Is Your Fixed Deposit Making You Wealthier?

Yogesh Shugani, the Jabalpur resident, has invested in a bank’s fixed deposit and was earning 6.95% FD interest rates. He had saved some money, and that’s why to make his money grow, he chose an FD over a bank’s recurring deposit while opting for investment.

However, once six months passed, he analyzed his investment and found that his bank was offering him lower fixed deposit interest rate profits when compared to his friend’s FD account with a private company which was fetching him around 8%.

Thus, he quickly realized his mistake and closed his bank’s FD account and initiated an FD with a non-banking finance company (NBFC) and is a happy man.

If you are the one like Yogesh who is not happy with his/her current fixed deposit scheme, you can open an FD account with a leading non-banking finance company (NBFC) and make the most of it.

Let’s provide you some amazing features of a company fixed deposit scheme that will not only let your investment earn more but even avail other benefits.

Avail a higher fixed deposit interest rate profits

When compared to banks, non-banking finance companies offer a healthy return on FD interest rate of up to 8%. Thus, the immediate benefit is that you get to make your investment grow faster facilitate your goals better. 



You also get the facility to apply for a cumulative as well as non-cumulative FD. Monthly, quarterly, half-yearly and yearly interest profits are given in a non-cumulative FD type while a non-cumulative type lets you earn more as the interest profits are calculated on a compounding basis.

You get an easy access

An online fixed deposit scheme with a leading non-banking finance company lets you have an online assessment of your account. It makes applying for an FD as well as managing and tracking of the fixed deposit accounts dead easy. 

Yes, once you have filled the online form, the lender calls you and schedule a meeting to pick the required documents and the cheque.

Tenor flexibility

Did not liked an FD account that you just opened? You can close it and open a new one instantly. Service providers offer investors with a flexible tenor facility. 

It means that you are free to select a tenor which suits you best. As a result, you get the freedom to apply for an FD account with a tenor ranging between 1 and 5 years. 

The higher the tenor, the higher the interest payout and that’s why you should choose a tenor accordingly if you want a fat FD income to follow.

Senior citizen fixed deposit

Financial institutions offer the highest fixed deposit interest rate to senior citizens. Yes, if you are a senior citizen, you can expect to gain the highest 8.10% FD interest rate gains. 

If you want to renew it or reinvest it after the maturity, you can expect a further 0.10% raise in your income.

FDs are insured

While other high-risk investments such as mutual funds do not offer assurance to the invested money, an FD account with an NBFC does. 

Yes, fixed deposits have insurance worth Rs.1 lakh on your sum of investment. Thus, it means that your invested money is in safe hands.

The Bottom Line

If you are looking to let your fixed deposits return you with a fabulous return, you can open an FD account with one of the leading non-banking finance company and get started. All the best!

Betterment.com Review Update: $25 Bonus, Asset Allocation, Fees

Since my previous review of Betterment.com there has been some changes made for the better. What still hasn't changed is the simple process of application, choosing investments, and getting started.

The hardest part of investing is taking that first step. Most people never start investing because they lack the knowledge of where to invest. Today we have so many different investment companies competing for our money. Their advertising can sometimes be confusing and contradictory. Even if you do manage to sign up for an account then you are faced with the choice of what to invest in. All these concerns have been addressed and solved by Betterment.com.

Application

The application process allows you to get started entirely online. They say you can the process only takes 60 seconds. It takes a little longer but couldn't be easier. Enter your personal information, they verify it through information on your credit report. You then enter your bank information so they can link it to set up quick deposit and withdrawls.

Asset Allocation

After answering a few simple questions Betterment.com offers a asset allocation suggestion based on my answers, goals and age. They gave me an allocation of 50% stocks/50% bonds.


Their current breakdown of stocks and bond portions are:

Stock Portion Only

• 25% Vanguard Total Stock Market (VTI)
• 25% iShares S&P 500 Value (IVE)
• 25% Vanguard Europe Pacific (VEA)
• 10% Vanguard Emerging Markets (VWO)
• 8% iShares Russell Midcap Value (IWS)
• 7% iShares Russell 2000 Value (IWN)

Bond Portion Only

• 50% iShares Barclays TIPS Bond ETF (TIP)
• 50% iShares Lehman 1-3 Year Treasury Bond ETF (SHY)

I like it that they are investing with passive index ETFs that are very low in fees. The weighted expense ratio of all the stock ETFs together is 0.16%. The weighted expense ratio of all the bond ETFs together is 0.18%.

What's all this going to cost me? (fees)

When I last reviewed Betterment.com they had a 0.9% annual fee for all accounts with balances up to $25,000. There were no monthly fees, no maintenance fees, no minimum requirements, and no commission charged for any trades. In March, their fee schedule has been changed to lower fees for most users, but also raised some fees for certain smaller accounts.

Here is the new fee schedule:

If your just getting started there is a requirement to have $100 per month added to your account. If you do not they charge a $3 monthly fee. This should not be a problem if you plan on making the $100 minimum deposit every month. If you are not ready to at least invest $100/month do not sign up for this program. 

Remember that to open an account and receive the $25 bonus you must have an initial deposit of $250. Add that to the monthly deposit of $100, at the end of the year your balance should be $1,450. With a 0.35% annual fee you will be paying about $5 of annual fees. Compare that to a discount brokerage that charges from $9.99/trade to $3.95/trade. Using Betterment,com keeps fees low and more money working for you.

$25 Bonus Offer For New Accounts

The $25 bonus offer for opening a new account, with a $250 initial deposit is a sweet way to try the process out.

Top 10 Ways To Get Ready For Retirement

Image via WikipediaAccording to the United States Department of Labor, less than half of all Americans have figured out how much they need to save for retirement. In 2009, 13 percent of private industry workers with access to a defined contribution plan (such as a 401(k) plan) did not participate. The average American spends 20 years in retirement.

1. Save early and often.
If your saving for retirement already, don't stop. If you haven't started yet, what are you waiting for, get going. The fundamental reason to start early is that it will have time to grow. Just putting money in an account isn't enough, the miracle of compounding will transform your weekly deposit into a large amount when it comes time to retire. It only works if you start early.

2. Know the amount you need to live on in retirement.
Retirement is not cheap. Experts say that you will need 70% of your pre-retirement income to maintain the same standard of living you enjoy now.

3. Participate in your retirement plan at work.
If your place of work has a matching 401(k), make sure you contribute all you can to it. The matching is free money in your pocket. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate.

4. Look into your employers pension plan at work.
If your employer has a traditional pension plan, check to see if you are covered by the plan and understand how it works. Ask for an individual benefit statement to see what your benefit is worth. Before you change jobs, find out what will happen to your pension benefit. Learn what benefits you may have from a previous employer. Find out if you will be entitled to benefits from your spouse’s plan.

5. Educate yourself about basic investment knowledge.
Educate yourself about the different ways to save your money. Put your savings into different kinds of investments. Learn how diversification and why investing in different places helps your overall rate of savings. Learn about your plan’s investment options and ask questions. Financial security and knowledge go hand in hand.

6. Do not touch your retirement savings.
If you withdraw from your savings early you will lose your principle, interest, and it's compounding power. You may even incur tax penalties for an early withdrawal.

7. Put money into an Individual Retirement Plan.
You can put up to $5000 per year into an IRA, when you are 50 or older you can put even more. When you open an IRA, you have two options – a traditional IRA or a Roth IRA. The tax treatment of your contributions and withdrawals will depend on which option you select. Also, the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose. IRAs can provide an easy way to save. You can set it up so that an amount is automatically deducted from your checking or savings account and deposited in the IRA.

8. Find out about your future Social Security benefits.
Social Security pays benefits that are on average equal to about 40 percent of what you earned before retirement. You should receive a Social Security Statement each year that gives you an estimate of how much your benefit will be and when you can receive it. For more information, visit the Social Security Administration’s Web site or call 1.800.772.1213.

9. Ask lots of questions.
While these tips are meant to point you in the right direction, you’ll need more information. Talk to your employer, your bank, your union, or a financial adviser. Ask questions and make sure you understand the answers.

10. Check out these web sites for more information.

AARP
American Savings Education Council
Certified Financial Planner Board of Standards
Consumer Federation of America
The Investor’s Clearinghouse
U.S. Securities and Exchange Commission

 

Is the Facebook Bubble Coming?

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Recently Goldman Sachs valued Facebook at an incredible $50 billion dollars. That's incredible for a company that produces revenue of between 1 and 2 billion dollars. With Goldman Sachs getting in the middle of this, I am sure it will end badly.

The Goldman Sachs deal consist of an investment of $1.5 billion dollars, roughly 3% of Facebook's accessed value. The shares are to be traded on the secondary market and are not for the general public.

To put Facebook's supposed valuation in context, consider this: $50 billion is roughly equal to the size of the economy of the Dominican Republic. The Gap has a market cap of $13 billion. McDonald's market cap is only $83 billion. So based on the current deal, Facebook is worth nearly 4 times as much as the Gap, and nearly two-thirds as much as McDonald's.

Inflating the value of a company by Goldman Sachs is only more of the same techniques of puffing up values for their own devices. They may be doing this because eventually Facebook will go public and having a foot in the door will only put them first in line to making 100's of millions of dollars in the eventual IPO.

Social Networking is a bubble like email was a bubble. It's a core technology that changes the way we communicate. But investors get carried away and drive valuations way up till the day comes where it's as common as email and the legs are kicked out from underneath it, and the the stock plummets. It's like the dawn of AOL, a high flier, that got it's wings clipped when one day it was only one of many email and data portals.

Other dot.com companies are in the news with high valuations. Google recently offered to pay $6 billion for coupon social networking company Groupon, which is less than 2 years old and has well over a dozen competitors doing the same thing. Though the offer was turned down, Groupon believes they are worth much more.


Look at a cloud computing company Salesforce.com. It rents out, via the internet, software that helps sales people track leads and customers to enhance productivity. At the beginning of 2010 it was at $62 a share. It ended 2010 at $150 a share. Hungry investors are looking to munch on some tasty dot com's and not using normal valuation techniques before investing. With a P/E of 96, investors are becoming speculators, an action that will cause another Dot.com bust.

It's time to be careful out there and not get caught up in another dot.com bubble. Over valuation and hyping of these popular companies will get us in a feeding frenzy. The ones that do the hyping will profit in the hundreds of millions, but the small investors will be the ones that get hurt the most. Didn't someone say.

"Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement: and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it."

The full quote from The Life of Reason (1905-1906) by George Santayana

Related articles

• Goldman Sachs Move Shows Why Facebook Is Already Public... Almost (GS) (247wallst.com)
• Facebook overvalued at US$50B in global poll of investors (financialpost.com)
• Mark Zuckerberg swimming in Facebook cash infusions right now (shortformblog.com)
• Facebook + Goldman Sachs: Here's What It Will Mean (mediaite.com)
• Simon Johnson: Why Are Taxpayers Subsidizing Facebook, And The Next Bubble? (huffingtonpost.com)
• Why Facebook Is Such an Important Friend for Goldman Sachs? [Lucas Wyrsch] (ecademy.com)

Can Your Kids Have Roth IRAs?

        Image by littlemaiba via Flick
With the past summer and the holiday season coming up many kids our working and earning money. Is it possible for them to put their money in Roth IRAs? 
 
The only requirement to have a Roth IRA is earned income for the year. Age doesn't enter into it. So if your kid earns money, they are entitled to make a Roth IRA contribution. For the year 2010 the rule is the contribution can be the total amount of income or up to $5000. This contribution amount is for a Roth or traditional IRA. 
 
Is the Roth IRA better than the traditional IRA? 
 
One way it is better than a traditional IRA is that you can withdraw all or part of it without any income tax or penalty to pay for college or any other reason. But rule is you cannot withdraw the earnings tax free till age 59 1/2. 
 
Even though contributions can be withdrawn anytime without tax or penalty consequences it's best to leave it in the account to grow tax free till retirement. If it's in a traditional IRA, all distributions will be taxed and there is a 10% penalty, unless their money is used for college costs. 
 
What about tax deductions? 
 
If your contributing to a Roth IRA there are no tax deductions. If your contributing to a traditional IRA the tax deductions are negligible to none. It would make sense only if your child makes a significant amount of money. 
 
Teaching our children to save is one of the greatest gifts we can give them. Also instructing them to invest in a Roth IRA is a great way to teach them to save. And with the tax advantage it's even better. Your is never to young to learn about the ways to save and minimize taxes or avoid them. 

Investing 101: Index Funds

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If your thinking about getting into investing and want an easy way to get your feet wet why not try Index Funds. We all have the common problem of which of the 3000 plus mutual funds do we put are money in. You can search for the hot fund or the fund with the great long term track record. But when you purchased it, it tanked. What to do? I would just like to pick a fund that will let me get some sleep at night!

The answer for you is Index Funds. Jack Bogle founder of Vanguard Funds and pioneer of index funds says," Why look for a needle in a haystack when you can buy the whole haystack." Get great diversification by buying everything. You will ride the markets ups and downs like a roller coaster. But always with a upward trend. You will be at ease in your choice of index funds because you won't have second thoughts. How can you? You own everything, you don't have to believe you have the wrong stock or fund, you own them all. Another plus for your index portfolio is, by not buying and selling a lot you'll save all those transaction fees. Also buying from Vanguard, there will be none if you buy their mutual funds directly.

Now what do you do to get started? What funds to buy? Start with the basic three with percentage allocations:

• Total Stock Market Index Fund. 60%
• Total International Market Index Fund. 30%
• Total Bond Market Index Fund. 10%

This is a good place to start. Your allocations can be adjusted based on years till retirement. There are many other index funds to add to this list for further diversification. There are TIPS, Small-Cap,Specialty Foreign, REITs and others. As your portfolio increases new money can be put here. To get some good advice study the work of John Bogle. He's the main source to go to. Others like Paul Merriman on his web site Fundadvice.com. He offers his own proprietary work on index funds including his "Ultimate Buy an Hold Strategy". He offers sample index fund portfolios. He also produces many educational videos on investing. His active web site keeps you going back for more good advice. Also Paul Farrel over at Marketwatch.com keeps a scoreboard of the top eight index fund portfolios. He has there performance over the last 10 years and its updated daily. You'll also enjoy his "Andy Rooney" style commentary's. He is many years experience in the equity markets and writes a thoughtful column. Here's a list of the Index Fund Portfolios Courtesy of Paul Farrel's column at Marketwatch.com.

Take the strain and worry of investing away with index funds. Open an account Or if you have one see if you can purchase them there. If you go to Vanguard Funds there is a minimum investment of $3000. At Schwab their index funds have a minimum of $100. You can start there and latter move to the mother ship Vanguard. To be sure you will be saving money because a nice feature of these index funds is the low expense fees. Vanguards Total Stock Market Index Fund has an expense ratio of  0.18%. One of the lowest. But be careful because I have seen some expense fees as high as 1.5%. There is no reason for these high fees.