Concerns about online trading security will always be there, thanks to all the scary stories you read online about computer hackers and viruses. However, all online brokerages use high-end encryption to scramble data so that only the intended receiver can use it. Stealing information that is encrypted is virtually impossible even if they seem simple in those horror stories of online trading you may have heard from a friend or colleague.

Image Source – Trading

But as they say, “Prevention is better than cure.” Here are twelve amazing ways to protect your personal and financial data when trading online.

  1. When you are opening a demat account, create a password that is complicated and difficult to guess. Avoid your names, birth-dates, wedding dates, etc. Also, never share your password with anyone ever, and do not write it down on a piece of paper or your diary.
  2. Just having a complicated password is not enough, you must maintain it too. So, change the password every quarter. Though web browsers offer the ‘remember your password’ facility, avoid it. And do not use the same password for all your online transactions.
  3. Avoid using your internet accounts from a cyber cafe, as chances are no proper anti-virus or anti-phishing software are installed on these machines.
  4. Brokers will provide a Two Factor Authentication [2FA] security to help maintain a safe and secure trading account. This security level will require you to enter an OTP password sent via an email or mobile.
  5. Do not entertain phone calls and emails that try to extract your trading and banking details. These people are probably scammers and typically request for an OTP. Never share your OTP password with anybody else.
  6. While using your trading account, if you feel that your system has become too slow or there are too many pop-ups opening, log out and change the password immediately from another machine. Chances are that the security of your PC or laptop has been compromised.
  7. When trading, remember the 3 golden rules –
  • Never let your trading screen remain unattended
  • Always log out of your trading account instead of simply closing the window
  • Regularly clear the cache
  1. While it’s fine to use Wi-Fi to access your internet, you must avoid free Wi-Fi services offered at hotels and airports because these are mostly insecure. A dedicated connection for internet trading is always preferred.
  2. Avoid downloading unknown software on the device you use for trading, no matter how entertaining they seem.
  3. It’s wise to have a personal firewall with anti-virus and anti-spyware components. These firewalls may have a small price tag attached to them but consider it an investment.
  4. When trading, type your trading account name in the status bar. Don’t use any short cuts or hyperlinks. Also, ensure that the trading address starts with https:// and not http:// to be sure that you are using a secured and safe site.
  5. Stay away from unauthorized trades; one smart way to do this is to cross-check your personal trade sheet, order book, and trade book. Also, monitor the contract notes closely and reconcile it with your demat account and bank account at least once a week.

Given all the potential risks we are susceptible to, it is always better to ensure that we are trading safely and securely.

The usage of mobile apps in India grew by 43% in 2016, with the finance category witnessing a significant increase in adoption, according to a study by Yahoo Flurry Analytics. The fact that phones are omnipresent in the lives of today’s ordinary consumer, it’s easy to see why many Indians are opting to use financial apps to help them manage their spending, debt, savings and investments. With the right financial app, any young millennial aiming to live a financially responsible life can have their dream turned into a reality.

Image Source – Finance

Here are the most popular classes of apps that can have a positive impact on your financial future:

Debt management apps

While most people might try to avoid them, loans and credit play an important in the financial status of most people, not to mention, in fulfilling emergencies. In fact, 29.8 million credit cards had been issued by 31st March 2017, according to the Reserve Bank of India. Even as you seek financial options like personal loans from lenders, it’s always wise to find ways you can improve your income and get your finances in order so as to avoid too much borrowing. Otherwise, without the right approach, repaying all this debt can be a challenge. Luckily, there are some few apps that can help you plan a strategy for repaying your loans. Apps such as Debt, Qoins, Bury.Me and Digit can not only help reduce your debt levels but also help in preventing you from spending more than you earn using your credit card.

Strategic saving apps

With India poised to become the third-largest consumption economy by 2025, it’s important to know that the little things you purchase daily have a significant impact on your spending, savings and overall financial future. For instance, simple choices such as drinking coffee every morning in a cafe could easily eat down on how much you can save for investing elsewhere. With apps such as Mydala, Little App, Pennyful and GrabOn, you can make the right choices on where to buy items. Most of these apps also have great suggestions of the best places to get coupons and take advantage of discounts. Although a slight discount might seem minor at first, it will affect your savings cumulatively.

Apps geared for investment

The world of investment can both be intimidating and challenging for a person with little to no knowledge about which area will be most profitable. In fact, some people might make emotion-driven investments which can turn out to be entirely unfruitful. On the other hand, working with financial advisors who charge high fees is not for everyone. Online apps provide both the young and old investors with unbiased information on where to be put their money at a low cost and with tight security features. Apps such as Acorns, Betterment, Robinhood, and Stash are some of the best apps on the market for those looking to get investment tips.

Financial responsibility is essential for a sustainable future. The above apps are only but tools to help you manage your finances better. Consider using them for making smarter money decisions.

The best way to deal with a financial crisis is by borrowing from external sources. Many banks and Non-Banking Financial Companies [NBFCs] offer loans at competitive interest rates and flexible repayment schemes. Due to the numerous features and benefits offered, loans have become a popular option among the masses.

Image Source – Personal Loans

An increasing number of individuals are now opting for personal loans. Such loans, also known as unsecured loans, are obtained without the need for collateral. You are required to repay the principal amount along with the specified interest over a period of time, known as the tenure. The installments paid over the loan tenure are known as Equated Monthly Installments [EMIs].

Following are some basic features and benefits of an unsecured loan.

  • High borrowing amount
  • Flexible repayment options
  • Competitive interest rates
  • Minimal paperwork
  • Quick loan disbursal
  • Online approval

Uses of an unsecured loan

Banks and NBFCs do not question the purpose of borrowing such a loan and hence you may use a personal loan for any purpose you seem fit. You may use the amount received to cover emergency medical expenses or may use it to cover your wedding expenses. You may also use such a loan to pursue your further education, to cover expenses related to a domestic or international holiday, to consolidate debt, or to renovate your home, among others. Such a loan is also useful for repairing your vehicle, making down payment for a new home, or for starting a new business venture.

Eligibility criteria

The eligibility criteria for applying for such a loan vary from lender to lender. However, the basic criteria remain the same. Applicants need to be Indian residents and in the age group of 21 to 58 years. Applicants may be employed at public companies, Multi-National Companies [MNCs], or private companies. It is also mandatory to have a basic educational qualification, that of a graduate. Financial institutions also require applicants to have a minimum net monthly salary, say around INR 20,000, with a minimum work experience of one year.

Documentation required

Upon fulfilling the eligibility criteria, you may submit your application at the bank of your choice. Along with the application form, it is necessary to provide supporting documents such as identity proof, residence proof, age proof, signature proof, photograph, and ownership proof. Banks also mandate the submission of income details and bank account statements. You may display the originals for verification and may submit self-attested copies.

A personal loan offers relief from your cash crunch. Instead of tapping into your life savings, you may borrow such a loan to cover contingencies or any other financial obligation. By doing so, you may meet your expenses without any financial strain. You may systematically repay your EMIs and budget your finances accordingly.

Financial markets are subjects to volatility. The price of securities, commodities, and currencies, among others, fluctuate due to the market volatility. In order to combat these fluctuations effectively, investors deploy numerous strategies to avoid losses. One of the most popular strategies to reduce the risk of market volatility is hedging.

Image Source – Derivatives

It is a known fact that derivatives are widely used for hedging. The value of this financial security is obtained because of an underlying asset or a group of assets. Based on the price fluctuations of the underlying asset, the value of the derivative also changes.

A major benefit of derivatives is the minimization of risk. It transfers risk from those opposed to the risk to high-risk individuals. Besides, it helps determine current and future prices. Moreover, you may enjoy increased savings and investments in the future.

Types of derivatives

It is important to understand the various types available in the derivatives market. Following are the four most common types.

Future contracts

Simply put, future trading is a contract to sell or purchase a security at a predetermined price at a specified time at a later date. Based on the underlying asset that is being traded, future contracts detail the quantity and quality of the security. Future contracts trade on futures markets and are subject to a daily settlement procedure.

Options contracts

Options trading is a contract wherein the buyer does not have the obligation, but the right, to sell or purchase a security at a pre-determined price on a particular date or during a certain period of time. There are of two types of options – put option and call option. Call options offer the buyer the right, but not the obligation, to purchase a security at a pre-determined price during a certain period of time or on a specific date. Puts, on the other hand, offer the buyer the right, but not the obligation, to sell a security at a pre-determined price during a certain period of time or on a specific date.

Swaps

Swap is a contract to exchange future cash flows based on a prearranged formula. There are two common types of swaps, namely interest rate and currency swaps. As the name suggests, interest rate swaps indicate swapping the interest cash flows of the same currency. Currency swaps, on the other hand, involves swapping the interest and the principal of equal value in another currency.

Forward contracts

A forward contract is a customized contract between a buyer and seller, where they buy or sell a security or commodity at a later date at a price agreed upon today. Securities traded in a forward contract generally include precious metals, commodities, and natural gas, among others.

You may, therefore, use the above-mentioned types to tackle hedging effectively. You may use futures and options, the two most common types of financial contracts, to trade on the stock exchange market.

Shoot for the moon. Even if you miss, you’ll land among the stars. This quote sounds inspiring. In other words, it says: follow your goals even if they appear to be a tad improbable. You do so even when you draw up a financial plan for yourself, especially if you are planning for your retirement.

Image Source – Retirement Planning

In this article, let’s find out why the traditional retirement plan may seem a bit unrealistic but also show how an unrealistic goal can actually be achievable.

Unrealistic goals

Small exercise: go online and use a retirement calculator. The calculator asks you to fill in a few answers about your age, current salary and expenses. Based on this data, the calculator throws up a number. This is roughly the amount you would have to save in order to enjoy a comfortable retirement. If this number is around Rs 5-10 crore [or even more], don’t be alarmed. This is the reality.

Most people are surprised about the ‘unrealistic’ retirement goals. In truth, traditional retirement options end up being unrealistic when the time comes for you to retire.

Traditional retirement plans

Pension plans have been widely popular among Indians for a long time. However, these plans do not offer very high returns. And in the end, they end up covering a small portion of your varied expenses post your retirement.

Employee Provident Fund [EPF] and Public Provident Fund [PPF] are good saving tools, no doubt. But if you see the trend, the interest rates on these plans have been gradually decreasing over the years.

In the last three years itself, EPF has seen a steady decline in interest rates. In comparison, the rates were as high as 12% two decades ago [Source]. This downward trend can pose a problem in the long term.

Inheritance

Assets such as gold, silver and real estate have passed on from one generation to the other for a long time. Many people take comfort in thinking that their inheritance would take care of their expenses during retirement. This is partly true. However, you cannot overestimate the extent of these assets. When you consider factors such as rise in inflation, medical expenses and lack of other sources of income, the inheritance can vanish quickly.

Post-retirement job

Once you retire from your job, you do have the option to look for other sources of employment during your retirement. For instance, you can take up teaching jobs at a local school or university to supplement your income. But this is not an option for everybody. Many people prefer to spend more time with their friends and family during this phase in life. And even if you do work during your retirement, there is the question of how long. As you grow older, it can get tougher to meet the physical demands of a regular job.

What you can do?

What if you had a simpler alternative to the above options? Yes, you heard right. Investing money! That’s all you need to do for a creating a solid retirement plan. The trick is to start investing at a young age. In other words, don’t think of retirement planning as you your retirement day nears. Instead, you should start investing right from the moment you start your career.

For instance, even investing as little as Rs 5,000 each month in a Systematic Investment Plan [SIP] can help you create a large corpus of money by the time you retire.

Here is a table of the benefits of early retirement planning [Source]

Unrealistic?

Well, check again. By investing just Rs 5,000 each month, you can create a lump sum of Rs 4.3 crore!! No fancy investment schemes or plans. Just a simple SIP investment each and every month can help you enjoy a comfortable retirement.

Also observe how the lump sum amount decreases drastically as you delay your retirement planning. This shows how important it is to kick-off your retirement planning early. Even a delay by a decade can create a large setback for your retirement plans.

Conclusion

Retirement is a period of life when your expenses continue [and grow, in fact] but your income stops. And to live comfortably in this stage, you need a good financial plan. Unfortunately, a lot of people ignore this until it is too late. But the best part is, by starting early, you don’t need to worry about it too much. Just invest steadily and you can create a large corpus of money for your retirement. Imagine your happiness when you find out that your account has Rs 4 crore at the time of retirement! Now that calls for a great retirement party!!

Travelling can be fun. But what if you took a trip by yourself just on a whim? Here’s what would happen – You would probably get lost in an unfamiliar city and you wouldn’t know where to go. And during this whole time, you would probably chide yourself for not planning ahead.

Image Source – Goal based investing

Sure, you may think that you’d meet your soulmate and the two of you may have a grand adventure. But unless you are in the middle of a Bollywood film, chances of this happening are very unlikely.

Investing without a proper plan can be quite similar to travelling without preparation. In this article, let us find out how goal-based investing can make your investment journey a lot easier.

Vague investments vs well-defined goals

Here are two investment approaches:

  1. I want to earn a lot of money
  2. I want to earn Rs 1 crore in the next 10 years so that I can buy a 2 BHK house

Can you spot the difference between the above two statements?

The first statement is very vague but the second one is a well-defined investment goal. When you have clear-cut investment goals, you are well aware of the finish line. You know how much money you need to earn and you are also aware of the deadline. With these inputs, your investment purpose becomes clear and you can work towards achieving it.

Identify the best investment choices

Lets continue with the above example of buying a house.

Here, you know that the financial goal is Rs 1 crore. The time limit is ten years. In this situation, where should you invest? There are many investment choices in the market but what is the best choice that can help you meet this goal in the best manner possible?

Unless you have a huge initial capital, debt instruments may be out of the question because the returns may not be high enough to earn the specified amount in the time period. On the other hand, you could invest in equity. Here, you have the ability to earn higher returns. For example, by investing Rs 40,000 per month in an equity mutual fund [at 14% per annum], you could end up with Rs 1.04 crore by the end of ten years.

Similarly, if you have a short-term goal like taking a vacation with your family in the next 12 months, it may be better to invest your money in a liquid fund or a short-term mutual fund. Identifying the right investment avenue becomes clear when you invest for specific goals.

Monitor your investment journey

There are a lot of investment choices available for you. Fixed deposits, bonds, mutual funds, stocks, real estate, gold and so on. For instance, even if you put all your money in a low-interest fixed income instrument it would be considered as an investment. But is that the best way to deploy your money? At the end of your career, you don’t want to find out that your retirement fund is not big enough.

Avoid this situation by identifying your investment goals and working towards them. You can go online and use an investment calculator to find out your future financial requirements. And during the investment journey, do not forget to regularly monitor if your investments are on the right track or not.

Segregate your funds for different goals

Everyone has different financial goals. However, not all goals are the same. You may have short, medium and long-term goals. In addition, each goal can differ in terms of importance and urgency.

For example, taking an exotic vacation may not be as important as clearing your credit card debt.  By identifying these differences, you can channel your funds more appropriately.

Here is another example. When people invest without specific goals, they tend to dip into their savings whenever any financial need arises. Your son needs money for a new course at college: dip! You need to renovate your kitchen: dip! Pretty soon, your fund amount doesn’t look as large as it used to be. This is not to say that you shouldn’t finance your child’s education. It means that you should explore all options in front of you. Perhaps, you could take an educational loan to pay for the course. This way, you protect your retirement fund while helping out your son at the same time.

To sum up, investing is good but goal-based investing is better. With this approach, you can clearly identify your financial goals and meet them comfortably at the right moment in time.

Where once, words like lending, borrowing and loans belonged to the confined walls of a bank, these terms have now grown to the unconfined boundaries of technology.

Fintech i.e. Financial Technology is a term used to describe technology disruptive start-ups that are changing the way traditional financial services are carried out. Any app that you use for availing financial services all fall under the Fintech ambit, whether you’re talking about digital wallets or robo-advisors. Even lending has transformed significantly thanks to Fintech!

This means one can safely bid adieu to long queues, heavy paperwork, continuous rejection and slower procedures when it comes to borrowing loans. Fintech makes use of big data, cloud and digital technologies to acquire, retain, underwrite and monitor customer’s behaviour at greater, efficient speeds and at betters costs and accuracy.

Abhishek Kothari [Founder of Indian digital lending platform FlexiLoans] in his article in VCCIRCLE has thrown light on how Tech & Data has driven the fintech lending space in India

Tech: With cloud-based IaaS [Information-As-a-Service] models and API [Application Programming Interface] banking gaining rapid adoption, it is now possible to have the stack ready with minimal capital expenditure. In fact, technology has been a great asset for companies across the globe to gain speed to market and grow as fast as the more established counterparts in other countries. In many countries, disbursing and collecting installments has been made possible through seamless banking integration but India is yet to see a mature solution around it. UPI is a step in the right direction but still needs a lot of work before lenders can use it.

Data: Alternative finance hinges on the availability of newer data sources to make risk decisions. More data allow informed decision making and lending to segments which were otherwise underserved. On this metric, countries like the US, UK and China have been far ahead because of connected data sources like bank accounts, companies database, tax data, etc. while India lags behind as many data sources are still inaccessible [e.g., litigation database], insufficient [e.g., bureau penetration] or inaccurate [e.g., business ratings]. However, the government has put huge focus on this and programmes like UIDAI and IndiaStack are enabling this at a good pace.

He’s also spoken about the unique problems faced by Indian retailers and how Fintech has helped overcome some of them

Fintech lending platforms provides credit to small segments

According to him small Indian businesses are really unique and in the absence of government aid they fall back on the informal sector for funding. That’s why fintech companies in India try to innovate on the acquisition model to provide finance to this segment. They use partnership models wherein they either partner with e-commerce platforms for borrowers or offline retailers through point of sale providers.

Fintech solves the problem to identify risk of borrower

But, after the acquisition, the bigger problem is assessing the borrower’s risk of default. That’s where the ‘alternate lending’ methodology helps. Because of a thin credit file or sparse financials in this segment, new-age lenders have developed innovative data science-led approaches to solve this problem. Various sources like social sites, device data, digital footprint, seller reviews, etc. are being used to develop surrogate yet highly correlated indexes that can potentially replace or enrich traditional models.

They solve the problem to provide credit at low costs

Another problem banks face is the difficulty to carer to small business segments. These segments want quick, unsecured, small-value loans but because of the cost-heavy branch-based operating model, it is sometimes unviable for banks to lend small-value loans. New-age lenders have solved this very efficiently by using cutting-edge technology to bring the acquiring, processing and servicing cost down such that they are profitable for small value loans as well. This is really the birth of ‘digital lending’.

Collection of data is super useful to a company to understand the credit worthiness of a customer. Here’s how this data is collected

Suppose you opt for ‘Pay as EMI’ while online shopping, this information is captured and gives an insight on your payment history. According to one Fintech startup founder, “Someone has to look at a range of these financial, behavioural, and social attributes, make sense of them and make the data available to institutions in a manner that they can trust and use for lending.”

He believes that, “Most institutions are completely missing out on maximizing how they use old data, let aside new data and new insights. Alternative data may be the answer”.

He explains how sometimes the name and details on an Aadhaar card may not exactly match the one name on the PAN card. Location data might suggest that the person is living elsewhere. Or an individual may on paper be working with Company X, while social data suggests that they’ve already moved on to Company Y.

For a lender all these are extremely important and valuable pieces of information. If used they could significantly bring down default rates. He also throws light on how Mobile Data in India might not exactly be clean because of use and throw sim cards. But that’s when algorithms come into picture to counter this problem.

References1, 2, 3 and 4

Retirement planning is like jogging. You know you start doing it today but you keep postponing it. Your retirement may be decades away but that doesn’t mean you ignore it. Proper planning today can help you enjoy a great retirement life in the future. However, many people make a lot of mistakes when it comes to retirement planning.

Image Source – Retirement Planning

Here are a few you should avoid:

Late start

Many investors avoid retirement planning until the last moment. This can negatively impact your retirement corpus. There is a common saying when it comes to road trips: start early, drive slowly and reach safely. This principle can be applied to retirement planning too. The earlier you start investing, the greater will be your final corpus. Even a difference of ten years can make a huge difference to your retirement fund.

Take the following example:

Suresh starts investing for his retirement at the age of 30. He regularly invests Rs 10,000 per month in a SIP. The fund earns him 15% rate of interest. His colleague Giridhar starts investing at the age of 40. He invests Rs 12,000 per month. Both of them retire at the age of 60. At the end, Suresh has amassed a corpus of Rs 7 crore. On the other hand, Giridhar has earned only Rs 1.8 crore.

Lack of proper planning

Not many people know how much money they need for their retirement. So even if they invest for retirement, the returns they earn can be much lower than what they would actually need. For example, Sanjay creates a corpus of Rs 4 crore for his retirement. He expects that this amount will be enough to finance his expenses for 20 years. But what if the funds are not enough?

The first step is to identify your needs and requirements during your retirement. How much money do you need to maintain your lifestyle? Once you retire, your income stops but your expenses continue. In fact, they may even increase during the retirement phase. You need to account for all these expenses and provide for them.

Underestimating cost of health care

In this current day and age, the cost for quality health care is sky rocketing. Older people are more exposed to health concerns. And as a retired person, it is extremely important to ensure that you are prepared to meet these expenses. Otherwise, your hard earned savings can quickly go toward medical expenses leaving your finances depleted.

Make sure that you buy a good health insurance plan for yourself and your spouse for the retirement phase. Also create an emergency fund in case you need to pay for medical expenses urgently.

Poor investment decisions

If you have Rs 1 Lakh to invest for your retirement, you can invest it anywhere you choose. But remember that different investment avenues offer different returns. For example, bank savings accounts offer around 4% returns while fixed deposits give around 8%. In comparison, equity mutual funds and stocks offer anywhere between 10~15%. Sometimes, these returns can be even higher.

By choosing a wrong investment avenue, you can lose out on good returns in the long term. It is ideal to invest in equity funds for retirement. This way, you can benefit from high returns at a faster rate. And as for the risk, it shouldn’t be a great issue since the long investment term can help you comeback from any downfalls in the market.

Dipping into your retirement fund

Praneet had been meticulously saving for his retirement when his son announced that he was going to do an MBA course in Australia. The course cost around Rs 20 Lakh rupees. Not wanting to disappoint his son, Praneet decided to dip into his retirement savings to fund his education.

A lot of parents dip into their retirement funds to finance other financial goals that come along the way. This is not a wise step. This is because it is possible to finance your son’s education through other sources such as bank loans. But once you take out money from your retirement fund, it may not be possible to rebuild the corpus. This can be especially problematic if you are close to retirement. As a result, your fund would be depleted and you wouldn’t be able to enjoy your retirement as you hoped. Always seek out better alternatives to finance your other goals. Don’ dip into the retirement fund unless it is absolutely necessary.

Conclusion

Retirement is like a second childhood. People discover new hobbies and a new zest for life. But to make it truly special and comfortable, you need to have a solid financial backup. And for this, you need to start planning for your retirement today.