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Personal finance is not rocket science: Ranjan Varma

Source: IRIS (24 December 2010)

Personal finance is not rocket science: Ranjan Varma
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In an interview with Yogita Khatri of, Ranjan Varma, personal finance evangelist and founder at RupeeManager, says, personal finance is not rocket science and you can quickly learn all the ropes.

> Tell us something about yourself and initiatives that you have taken so far to spread personal finance literacy. How has been your journey? Going ahead, what are your plans?

As founder, RupeeManager, I am in the business of organizing information on personal finance and facilitating people to achieve their financial goals. I do this through my blog/website, financial planning workshops and software for financial planning and tracking money related things.

The response of my blog and website has been exciting enough to help me focus on this vertical fulltime. We are building interactive learning sites with infographics, videos, games and compelling content so that this subject of personal finance becomes interesting.

> In India, when it comes to wealth management and financial planning, people do lack initiatives. Why is it taking long for these concepts to gain popularity in India? How long will it take to pick up momentum?

It`s not just about India. As human beings, we are not hard wired to be responsible with future planning about money. In Mahabharata, Yudhisthira was asked by a Yaksha that what is the most amazing thing in this world. Yudisthira answered that all of us are going to die or be old and die, but nobody visualizes that for him/herself.

That`s why we say we are forced to take up insurance even though it`s a rational thing to do. But slowly people are becoming more responsible. I see a lot of young people interested in personal finance compared to what we were in our youth. This is a good sign.

> Most of us think that we don`t have enough money to do financial planning. According to you, is it the ``time`` or ``money`` factor that prevents people to go for it?

You need just Rs 500 to start a SIP. So it`s not about time and money. It`s more about our inbuilt mental blocks that I mentioned about above. We also need to be aware of these limiting thoughts and then we can change them automatically.

> What do you feel is the biggest mistake people make regarding money management, and how can they be corrected?

The biggest mistake is avoiding the issue and not getting started. Once you confront the issue, the rest is easy. Personal finance is not rocket science and you can quickly learn all the ropes.

> What are your thoughts on ULIPs after the recent IRDA regulations? How would you recommend going for new ULIP plans? What things one should consider before choosing a plan?

After Sep. 1, 2010, the life insurance companies have come out with new ULIPs where they have significantly curtailed down the charges. This is because as per the IRDA, the difference between the gross yield (actual return earned by the fund) and the net yield (yield after deducting the actual expenses incurred by the fund) should not be more than 3% in case of products with tenure of less than 10 years and 2.25% in case of products over 10 years.

I don`t think the charges are the only factor to decide in favor or against the ULIPs. I think the most important factor is the professional expertise of your agent. Insurance is a long term contract and the post buying services are very important.

> What are the parameters that matter you most when selecting funds. What would you recommend investors on equity and debt side?

Before zeroing in on funds, we need to assess our risk profile, investment goals and arrive at an asset allocation rule for ourselves.

Only after doing the above, we can go forward and analyze funds that suit our requirements. The above process will help you find the parameters for selecting funds that suits you the most.

> What is your view on the current market scenario? What are the risks an investor should look out for in 2011?

I am not competent enough to comment on the markets. Though I believe in the equity markets and the India growth story and that they can help build wealth in the long term.

> Can you give a brief overview of how should one`s portfolio be at different ages... E.g. at 25 years, 35 years, 45 years etc.

I do not believe in generic advice. Thumb rules such as the portfolio at certain ages can easily mislead.

But if you love readymade formulas, here`s some from allocation strategies: To make it simple, I have taken out the percentage that should be in your saving account (liquid instrument)

> Older investor (Conservative) : 30% equity; 70% debt
> Older investor (Aggressive) : 50% equity; 50% debt
> Young investor (Conservative) : 80% equity; 20% debt
> Young investor (Aggressive) : 95% equity; 5% debt

> What`s the one thing that you would change in the financial services industry, if you had the power to make that happen?

I would like to see greater transparency from the giant financial institutions. But while I would like to see the institutions being more responsible, I also see the need for individuals to be responsible for what they buy and not just blame the agents and institutions. Recently, a friend remarked that it`s more mis-buying than mis-selling!

> What three books related to personal finance would you recommend every person read?

The three books that I would recommend are:
1. Value Investing and Behavioral Finance by Parag Parikh
2. Retire Rich: Invest Rs 40 a day by PV Subramanyam
3. Stocks to Riches by Parag Parikh

> Any other thoughts, comments would you like to share with our readers?

I am grappling with how to create platforms and programs that work both online and offline and help people manage their finances.

We are building interactive learning sites with infographics, videos, games and compelling content so that this subject of personal finance becomes interesting. I believe that the young and educated Indian is becoming smarter with their money and I hope to work with them to help them handle their finances.

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