, in one of the cautionary sign to companies that tend to borrow to fund buybacks and dividends, had suggested that investors may stop rewarding capital returns to the same degree as done earlier.

Net percentage of fund managers saying pay-out ratios to be `too high’, had been at the highest level since March 2009. Fund managers instead are progressively searching for earnings and rewarding companies which are either reinvesting back profits in order to expand their business or those which have cut pay-outs to protect their balance sheets.

Tim Crockford, lead manager of the Hermes Europe Ex-UK Equity Fund had said that they like companies which do not essentially pay too much of their cash flow out since they have good opportunities of investing in fixed capital, generating higher returns in the future through these investments.

Leaner Balance Sheets Indicates Substantial Shift

Crockford pointed out Spanish Technology Company Amadeus IT and German laboratory equipment company Sartorius as good examples. For instance, Amadeus had spent money for investment in its IT business, making the services of the firm much more appealing to customers like airlines.

In the meantime, some commodity connected firms that had cut dividends in an effort todeal with the slump in metals prices had seen their share prices gathering. Glencore that had lost more than half of its value last year before suspending dividends in September, had profited by 13% since then. BHP Billiton had gained 30% since cutting its dividend in February.

The inclination of accepting lower or no dividends in favour of leaner balance sheets indicates a substantial shift. Besides, it would also signal to European firms that attempts to spend on themselves and getting in front of a pickup in growth would be compensated while stubborn reliance on pay-outs would not.

BHS Collapse - Pension all you Need to Know

Credit: Dominic Lipinski/PA Wire

Defined Benefit – DB Scheme

Employees provided with financial security when they tend to retire seem to bea useful aim for liable company.Several of Britain’s biggest firms have set up defined benefit – DB pension schemes over the years, which tend to reward the staff based on how much they seem to earn and how long they work. There are around 12 million active members in Britain during the heyday of the DB pension in the 1960s and 70s and it was clear that companies could not afford to support so many people in this way for decades after they had finished working and the long period of strong stock markets had concealed the worst of the problem in the 1980s.

Towards 2007, there were only 2,240 open DB schemes with an addition of 6,250 still paying out though closed to new members. This relates to more than 38,000 less generous defined contribution schemes. As for companies which are left with the gold-plated pensioners, even if they tend to have adequate funds to pay them, the long-term liabilities could be bigger than the business. The RSA insurance firm is just one FTSE 100 firm where its pension fund is many times larger than its own £5bn value of the market.

Pension Fund of Company Has a Deficit of £157m

When a company tends to get ruined, the first thought should be for the workers who will not only lose their jobs but their retirement income could also be at risk. Often a trouble company tends to have pension deficit and so it is the case with BHS, a respected British retailer that has been overtaken by changes in fashion. The present workforce at BHS of about 11,000 is dwarfed by the 20,000 people qualified to claim a pension.

The scheme has resources of over £400m though its deficit between its resources and disabilities is over £200m. It is estimated that the pension fund of the company has a deficit of £157m. Though the company had been struggling financially for some time, it has gone into administration which is a process wherein a company is controlled by a licenced professional who tends to run it in a way protecting creditors as well as the company directors. Presently administrators Duff and Phelps have been running BHS as going concern and if it does not discover new owners, it could begin the process of realising its assets to cope up with its debts.

Possible Buyers Apprehensive

As of March 31, 2015, the company is said to have £435m of pension assets which indicates the scheme was less than 50% subsidized. It is assumed that Sports Direct had held talks regarding buying some of the 164 stores of BHS together with a number of other retail chains who have expressed interest in purchasing part of the company or its estate. However possible buyers are apprehensive by the £571m pension deficit of the firm.

The Pension Protection Fund which was set up in 2005 tends to use an annual levy charge to all companies with DB schemes in order to support the one whose corporate sponsor tends to fail. The PPF has 220,000 current as well as prospective pensioners on record and intends to be self-funding by 2030. Rescue of BHS’s pension is set to be among the top ten largest deals though comfortably within the financial abilities of the lifeboat.

Taking a Complicated Financial Case to Court

Court cases that involve financial matters tend to always be delicate, if not heated and highly contested. You need the judge and jury to side with you if you hope to protect your assets and money. However, many juries lack the inside financial know-how when they are first seated for your case. You need someone to come to court to back up your argument and evidence. Along with retaining an attorney with this experience, you likewise may need to retain a consultant to provide advantages like expert witness testimony and explanations about why your argument is factual and deserving of the court's favor. You can retain this help today by going online and finding out more about the consultation services.

Explanations for Complicated Financial Matters

As noted, lay people typically have a working knowledge at best of complex financial terms and practices. They may not realize some of the finer implications that your case involves or why they should decide in your favor.

When you retain the consultation services of the firm, however, you get the help of an individual who has years of experience in the financial industry and can break down the terminology so that any jury can understand it. This person can also go into detail about why your argument is the most valid and why the other party in the case may be taking advantage of you or simply mistaken in their own arguments.

The consultant can help in cases that involve financial matters like bankruptcy, loans, and other banking practices. The service also may come in handy for cases that center on collection or credit issues.

The consultant can work with your attorney and you to ensure that your case is as solid as it can be before it goes before the judge and jury. You may be able to protect your own finances with this additional legal help.

Contact and Resources

When you are ready to retain this help, you can use the contact options found on the website. You can call or email the company directly.

You can also find resources that may help you understand your own case better. The resources link is found at the left side of the page.

Financial cases need to be competently presented in court. You can make your case stronger with the professional consultation services of a financial expert.

Bitcoin Could Help Cut Power Bills

Accenture a multinational service and consultancy firm has created a smartplug which tends to leverages blockchain technology in seeking the lowest tariff possible thus saving money by reducing the electricity costs whenever it is possible. Research recommends that the technology behind the Bitcoin virtual currency could be helpful in reducing electricity bills.

A blockchain based smart plug has been created by technologist at Accenture which tends to adjust power consumption every minute. The blockchain is the automated ledger which tends to underpins Bitcoin, tracking where the coins are spent and swapped. The plug shops for various power suppliers and would sign up for a low-priced tariff it comes across one.

Accenture has mentioned that the smart plug can help people on low incomes who may pay directly for power. According to Emmanuel Viale, head of the Accenture team at the firm’s French research lab which tends to work on the plug, has commented that the smart plug tends to adapt the basic Bitcoin blockchain technology in making it more active.

 Rather than just resolving and confirming the records of transaction, Accenture work helps in changing the blockchain in permitting it to negotiate deals on behalf of its owner. Mr Viale has mentioned that `it is about how one puts more business behaviour or logic in the blockchain and that this essentially embeds a `smart contract’ in the digital ledger.

Searches for Energy Price When Demand is High/Low 

The smart plug model tends to work with the other gadgets in the house which monitors the power use. It tends to search for energy prices when the demand is high or low and then utilises the modified blockchain in order to switch suppliers if it finds a cheaper source.

Mr Viale had said that so far the Accenture system was just a proof of concept though it could help several people on lower incomes who seem to pay for their power through a meter. With the capability of shifting suppliers, it could save this group with over £660m in the UK annually,recommend Accenture research. Blockchain-based system which tends to act on behalf of its owner could also be useful as the Internet of Things becomes more universal according to Mr Viale.

He adds that handling of several various gadgets could be complicated without a much centralised system. A mobile services expert at analyst firm CCS Insight, Martin Garner stated that blockchains were beginning to crop up in various areas inclusive in share trading, fishing rights databases as well as land registry claims. He said that they had two main attractions for the Internet of Things.

Substantial Ventures in Exploring/Investing in Blockchain 

He further added that they avoid dependence on any particular supplier or ecosystem. Some users seem to have concerns regarding the possible dominance of key internet players developing for instance, the Google-of-Things or the Amazon-of-Things.

The second attraction is a means of enabling autonomous trading between things like the appliances in your home being set up to re-order supplies from a pre-approved list of suppliers. As the leading independent services firm in the world, Accenture has made substantial ventures in exploring as well as investing in blockchain or distributed ledger technology recently.

Moreover, the company also became one of the investors in blockchain-startup, Digital Asset in January. A new partnership following its investment with Digital Asset would also see blockchain solution together with ideas offered and organized to the global client base of the consulting firm. Accenture has been servicing 42 of the top 50 financial institutions worldwide, thus making its blockchain attempt, a substantial one to the Bitcoin technology.

Pensions still the most effective savings option, says IFS

Pension – The Most Tax-Efficient Kind of Savings

Pensions still tends to be the most tax-efficient kind of savings, inspite of the tax changes, according to the Institute for Fiscal Studies – IFS. It seems to be the big winners since they are subject to various tax advantages. The pension contributions are taken out of untaxed income resulting in paying into a pension that actually lowers the income tax bill.

Moreover, the returns on your investments are not taxed though one tends to pay tax on withdrawals. Besides this one tends to take 25% of the pension as a lump sum without having to pay a penny in tax. According to IFS, `pension saving is in effect subsidised’.

 The IFS had made a comparison of saving in a pension with buying a house, putting funds in an Individual Saving Account –Isa, or investing in buy-to-let property. The foremost motive is that under the auto enrolment programme, employers tend to match employee contributions resulting in workers getting 60% increase to their pension, according to IFS. According to the report, since the employers seldom make equivalent offers matching employees’ contribution, for instance in an Isa or a house, it tends to make savings in a pension more attractive comparative to other assets.

Personal Savings Allowance – PSA

The research took into accountthe new Personal Savings Allowance – PSA as well as the changes to dividend taxation which will be effective in April and probable changes to pension taxation. The government had earlier mentioned that any such changes would motivate people in saving. When the PSA tends to become effective, basic rate taxpayer would not pay tax on the first £1,000 of their saving income while higher rate taxpayers would be getting an allowance of £500.

IFS have mentioned that due to this, the 16m people would stop paying any interest on their income savings and 95% of the people would no longer have their savings taxed. But the report has stated that the change would weaken the incentive for several people in saving in an Isa.

It stated that for most of the people, the ordinary bank account would in effect be tax-free just the same way as cash Isas and there would be little incentive in saving in a cash Isa. Moreover, the PSA would also mean an end to tax deduction at source on the saving accounts that would be of certain help to pensioners.

The research also observed that people desiring to invest in property would make a much better tax-efficient choice by investing in their own home instead of becoming buy-to-let landlords. The report further states that `investment in owner occupied housing is significantly more tax-advantaged than the investment in property to-let, prior to recently announced changed to the treatment of mortgage interest for landlords.

There have been plenty of talks regarding further changes to pension that would be announced in the next month’s Budget. The present thinking seems to be that the government would be setting a flat rate of around 30% and this would essentially represent a further increase to pension saving for basic rate taxpayers who tend to currently enjoy tax relief of 20% on their contribution.

 However, it will dip the appeal of pensions to higher rate as well as additional rate taxpayers who tend to enjoy tax relief of 40% and 45% presently.

The current thinking seems to be that the government will set a flat rate of somewhere around 30%. This will actually represent a further boost to pension saving for basic rate taxpayers, who currently enjoy tax relief of 20% on their contributions, but will dent the appeal of pensions to higher rate and additional rate taxpayers who enjoy tax relief of 40% and 45% at the moment.

Some Common Mistakes People Make When Planning for Retirement

Focus on Dreams of Retirement 

Retirement could be some several years ahead but how you handle your finances would determine how efficiently you could manage your post-retirement life. Focusing on dreams of retirement could be the initial step, where planning and working towards your dream goals could eventually lead you there. Often there seems to be some errors which can be avoid in reaching your goal.

Refraining from creating a retirement road map

A retirement road map needs to be done in order to know what the person may want to do, how much is needed to save and how one would intend achieving their goals. The best way to map the retirement plan is to envisage what the retired years ahead would look like, which will provide an idea on how to be prepared for the same.

No knowledge on how much is needed at the time of retirement 

An individual at the age of 55 has plans of retiring at 60 and has saved around 50 lakhs for his retirement. But in order to maintain his present lifestyle for the future, he needs to have a saving of at least Rs 3 crores. Having just five years to retire with shortage of Rs 2.5 crores, he may face difficulties in the future.

Not investing early 

Mr A and Mr B had followed a disciplined process of investing and both had invested Rs 10,000 each year. But Mr B had started investing at the age of 25 and had stopped at the age of 35 while Mr A had started investing at the age of 35 and had continued till the age of 65. When both of them retired at 65, Mr B would have as much as 2.5 times the amount as Mr A inspite of him investing for only 10 years in comparison to Mr A who had invested for 30 years. This is known as the power of compounding. The effect of compounding is appreciated when adequate time is given for the money to grow. The sooner one starts saving, the earlier you can retire.

Not including the possibilities like health care expenses in retirement plan 

Medical expenses during retirement are the most common possibility which is needed to be taken in consideration. A single medical bill could drain out the savings in one go. One should ensure that some emergency funds are assigned to handle the health care expenses in old age. Post retirement, ensure on the factors of the costs of medical insurance and health care expenses and plan for retirement corpus.

Avoiding in making intelligent investment decisions 

Mr A had invested in a bank FD which offered a 9% return and though it seemed to match inflation rate, he did not check into account the impact of taxes on his returns. Being in the 30% tax bracket, his net return fell a bit over 6% less than the inflation rate. Investments can be done in company shares or equity mutual funds which would give the inflation a beating return in the long term that will help in hastening up the retirement corpus growth as well as get started with lower monthly savings. While planning for retirement, it is essential to apprehend where one would want to be, to know what one needs to do to reach their goal.

Payment Wallet Companies See Red in New Game Plans

Some Payment Wallet Firm – Locked out of e-commerce Segment

Some of the payment wallet firm are of the opinion that they get locked out of the successful e-commerce segment since companies running marketplaces tend to prefer their own subsidiaries or are determined in ensuring that customers spend any cash-back money on their own sites.

Oxigen for instance has said that it is no longer available on one of the biggest shopping sites of India. According to CEO of Oxigen, Ankur Saxena has stated that they are presently on Snapdeal prior to acquiring Freecharge and have decided to take them down.

He further stated that at one point of time they accepted wallets but now they want to come up with their own wallets. Freecharge seems to be the only wallet option on Snapdeal that has also launched cash-back options which tends to direct consumers to the unit’s offerings. Freecharge was acquired by Snapdeal in April this year, for almost 2,400 crore.

Snapdeal had refrained from responding to queries and Flipkart informed that it would not comment on its wallet practices. Saxena had mentioned that the trend would hurt Oxigen and that there would be an impact on the business if the customers are unable to use the wallet on a particular site, they would be compelled to utilise another mechanism to process the payment.

Paytm – Its Own e-Commerce Platform

According to managing partner, Ashvin Parekh of Ashvin Parekh Advisory Services, stated that striking boundaries on the e-commerce evolution could be envisaged as a restrictive exercise and that they have still not achieved anything with regards to permeation of e-commerce.

Market leaderPaytm, though does not seem to be too worried. Vice President Products, Paytm, Nitin Misra had commented that they have better acceptability and more consumers. Why would customer put money in a wallet which can be used only on that particular site and the cash back too cannot be utilised elsewhere?According to him the consumers is not dumb and if someone does not intent to permit them as a payment option on their site it is entirely their choice.

Paytm has expanded to begin its own e-commerce platform and the government as well as the Reserve Bank of India have made financial presence significant, making for an ecosystem wherein payment wallets would play a role together with various other elements. However, what is serious for such companies is having a large subscriber base.

Several Banks Launched Own Wallets

Towards the last week of October, Vijay Shekhar Sharma, founder of Paytm had received a message from State Bank of India which was not good news. The message stated that the nation’s largest lender together with its associate banks would not permit their customers to load money onto the Paytm wallet from their accounts.

The reason provided to their query was that the net banking services were only for shopping and not for uploading wallets according to Sharma. After independent wallet companies have started operating in India and gained reputation, several of the banks launched their own wallets.

SBI in fact according to reports by The Economic Times, recently, even planned to launch a wallet for feature phone users known as Batua, by next month. Chairman of Payments Council of India and the managing director of ItzCash, Naveen Surya, had stated that some players would always think that they are big enough and that they have adequate customers. However as one tends to go deeper and begin running independently the payment business, when it is separated from the core business, one would realize that it is difficult to create scale.

The Latest in the Battle to Own Your Digital Wallet

Digital Wallet – Now Standard Features on Smartphones

The fight to own digital wallet is on and 2016 is foreseen as a vital year for mobile payments and according to eMarketer, its total transaction values reaching 210%. Mobile wallets such as Android Pay, Apple Pay, Samsung Pay as well as MCX would now be standard features on smartphones with more merchants adopting point-of-sale systems which would be accepting mobile payments.

Recently in a keynote, JPMorgan Chase had unveiled a payment service together with retail partners comprising of Wal-Mart, Shell and Target. Chase would be needing help and skipping into mobile payments would means competing with companies like Apple, Google, PayPal and Samsung.

Chase Pay seems to be the outcome of a new partnership with JPMorgan Chase and MCX, a multinational of major retailers which has so far been unsuccessful in gaining much transaction in digital payments. The app is said to be made available by mid-2016 and could be utilised for in-store, online and in-app purchases and would be available to all with a Chase credit, debit or a prepaid card account.

Chase Pay to Solve – Pain Points for Consumers

With this kind of scale it could be advantageous and according to CEO of consumer and community banking at JPMorgan Chase, Gordon Smith states that `Chase Pay tend to solve a number of pain points for consumers as well as merchants and will improve the customer experience driving down the cost of payments’. Besides scale, consumer trust could also help chase initiate adoption.

According to latest Phoenix study reported at Money20/20, it was observed that banks and card issuers, followed by PayPal did enjoy a trust benefit against other digital payment players. The research also found that 64% of smartphone payment app users or those preferring to try it would contemplate downloading a bank’s payment app.

Around half the number stated that they would ponder on trying Apple Pay or Android Pay.Google is keen on changing that relative level of comfort and Sridhar Ramaswamy, the company’s senior vice president of ads and commerce would be delivering a keynote wherein he would lay out a vision to drive mobile commerce adoption with Android Pay which is the newly re-launched Google Wallet.

Brought Together NFC/Tokenization/Biometrics

Google had partnered with American Express, Discover, MasterCard and Visa in order to assist them in integrating Android Pay in the U.S. and is also working with AT&T, T-Mobile and Verizon Wireless in training sales representative to get consumers in setting up with Apple Pay prior to leaving the store with a new device.

Apple however not officially represented at the event was also the focus of many surveys and panels.Brendan Miller, Forrester Research analyst praised Apple for kick-starting the mobile wallet fight with the launch of Apple Pay, believing that it is best positioned to win stating that they have the consumer base and they have the users.

He further added that they had brought together NFC technology, bringing together tokenization as well as biometrics and combining those three things in creating a frictionless consumer experience at the point of sale. PayPal, according to Miller has been at this longer than anyone else and they have more mobile users than any of these competitors Anu Nayar, senior director of communications and customer engagement comments that `as we move to a mobile first world, digital wallets would be moving from a nice have, to a must have, as people tend to tap rather than type for their purchases and PayPal innovations like One Touch could make it easier to buy from mobile.

Perks That Might Be Hiding in Your Credit Cards

Credit cards tend to have its advantage as well as disadvantage if not used rightly. At times even the most responsible people could meet up with problems if they are faced with a dismissalor in a situation of an expensive treatment. If all tends to go well and the user is well aware of what they are doing, credit cards could save them with a lot of money. One need to know their credit card well because if not, they may be unaware of the various perks which some of the credit cards tend to offer and hence will not be able to take advantage of them resulting in losing money. The fine prints should be checked since there are some of the hidden perks, which an individual may be entitled to, while utilising the credit card

Rental insurance 

Spokesman for Clear Point Credit Counselling solutions, Thomas Nitzsche, headquartered in Atlanta, had been faced with a problem when on renting a car to drive from Missouri to Georgia had to street-park it for three days while staying in Atlanta. He had noticed that it had been hit on the rear bumper and the cost to fix it amounted to $800. Though he had not bought the expensive rental insurance, the rental company offered help.Nitzsche’s credit card, VISA Signature comprised of rental insurance and the entire bill was paid after he had submitted the paperwork with proof that the car had been rented by him and was being asked to pay a claim.He informed that Visa was capable of reducing the $800 by around $50 and they probably had some negotiating power.

Airline incidentals 

Matthew Coan running the financial comparison website, Casavvy.com informed that he was overwhelmed with a recent perk provided by the American Express Premier Rewards Gold Card, a $100 annual credit for covering airline incidental fees. According to him, these fees comprised of checked bags, flight refreshments, airport lounge passes and much more. A few things need to be kept in mind in order to utilise the perk wherein for the reimbursement of any of these fees, the same has to be paid separately from the airline ticket and can only obtain the fees reversed for one airline for the calendar year.

Dispute resolution 

If the individual feels that they have been overcharged for something, they could contact their credit card and get help. If the dispute resolution service is offered with the card, you stand a chance of getting the charge reduced.

Trip cancellation insurance 

According to Jared Blank, chief marketing officer of the retail website DealNews.com, states that with Chase Ink Plus card, they offer this facility of trip cancellation insurance. He narrates that his parents had booked a cruise and a non-refundable flight for a holiday and had paid with the Chase Ink Plus card. His mother had been ill and the trip had to be cancelled. The airfare and the cruise cancellation fee were reimbursed by Chase that was done without any difficulty.

Extended warranties 

At the time of purchase of a computer or any expensive product, one would often be asked if they would prefer purchasing an extended warranty. They would then get engaged with their associate on, whether the offer would be worthwhile. Four of the major credit card networks, namely MasterCard, Visa, American Express and Discover tend to offer extended warranties on several, though not all of their credit cards.

7 Common Money Traps Even Smart People Fall Into

Important Aspect - Cash Flow Management

Handling cash flow is very important aspect since all work hard for money and tends to make the most of our income. In order to avoid spending mistakes and help to stretch the cash for a longer time the following tips could be helpful –

1. Buying things on sale

Buying things on sale tends to be a mistake and can actually be a huge money waster. Whatever the price or bargain may be, if one purchases something which would not be used, it would be like throwing away your money. Before indulging in the sale purchase, one need to ask oneself whether the said product would had been purchased if not put up for sale and will be used after purchase. One should indulge in sensible
purchase and not go on a shopping spree for anything on sale.

2. Buying stupid products

Sometimes one tends to indulge in purchasing useless things and then repent for having done so. Prior to purchasing any of these unwanted commodities, one could hold onto to purchases for a later date if essential. It is best to limit them by having certain standards for the purchases especially big purchases.

3. Spending money on problems one cannot solve with money

Stop to think if by going shopping or indulging in some purchases, would help in resolving certain issues in life. There could be other options which could be more beneficial than in shopping and wasting money.

4. Refraining from spending when one has the opportunity

Your hard earned money needs to be spent on what could add great value to your life. It would be pointless if one cannot spend the money earned on important things in life and miss out on opportunities that come your way.

5. Not maximizing rewards and points 

Reward credit cards are of various shapes and sizes enabling the user to collect points on purchases like merchandise, gift cards, airline miles or cash back which could be utilised at the appropriate time when needed. One could opt for a card which offers points while shopping for basic like the grocery which when accumulated could be used for gas fuel or if travelling, an airline miles reward card which could be beneficial in the long run and take advantage of the points or cash back.

6. Not setting up automatic savings outside your 401(k) 

One should discipline oneself in setting up an automatic investment plan to come up after the pay check comes to your bank account every month. We often tend to pay the bills and other non-essential things leaving our savings till the last, if there is anything left after all. This needs to be avoided if keen on a good future.

As the saying goes -Money Saved is Money Earned. You could check with an investment company to set it up which would be very beneficial over a period of time. Automate your savings and investing inside as well as outside of your 401 (k) and set a direct deposit from pay check to bank account and monthly automatic transfer to your investment account.

7. Not spending enough

Sometimes we tend to compromise on our purchases by not buying the essentials when the need arises. We look out for other options which at times could be dissatisfying on purchasing. If one can afford it, go in for the best quality which will satisfy your requirements even if you have to delay the purchase.

8 Bad Money Habits and How to Break Them

Handling Finances – Money Habits

Managing your funds is often related to the habit one may cultivate and money habits could decide how a person handles their finances. The following could help in comprehending some of the money habits which one may not be aware of, but which would be draining away your finances

1. Spending more than the earnings

This is could be the most awful habit which could hurt the well-being of your finances when one tends to continuously spend beyond their means and when the expenses exceeds the income coming in, towards the end of the month one realises that they have overspent. The remedy is that one should monitor the spending habits and keep a tab on overspending.

This could be done by checking on the expenses and segregating them into `need base’ and `want base’ opting on what is essential and refraining from unwanted purchases. A budget could be prepared to keep the spending activity under control. If the need base on essentials tend to make you spend more than the earnings, one would need to focus on increasing their income either through loans or credit card debt. However this too should be taken into consideration with regards to repayment.

2. Postponing financial decisions for tomorrow which may never come

Often we tend to put off investment plans for a later date which never turns up or it tends to get pushed off every month since no savings have been done. And postponing financial decisions is worse than making bad choices. Since the earnings saved tend to generate additional income by way of interest earned, the sooner the investment is made, better are the chances of increasing your savings. The right opportunity of investing should be done when one tends to have the funds. Delaying in investments could lower your ultimate corpus.

3. Falling into debts for wants instead of needs

We live in a competitive world and very often we tend to get carried away with lifestyle based purchases and indulge in purchases which may not be needed, leading us into unnecessary debt. If the much needed purchases tend to constantly run you into debts, it is a habit which needs to be kept under control to save from future distress. Debt is for the vital and planned purchases which could be indulging in manageable debt for the purchase of a home or a child’s education though it would not be appropriate to fund for luxury items.

4.Gambling instead of investing

Several people indulge in experimenting in the stock market without really comprehending its concept which could be dangerous and as the saying goes `little knowledge could be dangerous’, this could be applied here. Often a person may get a tip on some particular stock which may be a good bet or someone may inform that Options are a good way of making money.

If one intends putting saving into investments without any knowledge about it or the risk involved and just speculating, it could be one form of gambling and not investing. Several people have been indulging in this unknowledgeable move and have repented in doing so. The best remedy is to place your investments on your goals. Ensure to refrain from investment option which may seem too good to be true. There are no shortcuts to investment and prudent disciplined investment tends to work in growing wealth.

5. Refraining from saving regularly

Most of the people do not save regularly which is common while indulging in spend first and save later. Organising your expenses before saving makes your saving an unreliable matter. Hence adopt a habit on how much one can save regularly keeping aside the saving as soon as the income comes in. This would be helpful in saving habit instead of spending.

6. Being risk averse

One may consider not taking risks could be good and would make you cautious of bad investments. But if risk aversion prevents you from investing in some risky though essential investments it could be nothing a bad habit. Risk aversion seems natural though it should not hold anyone back. Not taking risk is not like understanding risk and several investors understand risk instead of avoiding it. If one intends to beat inflation and increase wealth, then risk taking seems to be essential. Here again what matters is the risk profile of investment goals instead of your own risk profile wherein one could invest in safe options such as Bank FD though could expect lower than inflation returns.

7. Paying dues after the due date

If one tends to constantly make late payments against credit card bills or utility bill you would be incurring additional expenses by way of interest which could probably lead you to being broke paying up the hefty interest rates charged against late payment. Payment of bills needs to be made on time to avoid late payment charges.

8. Indulging in habits which are financially taxing

Smoking, dining out too often or drinking spree could lead to a substantial financial burden and though these habits could be considered as small expenses but over a period of time could add up to weighty amounts. This needs to be stopped to avoid further tension on health and money.

Save tax by investing in Mutual Funds

Mutual Fund – Substantial Returns

A collective investment in the form of mutual fund is professionally handled fund and investing in it could maximise the savings as well as receive substantial returns. As an investor, one needs to identify the needs and goal for the investment which could be in funding for a child’s education or retirement or a secondary income. In identifying the goal one could opt for the most appropriate investment options and reap the benefits. Tax savings mutual funds are known as Equity Linked Saving Schemes – ELSS wherein the main objective of these funds tends to provide a tax rebate of the Income Tax Act under section 80C and are also exempted from taxes for long term capital gains. Tax rebate from one lakh INR to 1.5 lakhs in 2015 had been increased by the Government of India. For ELSS, the minimum investment tenure is 3 years and if the fund tends to do well it could offer benefits of around INR 1 lakh. ELSS funds are offered 13% to 22% returns annually averaging to around 17.5%. Due to these reasons ELSS seems to be one of the topmost tax saving mutual funds of 2015. Besides this, other popular tax saving investment comprise of –

• Tax Saving Fixed Deposit wherein one could benefit up to 1 lakh INR though the interest which is earned from fixed deposits tend to be taxable 
• National Savings Certificate – NSC – which enables investments as low as INR 100 with a rate of interest of 8.5% for a period of 5 years and 8.8% for 10 years wherein one could save around INR 1 lakh with this scheme. 
• Home Loan Principal – under section 80C, principal amount on home loan qualifies for a maximum deduction of INR 1.5 lakh. However the same is not applicable for properties under construction as well as commercial properties. 
• Rajiv Gandhi Equity Saving Scheme – RGESS is a good choice for first time investors since it tends to offer tax savings of around 50% on the invested amount for the first year. Maximum deduction is INR 50,000 which can only be claimed by those whose annual incomes falls below INR 10 lakhs.

ELSS – Long Term Investment

ELSS seems to be a better investment plan due to its comparatively minimal lock in period of 3 years over Public Provident Fund – PPF which tends to be locked in for a period of 15 years. National Savings Certificate – NSC on the other hand is locked in for a period of 6 years and fixed deposits are locked in for 5 years. Moreover, ELSS could offer enhanced returns over the long term since it is an investment in equity markets. Prior to investments one needs to be well informed on the risks and expenditures associated with mutual funds. Some insight could be beneficial to the investors such as –

• Considering the prevailing financial situation of the market intending to invest in 
• Select an experience fund manager who is well versed in delivering good results, one who will keep you informed on the anticipated trends as well as prospects of the fund in the market 
• The prevailing performance of the mutual fund need to be investigated to lessen probable risks and look out for premium, mutual fund rates as well as consistency of the fund in the market 
• Match the returns of the fund with the other tax saving investments 
• Discover hidden expenses like the fund manager’s commission, marketing expenses and the other expenses.

Easy Ways to Simplify Your Finances

Trim Spending If Possible

In the present scenario, prices on commodities have been escalating and at times one may find it difficult to cope up with the expenses wherein it tends to get more than the income. No matter how hard one may try to simplify life there seems to be no way to mentally track every financial deal in the current busy world.

Keeping track on the budget of what comes in and goes out, is very much essential which could help in understanding where one tends to spend more and where you spend it, so that you could trim spending wherever possible. The aim is to understand and trim the budget categories which would otherwise lead to stress and several sleepless nights or probably financial adversity. Creating a personal budget could be helpful since it provides a deep vision on the finances, on its expenses and savings. It is essential to first list out –

•  Fixed expenses which are those that do not tend to change for instance the homeowner insurance, mortgage etc. 
•  Variable expenses are those expenses which may differ monthly such as the electric bill, water bill, grocery bill etc. 
•  Check which major categories each bills may fall in, such as home expenses, phone expenses, car expenses, utility expenses etc. 
•  List out each major category, detail each expense under the categories and sum up each category which will then indicate on the accurate expenses incurred in each category. The individual will get a better insight on the expenses done and where one could draw the line in curtailing the expenses.

Personal Budget

You could follow the steps by starting on making a list of necessities which needs to be paideach month by creating a personal budget. These could be the expenses which cannot be avoided and is incurred every month as mentioned earlier like the groceries and all the payments of utilities.

Then we have the personal expense ladder which may include things which provide security and peace of mind like health insurance, life insurance etc. If the expenses tend to exceed the income slab, one may need to reconsider on the expenses involved which could be the internet usage, cable or satellite television, phone etc. and find out means of curbing on the expenses which would not be much of a strain at the time of making payment.

The amazing thing about personal budget is that it is an eye openeron where you can cut down in some areas to save on some cash.

IRA – Individual Retirement Account

Individuals could evaluate their net income or loss by considering the income and subtracting the expenses and you tend to meet up with a positive number. Then there seems to be a balance left after meeting all the expenses.

The extra money could be then put into a IRA which is an individual retirement account, offering a valuable future tax break, a tax-free income during retirement. The benefit of a Roth IRA is based on the beholder’s tax bracket, both now and when they tend to retire.

 IRA is an ideal saving for young lower income workers, who will not miss the upfront tax deduction and will benefit for years of tax free compounded growth. Cutting down on unwanted expense could also help while making purchases which could benefit tremendously in managing the income within its limits and be able to cut back for some free cash.

Asset Allocation - Don't Put All Eggs in One Basket

Asset Allocation – Portfolio Distribution of Various Investments

Asset allocation is a term on how the portfolio is distributed with the various investments. As such there does not seem to be any simple formula which could define the right asset allocation for a single investor. It is one of the most major decisions which investor could make, according to a certified financial planner and the founder of the Delancey Wealth Management, Ivory Johnson.

A simple expanded portfolio could comprise of many investment classifications like stocks, cash and bond and the allocation to each of these groups should be based on the investment goals, risk tolerance as well as the time horizon needed for the utilisation of the funds.

However the agreement among several financial professions is that asset allocation seems to be one of the most major decisions which investors should make. Selection of individual securities is secondary to the way one allocate the investments in stocks, bonds and cash as well as equivalents which would be the main factors of one’s investment consequences.

Extension of Financial Plan

In brief, asset allocation should be an extension of a financial plan. Three main sections of asset being equities, fixed income and cash and equivalents, tend to have various levels of risk and return. Hence each will behave differently over a period of time. The benefits of using an expanded asset allocation are that the combination of several various investments could have varied patterns of returns according to Johnson. He adds that this would mean that the goal of portfolio variation would be to generate the maximum possible return for a specified level of risk.

For instance, if a portfolio of a small company stocks could cause greater returns than an exp

anded portfolio of stock then it is unlikely to achieve that result without considerable more risk or volatility. The outcome would be that in the process of determining an appropriate asset allocation, the combination of assets to hold in your portfolio would be a very personal one. Asset allocation which would work best at any given point of time would depend mainly on the time horizon as well as the ability to handle the risk factor.

Life-Cycle/Target-Date Funds

Known as life-cycle, or target-date funds, asset allocation mutual funds are an effort in providing investors with a portfolio structures which would address an investor’s age, risk factor as well as investment objectives with an adequate allotment of asset classes.Nevertheless, critics of this approach indicate that coming to a standardized explanation for allocating portfolio assets, can be challenging due to individual investors would need individual solutions.

By including asset groups with one’s investment returns which tend to move up and down under various conditions in the market within a portfolio, investor get the opportunity of protecting themselves from substantial losses. Generally, the returns of the three main asset groups have not moved up and down at the same time and the market condition which tends to cause one asset group to do well often causes another asset group to have an average or poor returns.

The investor here on investing in more than one asset category tends to reduce the risk of losing money and his portfolio’s overall investment returns will not suffer losses. Should one asset group’s investment return tend to fall; the investor would be in a position to counteract the losses in that particular group with a better option in investment returns in another asset group.

How Much Cash is Too Much for Your Portfolio?

Cash Position – 6% - 30% Based on Age/Risk Appetite

As per Charles Schwab Corpn’s – SCHW robo-advisor, Schwab Intelligent Portfolios, the cash position of an investor should be between 6 and 30 percent based on age and risk appetite. If one would be looking for a precise percentage, advice from financial experts will inform the individual to focus on capital allocation of 60 percent stock, 30 percent bonds and 10 percent in cash.

Investors though who are more likely to take risk are the younger generations who don’t necessarily need a stable income and could have more capital allocated to stocks. Cash is king as well as trash and nowhere is cash said to be more controversial than using it by way of investment, where too much of it is considered to be a risk but how much could be `too much’?

The debate came up when Charles Schwab had launched Intelligent Portfolios which is an algorithm based platform that automatically builds and rebalances portfolios like the asset-management services of robo-advisors and his treatment of cash in platform had many eyebrows raised, leading to criticism of allocation to cash, depending on the investor’s risk profile.

How Much Cash an Investor Should Hold …?

Charles Schwab replied that there seems to be no right or wrong answer as to how much cash an investor should be holding as an investment and that it is a strategic decision. He further added saying that it is easy to question cash in the 6th year of a bull market and when the Federal Reserve is artificially suppressing interest rates, but they did not invest based on the last six years.

Investment was based on what can be expected in the future. Bull market end and interest rates increase and when they do, a little cash will feel pretty good’.The question raised was, how much should one hold in their brokerage account to which both sides seemed to agree and there was not a single answer that fits all circumstance. When people tend to discuss their investing portfolios they usually refer to the stocks, commodities, bonds and real estate that they own. Regarding cash and how much to hold in a portfolio is based on who you are and how you are investing as well as your investment perspective.

Cash Not As Asset Class – Call Option Which Can Be Priced

When Warren Edward Buffett an American business magnate, investor and philanthropist and the most successful investor of the 20th century had patiently held around $20 billion in cash, he thought of cash not as an asset class which is returning next to nothing but as `a call option which can be priced, relative to ability of cash to buy assets.’ He put in good use at the time of the financial crisis gathering deeply discounted bargains. Most of the investors, lack the discipline of Buffet.

When the market is rallying, cash in the portfolio tends to drag on performance, returning to around zero. The debate for cash in the portfolio is that it does not go down at the time of market crashes but enables the purchases of cheap assets like Buffett, at smart prices. However, investors rarely tend to buy when markets are crashing and are simple apprehensive, to take the plunge. Those who avoided the 2008 crash were stuck with too much cash in their portfolios as the markets recovered.