It’s back to basics – so it seems. The ” good old days” – days when firms would simply throw money to retain people, Compensation Managers were given marching orders to “do what it takes” to retain talent and in the bargain delivered top dollar increases and fancy variable pays, when counter offers was the need of the hour and kept compensation managers on their toes -

This all seems to be a passe!

With global recession tightening it’s grip around us and with nightmares like the 50B US$ fund run by Bernaud Madoff coming to light, analysts say this is the tip of the iceberg!

I wish it isn’t because what we have been through over the last few months has been more than what we can take. Unfortunately, my wish isnt going to come trough and this will last a few more months – the damage, unraveling like a ravaging hurricane, the magnitude of which will be know only when the storm passes!

While we duck for cover and realize that umbrellas are not enough to weather this storm, compensation managers are going through a pretty different and unique year end / compensation planning process. Quite a few firms that I know, both big and small have said they don’t plan to do merit raises this year – some of the other players are even taking a call on doing away with variable pay plans, not to mention the scary issue of headcount reduction.

So what does the employee feel?

Well – at least some of my experiences tell me that the real world is living in an ivory tower. I’ve had a few folks walk by to me and say, “Can you tell me how much increase I am going to get ? “, “I want to know the “exact” percentage of my bonus!” and I am stumped for words!!!!

It’s sad that a majority of the work force thinks that this is a passing cloud. I can’t blame their ignorance because they probably don’t understand the magnitude of what we are contending with today. But as someone who reasonably understands the situation, I can tell you one thing – the good old days are gone forever and will never ever return.

Hold on! I’m not a pessimist. I am an eternal optimist!!! I’m not predicting doomsday for a second. The point that I am trying to make is that corporates are learning lessons and learning them hard and fast – mistakes teach us a lot and this one is no different.

This too shall pass say some – Yes!.. This too will, because we can’t expect to see things never improve. They will and they better.. Just that the new world order has arrived and when things get back to normal – it’s back to the days of our parents, days when value propositions will be driven by learning and growth opportunities, loyalty to firms having some value and of course, compensation being at the bottom of the stack..

Good bye good old days, welcome to the new world order!!! – if your firms want to survive!

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Popularity: 22%

Diversifying a portfolio means, deciding on how to divide the money available for investment between various investment options like shares, bonds, fixed deposits, Mutual funds, fixed property, gold and cash to be retained in hand.

In your personal investment plan try to ensure that there is adequate diversity. A clever investor will never put all his money in one type of investment. Let’s see why we should diversify our portfolio.

Main reason for a well diversified reason is mitigation of risk.

You can even add insurance to this list. But it’s slightly a different investment option in the sense its benefits are not available to you but to your dependants.

Once you have arrived at the money available for investment, it’s important to decide the ratio to be invested in different investment options. Before investing it’s important to know the amount of risk and return associated with each investment option.

Time is Money:

If you think of making money in a very short span it’s not possible with any type of investment option. Every investment needs certain time to generate returns. Before deciding on an investment option we need to be clear about how long we can hold that investment and what would be the approximate return. You must be clear as to go for capital appreciation or a short term return or a combination of both.

For example, if we remain invested for long term in stocks and fixed assets like a house, there are very few chances of incurring losses. Long term means you should keep the investment for at least 5 to 10 years.

History tells that those who have invested in stock market for 10 years have maximum lost 1.5 % of their investment.

So longer the duration lesser the chances of losses. There is also scope for making tons of money. Those who have invested money in stocks and real estate or gold between 2003 and 2007 have made tons of money.

Every investment has a cycle and it repeats. It’s very important to identify the right type of investment that has started churning money.

We can see that in the last 6 months, stocks are out and bonds are the preferred choice of investment.

• If your goal is long term, invest in stocks and real estate, this is the right time to buy as the valuations are very attractive. Though we can’t exactly say the % of appreciation, it will definitely yield good returns for long term investors.
• If your goal is short term, invest in fixed deposits or government bonds.
• It’s also very important to decide on the timing of the investment. Early birds will always make maximum money. When everyone is making money, realize that some will soon start loosing. Don’t buy when the market is at the peak. It’s very important to time the market.
• Finally ensure that you always have some cash in hand to attend to any emergency or to put in any attractive investment option that presents itself before you.

Finally remember that risk and return coexist in any kind of investment option and it’s always possible to lose money in any form of investment. Now the question you should ask yourself is “How much loss will I be able to bear?”

If you are not in a position to take more risk, put more of your money in FDs and Bonds and minimum in stocks. If you are capable of taking more risk, put more of your money in Equities and Real estate and very little in FD or Bonds. Those who have household responsibilities or those who are paying quite a bit of their money as interest towards loans should always be careful about the kind of investments they make.

Here is a small principle for dividing your funds amongst various investment options.

Reduce your age from 100 and what ever is the number you arrive at, you can put that much of money in high risk – high return investments.

For example, if your age is 30, you can put 70% of your money in high risk/high return assets and 30% in low risk – low return assets. As your hair starts turning grey, reduce your exposure towards equity, and increase it towards debt securities.

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Popularity: 24%

If you invest in tax saving schemes right now, you can get your money back early. For example: If you have planned to invest in Fixed Deposit which can’t be withdrawn for 5 years, if you deposit today you will get your money back in 2013 December and you can use this money for tax investment again. Where as if you save it in March, you will get it back only in 2014 March and you will have to again go in search of cash.

Most of us spend all the cash in hand all through the year and try to find some cash in March. If we don’t find cash in March then your tax plan will go wrong.

Some people are of the opinion that even if I save on 31st March it will still come under this financial year, but this is not clever thing if you are trying to invest in Tax Saving Equity linked funds (ELSS) or Public Provident Fund. You will stand to loose 4 months of interest free income.

Some of us will wait till the year end to submit the medical bills or bills of books purchased for research etc. There is a chance of bills getting lost. It’s better to submit these bills every month to the concerned department in your office.

What about the investments I have made in the financial year ?

Before making any tax saving investments, it is always better to review the investments you have already made in the current financial year. In case you have made investments through Systematic investment planning (SIP), or already contributed to PPF, add all the amounts and plan for the remaining amount.

Get your calculations right:

• For employees there is PPF and it will anyway come under Section 80C. Some employees also would have taken health insurance, life insurance, or group insurance policy. First calculate the amount you have already paid towards premium.
• For those who have taken home loan, calculate the EMI you have paid for all the months. See the interest and principal component in that. You can get the principal paid on the loan exempt under Section 80C. You can claim exemption on interest up to 1.5 Lakh per annum.
• Also take into consideration, the tuition fee you have paid for your kids (allowed only for 2 kids).
• Take into consideration all the above and then decide on the amount for which you have to do tax planning.

• After all your tax planning is done if you are falling under 10% tax bracket and tax payable is not less than two to three thousand, it’s better to pay the tax instead of making investments only for saving these two or three thousands.
• Accounts folks in your office would have already informed you the amount of tax payable. Once you have calculated the amount invested so far, return from the amount invested, and the amount to be invested, all that you need to decide is to where to invest.
• If you don’t have the appetite to take risk invest in National Savings Certificates and Bank Fixed Deposits and if you are planning to invest for long term, put your money in Public Provident Fund.
• If you have the ability to bear risk, invest in Tax Saving Funds or ULIPs.

Instead of investing your money at once, it’s better to choose SIP and invest in 5 equal installments.

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Popularity: 28%

I often wonder when I read about the bailout packages dished out by Governments all around the world to aid banks and other financial institutions that are on the verge of bankruptcy especially the amount of money spent in bailouts in last couple of months is staggering. I am even surprised that there was not a single protest from anywhere and these financial criminals go unpunished. It is the common man who is going to bear the burden of additional tax and increased debt.

Why should tax payer’s money be used for bailing out greedy banks and corporations that have done business only with profit as motive and no concern for morals or ethics and absolutely no concern for the consequences for their acts. Putting public money in corporate coffers is just not acceptable. Financial crisis that has happened is a man made crisis done through substandard policies, deregulation and greed. I can understand putting in public money for natural disasters like earthquakes or folds. Governments all over the world have spent trillions of dollars on bailouts already

This kind of bailout is ABSURD!

We must collectively protest this .This is real money, my money, your money, our money which is hard earned paid in the form of tax.

Why should banks and financial institutions which never cared about the creditworthiness of people who lined up for loans or the soundness of derivatives business be rewarded. We should not allow government to write checks on tax payers’ account. This measure will increase the budget deficit by a significant amount, with no guarantee of recovering the amount and not holding anyone accountable for the misdeeds they have done.

What is the signal you are sending to the corporate world and investors through these bail outs? Do your businesses as you like and we will reward you for the blind errors you might commit. Is this the right way?

As far as I am concerned, there should be a thorough probe into the events that have led to this disaster and every CEO, Executive or Government who were part of this financial carnage should be jailed, their assets sold and put in a bailout fund.

It is time to wake up and realize that greed is the basis for all the financial disasters and find a way, may be strict disclosure norms, increasing the transparency in strategic decision making, making one responsible for his actions and

Few weeks back Finance Ministers of several Asian, Europe and Americas countries met and decided to act rapidly on the financial crisis

And now stock markets are being artificially manipulated by bailouts by governments.

When corporations see that the demand is coming down , it is natural for the stock to take a beating. But every other day we see CRR, SLR rate cuts which means our money is loaned back to us and the market stages a rally of any significance. FIIs and Badla traders slowly and routinely remove their money from our markets to invest elsewhere leaving the retail investor in a fix.

It is certainly not a good thing for a responsible, saving, taxpaying citizen, with no defaulted loans or credit card debt to compensate for the that Wall Street gamblers will go bust on their stupid and greedy bets, over-leveraged and poorly managed businesses with huge losses.

Let me tell you some interesting fact. Lehman has set aside $2.5 billion as bonus for their employees even as they went bankrupt for the great performance they showed in pushing the bank to bankruptcy.

What do you call this?

Popularity: 33%

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The legal documentation of the distribution of the Estate (Assets) effective after the death is called a WILL or ESTATE PLANNING.

It is very common that there could be lot of disputes while doing the partition of the properties among the children by the middleman/arbitrator in the absence of a ‘will’.

A will is normally prepared by a person when he crosses 55 or 60 years depending on his health conditions. While preparing a will, the following points should be taken care of:

List of Assets

Include all assets (all properties – both movables and immoveable, deposits, stock, bonds, Mutual Funds etc.). If this is not done properly, there is every chance that one of the children who knows about the excluded or omitted property may be inherited by him depriving the other children.

In some cases we find the other children, although they are aware about this unaddressed property, keep silent about this due to age, financial weakness, fear for straining the relationship etc.

This defeats the very purpose of the will

Care for caring child

Child taking care of the parents is eligible and should be given additionally in accordance with or proportionate to the requirements for his noble services, but at the discretion of the parents.

Understandable disparities

There could be a disparity while setting aside the properties between the son and daughter. When the parents feel that they have spent huge sum for their daughter’s wedding when compared to the son’s education etc., in such cases, the son’s portion should be greater than that of the daughter proportionately but again, according to the discretion of the parents. This has to be communicated to both children in advance inorder to avoid any ill feeling or discontentment.

Undesirable disparities

Supposing that one of the two children is doing very well (financially) in life and the other is leading a below average life as he could not come up in life, in such case there should not be any disparity while distributing the assets. In other words, the person should not be punished just for the reason that he is doing well in his life.

When we think of preparing a will, the same should be ‘fair and equivocal’. This could vary from one situation to another. The best option to make it fair and equivocal could be to seek the help of a Certified Financial Planner.

Happy Planning!

Popularity: 9%

Kishore Biyani’s Future Ventures India, has received the approval of Securities and Exchange Board of India (SEBI), for an initial public offering (IPO).

Future Ventures India is the venture capital arm of the Future Group which runs stores like Pantaloons, Big Bazaar, City Centers etc.

Future Ventures has succeeded in getting the nod but SEBI is smarter. It came with certain riders which states that

• It has to invest theamountraisedinthree years. If not, the money should be returned to the investors.
• If the firm decides to pick up a stake larger than 20%, then the company has to seek shareholder approval.

This is a typical case where SEBI has given the nod to a Venture Capital to raise money from public and invest in new businesses. The other company in a similar business model is IL & FS.

My thought is that if it comes up with an IPO for providing funds to new businesses, chances are that Future Ventures may be treated like a Non Banking Finance Corporation instead of a Venture Fund.

That leaves a question behind – Who would be the regulator for the Fund?

Under normal circumstances Reserve Bank of India would be the regulator for NBFC while SEBI would regulate the capital markets which would also include venture funds.

I am waiting to see what happens.

Definitely seems Futuristic!!!

Popularity: 12%