A Vacation within your Budget

Well my last two articles were on proper investment and I guess it's time that we all took a break. I'm talking about packing your bags and going on a vacation. I've always wanted to just lay back and watch the sunset when I'm on a vacation. Now this article that I came across will help many people in choosing the right place and fitting an entire vacation into their budget. It's the few points that we must keep in mind when planning for a vacation.


Some of your travelling expenses, such as passport and visa costs, travel insurance, etc., are expenditures you cannot cut back on and if you are planning a vacation far from home, you may also have to add the cost of air fare. However, travelling strategically is the key to make the most of your money and save your hard-earned cash wherever possible. Here are some suggestions on how to plan a trip on a limited budget while keeping it organised and simple!

Zero in on a place

So, where are you going for a holiday this year? Might seem like a casual question but choosing the right destination is the first and the most important step to ensure that your vacation does not break your bank. The holiday destination you pick and the duration of the stay decide the cost of your vacation. You can start by deciding on what you and your family would like to do on this vacation. Say you wish for some sun and sand for this year's summer break, work out a list of beach destinations and then settle on a place that the family would like to visit.

Your next task is to find who is offering the best packages to this destination at the lowest prices. Trawl the Internet and call up travel agencies to do an extensive comparative study before you seal the deal. Online travel data repositories such as Wego.com, Expedia.co.in and Kayak.co.in can give you a fair idea about the best bargains . An old, but unbeaten, strategy to cut down on your travel cost is avoiding a trip during the peak seasons. So, if possible, travel during the low season and you will be able to enjoy the same vacation at a cut rate and catch a quiet and cozy getaway.

For those who are flexible about the place they holiday in or are not able to make up their mind, a good way to get the best bargain is to approach the local travel agents and get some idea of what type of packages they are promoting this season. Pick a package that suits your mood and is well with your time frame and you will be able to lock in an excellent deal with relatively less trouble.

If you do not mind some company, another great way to see more at a lesser price is booking a group tour rather than a regular holiday package. "Though a customised package lets you holiday at your own pace, group tours are much more cost-effective. They cover more places in less time and take care of all expenses like accommodation, food, transfers and transportation at a lesser cost," Karan Anand, head-relationships, Cox and Kings Ltd.

There is also the option of a 'staycation' if you do not wish to travel at all and yet have a nice respite from your daily life. Book an accommodation closer to home and visit some local attractions over the weekend and spend some time in a different environment, but without spending a lot of money.

Research the destination

Taking a holiday package is convenient, but might be costlier in some cases. Instead, if you have time and are ready for some research, building your own trip can be both fun and frugal. Even if you are availing of a tour package, knowing about the place you are travelling to is a must, especially, when you are in a foreign land and don't have a travel agent at your service.

With most of the airlines offering online services, booking an air ticket should not be a difficult task. The next thing on your list should be accommodation. When looking for a hotel in a popular tourist place, extend your search area and look at the lesser popular locales and suburbs. You will find more options that will save a few bucks from your budget as well. However, do read the reviews before checking-in. If you are travelling alone and are not picky about room service, staying in a hostel can also be a good way to bring down your accommodation costs. Also, try to find a hotel room with kitchenettes and services like complementary breakfasts, happy-hour buffet lunches, free spa and gym facility, etc., to save on these expenses. Invest in a good travel guidebook or try Wikitravel.org to research about such places.

Another advantage of knowing about the place you are visiting is that you can give the expensive sight-seeing tours a miss and make your own itinerary. One of the best ways of going about it is visiting the country's official tourism website and read their recommendations. One more way to save a few a bucks is buying multi-day or multiple passes/coupons to places of tourist attractions.
Also, make early reservations to avail of the discounts and lock in prices to avoid getting thwarted by fluctuating exchange rates.

Manage your money

If you were lucky to snap a good deal on the holiday package, you can be sure that most of your trip expenses are now fixed and settled and you won't be bankrupt when back from the jaunt. However, there are 'additional' expenses which form the exclusions list and still pose a threat to burn a hole in your pocket, that is, unless you plan your tour wisely.

A package tour usually takes care of the key expenses such as accommodation, airfares, sight-seeing and airport transfers. Other than these, food is the only major cost for which you would have to reach for your pocket. Avoid downtown dining and explore areas outside the main tourist spots. These are comparatively cheaper and will give you a chance to explore the local cuisines as well. Google maps and sites such as Tripadvisor.com can provide you with links of such restaurants. Many of these places would also have their menus available on the net for you to plan out a meal which isn't pricey.

Have a backup plan in case you do not find a suitable place or the local food does not suit your taste buds. Pay a visit to the grocery store and pick up items like bread, butter, marmalade, snacks, etc., for some quick-fixes.
Another significant expense which most likely won't be a part of the deal offered by your travel agent is the transportation cost when traveling within your holiday destination and visiting different tourist spots. Avoid renting a car or using a taxi where you have a good public transportation system. Though a guide book can be handy, ask the hotel staff or take help of the locals to know the routes and the most economical way of traveling within the city.

Packing checklist

Now that you are through with the bookings and reservations and have a nicely planned itinerary in place, its time to pack your bags. Before you head towards your wardrobe or wrap the toiletries, make sure you have a list of all essential items. If you have planned for a foreign trip, apart from a valid passport, you will also require a tourist visa. Though some countries like Singapore and Mauritius provide a visa on arrival, many will ask you to have it before you board the flight. Do not forget to check if there are some country guidelines on specific vaccinations you might have to take before your visit and keep some common drugs like painkillers and paracetamol pills in your first-aid kit.

Another important thing you might skip or tend to miss intentionally, given that on a budget, is the travel insurance. But there are times when it can actually save you from a loss and a lot of trouble . You may also want to invest in a phrase book and try speaking a few lines in the native language. However, do not worry even if you fail in your attempt, that is, as long as you have some currency notes in your pocket. Money is a common language which is understood by all, so ensure that you have access to it all the time.

I hope the above article was helpful for anyone who has been planning for a longtime to go on a vacation.
I think I too would make a few plans to travel to northern India.

take care

Aki

A Wealth Generator

Now some of you might have come across this word Wealth Generator before. It may be from some get rich quick scheme, excuse me I mean SCAM. I would like to make a firm point here that whenever you come across any website that says they can generate an enormous amount of cash in the least possible time then please refrain from signing up and paying them token amounts. Its all fake, none of it works, these are just simple means to cheat people into making money for themselves.

So coming back to the word Wealth Generator, yes it does hold value if you know how and where to invest your money. I have read this really nice article on how ELSS (Equity Linked Savings Scheme) Mutual Funds can be a continuous source of luxury income especially for the salaried individuals.

Most of the tax saving instruments under Section 80C are savings oriented instruments with returns after adjusting for inflation either in the negative or slightly positive. The exceptions to this are the ULIPs (Life and Pension Funds) and the ELSS Mutual Funds. The advantage with ELSS compared to the ULIPs is the frequency (mostly a single investment or a monthly investment for a year) and term for investment, for getting good returns.

Does ELSS diversify?

An ELSS (Equity Linked Savings Scheme) is a mutual fund that has to invest a minimum of 80% in Equity Shares. The balance 20% can be in debt, money market instruments, cash or even more equity. There is a 3 year lock-in period for the ELSS mutual funds. Post the 36 months, the funds remain invested and work like any other open-ended mutual fund.

Why an ELSS?

It has been an established fact that in the long run equity gives a much higher inflation adjusted returns when compared to any other investment except for maybe real estate. The top 5 ELSS funds have given returns from 22% to 26% compounded annually over the past 5 years. This is again higher than the market (Nifty) returns over the past 5 years which is at 19%.

ELSS is part of the Section 80C instruments which are cumulatively eligible for a deduction from income up to Rs.1L . This gives the tax payers benefits from 10% to 30% (excluding the educational cess) based on their current tax slab.
The return (maturity and the dividend [(if opted for]) from the ELSS is also tax free under the present EEE (Exempt - Exempt - Exempt) regime.  However, with the DTC regime tax benefits could be phased out and is under debate.

The 3 year lock-in period makes sure one stays invested. Otherwise in a normal mutual fund one tends to withdraw in case of any monetary requirement. The lock-in period also helps the fund managers to plan their investments better and also to hold on to valuable investments as they do not have to worry about sudden redemption pressures. The above logic is proved in the higher returns achieved by the ELSS funds when compared to the market returns. Wealth creation because of this is much better than most of the other mutual funds. Only some sector based mutual funds have given better returns than the ELSS fund in the past 5 years.

Options with the ELSS

Salaried people with a tight budget can opt for a monthly investment (SIP using ECS). The automatic investment from the bank through ECS makes it an easy way to invest.
Those who want an income in between can opt for the dividend option. This is particularly suitable for senior citizens. Also, the ELSS gives a tax free return compared to a bank or company deposit, which is taxable.

Limitations with ELSS

The investment in an ELSS cannot be switched or closed before the 3 years are completed form the date of investment. During market downturns, this becomes a limitation as one can only sit and watch the funds go down. One has the option of averaging when the market goes down, but an investment to save tax may not be required in the year in which the market is going down.
The lock-in works negatively also for the monthly investment because the lock-in is calculated from the date of the investment and not from the date the scheme was started. This means that the 12th month's investment can be withdrawn only on the 48th month. This is a disadvantage compared to ULIPs, where the lock-in is from the date of start of the scheme.

In summary

Most fund houses start an ELSS regular investment at Rs.500/- per month. Single investments start generally at Rs.5000/-. This makes ELSS accessible to all tax payers. With the compulsory lock-in giving better returns than other investments, even the most risk averse can look at an exposure to the ELSS fund for their tax benefits.

Hence from the above article I would urge the salaried individuals to take this article seriously and consider investing in ELSS to get a better future for one's self and family.

take care

Aki

A Sinful Investment

Well it is another weekend and thankfully I did make time to read a few good articles which I would like to share with all my readers. This article is about the 8 deadly sins one might make or makes while investing.



Overlooking Fundamentals

In a haste to make a quick buck from the market, retail investors tend to overlook the fundamentals of the company they're planning to invest in. Some investors buy shares without sparing time to gather the basic information about the company, most importantly the product or service that the company sells and the probable future for that business.
"Retail investors get carried away by a management's overoptimistic speeches, tentative expansion plans and are always biased towards short-term play, never wanting to miss the current surge in the price of the stock," says Hemindra Hazari, head of research, Karvy Stock Broking.
Investors should look at companies that have consistently delivered earnings growth and good corporate governance. Never invest in a firm without understanding the dynamics of the business.

Cheap, yet expensive

A successful investor looks for bargain stocks-the ones which are available for prices lower than their worth and have a strong growth potential. Newbie investors often misinterpret this golden strategy as buying 'cheap' stocks for high percentage gains.
Assume that you can buy a dozen fresh eggs for Rs 36, while rotten eggs are available for only Rs 3 per dozen. If you have Rs 3 in your wallet, will you buy one fresh egg or a dozen rotten ones?
"Retail investors look at the share prices of the stocks. They tend to buy cheap stocks, which might not be very valuable," says Sarabjit Kour Nangra, vicepresident of research, Angel Broking.
Returns from your investment in shares do not depend on the number of shares, but the performance of the company. You will have a higher chance of making a profit if you buy just one share of a blue-chip company rather than buying thousands of penny stocks.

Myopic Vision

Retail investors often look for short-term gains. If you want to make a quick profit from stocks, you should have the ability to time the stock market. Stock prices fluctuate wildly over short periods. Your profit or loss depends on your ability to clinch the deal at the right moment. Due to the turbulent nature of stock markets, it is difficult to profit in short time periods.
"Retail investors feel left out during phases of a secular bull trend or in times of short-term surges. Retail investors should judge their risk appetite and then take a long-term view," says Hazari. The equity market almost invariably gives a positive return in the long term, in this case a time horizon of at least three or more years will be most prudent.
Also, when you stay invested in a stock for longer than one year, the taxman won't come knocking for his share of the profit. Income from stocks held for more than one year is a long-term capital gain, which does not attract any tax. For investments less than one year, you will have to pay short-term capital gains.

Ignoring a Portfolio

You must have heard stories about investors who bought a company's shares, forgot about them and after a decade or so discovered that they had returned a fortune. While this is an example of how long-term investment is profitable, it's not the best.
If you are among those who think that long-term investment means buying shares at low prices and forgetting about them, you are taking a huge risk. The economic environment and market scenario are very dynamic. Apart from global and local policies and macroeconomic factors, there can also be changes in company strategies or management.
An investor should review his portfolio at regular intervals. If the outlook of a company improves, or at least remains stable, he should buy or hold the stock. When the assumptions under which he bought the shares no longer hold true, it might be time to offload them.

Unwillingness to Book Losses

Investors eagerly cash out small profits on retail investments, but they are often unwilling to book losses on stocks that are sinking. Even when stock prices keep declining, they continue to hold on in the hope that the stock will bounce back and turn profitable sometime. This often results in bigger losses for the investor.
When prices decline, some investors buy more shares in an attempt to reduce the average cost of their stock portfolio. Buying on dips is recommended, but only when the decline is due to a temporary setback and growth prospects remain positive.
"Retail investors should stop averaging every second stock unless they have a thorough understanding of the company. They should try to explore of the reasons for its underperformance. Averaging is not a tool to minimise losses but should be treated as a maximisation instrument," says Hazari.
When investing in a stock, you should also set a stop-loss instruction for it. When the price of a stock falls to the stop-loss level, the broker will sell them. If you set a stop-loss order at 10% below your purchasing cost, your loss will be limited to 10%.

Entry at Peaks, Exits at Lows

The stock market always overreacts to news, be it while rising or falling. Ideally, the price of a share should be proportional to the total capital and earnings prospects of the company. However, a marketfrenzy results in shares being, generally, overpriced or underpriced.
In a bullish market, investors often invest in overpriced shares because everyone else is buying. They become too optimistic and expect stock prices to continue rising. Conversely, in a bearish market, investors become pessimistic and tend to sell shares when they should be buying.
Stock markets tend to take wild decisions in the short run but behave rationally in the long term. Successful investors always base their investment decisions on a shares' intrinsic value and hunt for bargain stocks. They will buy shares of a company with strong fundamentals when it's beaten in the market and sell when prices surge.

Following Tips

Thanks to cheap bulk messages, you might have received SMSes tipping you about a 'golden opportunity' to earn huge profits. If you have acted on any of these tips, you probably have lost some money. If you haven't, you've done well to stay away from such unsolicited mails and messages.
Even solicited tips can do you harm. If you try to find trading tips on the Internet, you will get a large number of websites and blogs that offer you free advice. Don't take the advice on these sites as gospel. It's equally dangerous to buy shares because a friend told you that "its price is going to double in six months". Stock tips by analysts published in newspapers or aired on television should also be subjected to scrutiny.
Always perform due diligence before placing an order with your broker.

Allowing your Broker to Trade

If you just sign the forms on your agent's instructions and allow him to buy and sell shares on your behalf, be ready for a few shocks. Unscrupulous brokers often use this opportunity to misuse clients' money.
Brokers don't get a commission on the profit you earn, but get paid for trade volume. There have been cases of brokers using investor money for intra-day trading without investors' consent. When you get a statement from your brokerage house, you might see your portfolio running losses with a huge amount paid as brokerage.

Well I hope this article helps out any person who is thinking of investing into the Stock Market. Also if one plans to retire then he/she can sit home and trade online.

take care

Aki