"For A Secured & Wealthier Tomorrow..."

March 2018

Difference Between Price, Cost And Value

Price, value and Cost are the most frequent words we use to hear now and then from our friends or family members. Be it a product, service, property, investment etc. this three are the most common words used to describe a particular point. 

But, do you know that all this three values are not at all same???

Do you know that you can't use any word at anytime???

All this three terms are totally different and are applicable differently at different time and for different product.

Today, in this article I will try to explain all this three terms and there differences in a very easy language possible.

Whenever we went to the market to purchase anything we see that there are millions of products with different shape, size, color, features, brands etc. from which we have to select an item. While going through a product first question comes in our mind is - What is the price of this product? then, What would be the cost of this product? then, What is its value for me? There are slight difference between all these three terms - price, cost and value which are very much important to know. So let's have a look on it.
First of all let's understand this three terms can be very basically and simply understood as,

Price: Price is the money paid to the seller.

Cost: Cost is the amount of inputs involved in the manufacturing of  a product.
Value: Value is what product or service pay to the customer.

Now, let's compare all these three terms on the basis of different criteria as follows:

a) Meaning:

Price is the amount paid to purchase a product.
Cost is the amount spend to manufacture a product.
Value is the utility of good or services.

b) Ascertainment:

Price is ascertained from consumer's perspective.
Cost is ascertained from producer's perspective.
Value is ascertained from user's perspective.

c) Estimation:

Price is estimated through policy.
Cost is estimated through fact.
Value is estimated through opinion.

d) Impact of variations in market:

Prices of products increases or decreases.
Cost of input rise or fall.
Prices remains unchanged.

e) Money:

Price can be calculated in terms of money.
Cost can also be calculated in monetary terms.
Value cannot be calculated in terms of money.

Key Differences Between Price, Cost And Value:

  1. Price is what we pay for goods or services; Cost is the amount of inputs incurred in producing a product by a company and Value is what goods or services pay us i.e. worth.
  2. Price is calculated in numerical terms, Cost is also calculated in numerical terms, but Value can never be calculated in numbers.
  3. Price is same for all the customers; Cost is also same for all the customers while the Value varies from customer to customer.
  4. Price is estimated through the price policy; cost is assessed on actual expenditure incurred on manufacturing a particular product, but the estimation of value is based on customer’s opinion.
  5. The Ups and downs in the market will affect the price and the cost of any product while value remains unaffected.
  6. The ascertainment of price is done with the view of the consumer; the cost is ascertained from producer’s view whereas the ascertainment of value is done from the user’s point of view. 
Examples For Better Understanding And Differentiation:

Price Vs Cost

When we purchase a car, we pay the amount for it. The amount paid by us as a customer is its Price while the amount invested by its company for manufacturing it is its Cost. The price of a product is always more than its price cost because of the addition of the profit margin of the manufacturer and dealer.

Cost Vs Value

If you are a pen manufacturer who manufactures thousand of pens everyday then the cost of its production is your companies point of concern as you can manufacture more pens at lowest prices. But, the value of the pen is decided by your customer who is the final buyer of your pen which he will use on daily basis. If he thinks that the value of your pen is worth buying then he will purchase it.

Value Vs Price

Here, lets take Water and Diamond for comparison as examples. Without water we can't survive, still its price is very low. While diamond is just a materialistic thing which is ornamented for our bodily and nobody is going to die without it still, its price is very high. Reason behind this is, value of water is very high for us, it is available at low price while diamond is priced very high but the value of it is very low for us.

I hope that you are clear with the main and basic difference between these three important terms which we use frequently in our life. If you have other examples in your mind then let us know by commenting below.

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Low Risk High Return Mutual Funds

There are thousands of mutual funds schemes from 44 asset management companies to choose from. The biggest question arises here is then, in which fund to start the investment?

Before selecting a fund you should study its Risk-Return relation. Then after you can start investing your valuable money to give more value to it. Here in this article after considering the risk and return factor I am giving you the list of ten mutual fund schemes in which you can start you investment.

I have selected total 10 mutual funds Schemes on the basis of various important parameters like the type of fund, asset under management, returns (1, 3 & 5 year), Alpha, Standard Deviation etc.

Before moving to our list let me first clear you the very important concepts called Alpha and Standard Deviation in a short and very simple language.
  • Alpha: Higher the alpha, better is the fund to start investment.
  • Standard Deviation: Lower the standard deviation, better is the fund for investment.
Here is the complete list:
Low Risk High Return Mutual Funds

1. Kotak Select Focus Fund
  • Type: Large Cap Fund
  • AUM: More than 17,800 crore 
  • Return: 1 Year - 18.49% | 3 Year - 12.83% | 5 Year - 20.37% 
  • Return Since Inception: 15.08%
  • Alpha (Fund/Category): 1 Year - 2.5/1.7 | 3 Year - 6.4/3.7 | 5 Year - 6.5/3.3
  • Standard Deviation (Fund/Category) : 1 Year - 12.1/12.1 | 3 Year - 14/14 | 5 Year - 14.6/14.6
2. Aditya Birla Sunlife Frontline Equity Fund
  • Type: Large Cap Fund
  • AUM: More than 20,500 crore 
  • Return: 1 Year - 17.08% | 3 Year - 10.05% | 5 Year - 16.87%
  • Return Since Inception: 22.01%
  • Alpha (Fund/Category): 1 Year - 0.4/0.9 | 3 Year - 3/2.3 | 5 Year - 4/1.8
  • Standard Deviation (Fund/Category) : 1 Year - 11/11.3 | 3 Year - 13.1/13.6 | 5 Year - 13.9/14
3. ICICI Prudential Focused Bluechip Equity Fund
  • Type: Large Cap Fund
  • AUM: More tha 14,500 crore 
  • Return: 1 Year - 15.69% | 3 Year - 8.01% | 5 Year - 16.39% 
  • Return Since Inception: 14.89%
  • Alpha (Fund/Category): 1 Year - 4.6/0.9 | 3 Year - 4.4/2.3 | 5 Year - 4.6/1.8
  • Standard Deviation (Fund/Category) : 1 Year - 9.5/11.3 | 3 Year - 13.2/13.6 | 5 Year - 13.3/14
4. HDFC Top 200 Fund
  • Type: Large Cap Fund
  • AUM: More than 16,000 crore 
  • Return: 1 Year - 12.20% | 3 Year - 6.83% | 5 Year - 14.83% 
  • Return Since Inception: 20.35%
  • Alpha (Fund/Category): 1 Year - 0.4/0.9 | 3 Year - -0.6/2.3 | 5 Year - 0.1/1.8
  • Standard Deviation (Fund/Category) : 1 Year - 12.1/11.3 | 3 Year - 15.9/13.6 | 5 Year - 17.1/14
5. SBI Bluechip Fund
  • Type: Large Cap Fund
  • AUM: More than 18,000 crore 
  • Return: 1 Year - 14.32% | 3 Year - 8.40% | 5 Year - 17.60% 
  • Return Since Inception: 11.48%
  • Alpha (Fund/Category): 1 Year - -2.7/0.9 | 3 Year - 4.9/2.3 | 5 Year - 6/1.8
  • Standard Deviation (Fund/Category) : 1 Year - 11.3/11.3 | 3 Year - 12.4/13.6 | 5 Year - 12.9/14
6. Franklin India Prima Plus Fund
  • Type: Multi Cap Fund
  • AUM: More than 12,000 crore 
  • Return: 1 Year - 12.23% | 3 Year - 8.03% | 5 Year - 18.40% 
  • Return Since Inception: 18.81%
  • Alpha (Fund/Category): 1 Year - -3.1/1.7 | 3 Year - 3.4/3.7 | 5 Year - 4.7/3.3
  • Standard Deviation (Fund/Category) : 1 Year - 11.7/12.1 | 3 Year - 12.7/14 | 5 Year - 13.5/14.6
7. ICICI Prudential Value Discovery Fund
  • Type: Multi Cap Fund
  • AUM: More than 17,400 crore 
  • Return: 1 Year - 10.13% | 3 Year - 5.90% | 5 Year - 20.57% 
  • Return Since Inception: 21.56%
  • Alpha (Fund/Category): 1 Year - -3.9/1.7 | 3 Year - 1.2/3.7 | 5 Year - 6.1/3.3
  • Standard Deviation (Fund/Category) : 1 Year - 8.5/12.1 | 3 Year - 12.5/14 | 5 Year - 15.4/14.6
8. HDFC Equity Fund
  • Type: Multi Cap Fund
  • AUM: More than 23,000 crore 
  • Return: 1 Year - 15.29% | 3 Year - 7.49% | 5 Year - 16.53% 
  • Return Since Inception: 19.36%
  • Alpha (Fund/Category): 1 Year - -0.9/1.7 | 3 Year - -1.6/3.7 | 5 Year - 0.4/3.3
  • Standard Deviation (Fund/Category) : 1 Year - 12.8/12.1 | 3 Year - 16.7/14 | 5 Year - 18/14.6
9. HDFC Mid Cap Opportunities Fund
  • Type: Mid Cap Fund
  • AUM: More than 20,000 crore 
  • Return: 1 Year - 18.67% | 3 Year - 13.91% | 5 Year - 26% 
  • Return Since Inception: 17.48%
  • Alpha (Fund/Category): 1 Year - 1.7/2.1 | 3 Year - 2.2/3 | 5 Year - 6.8/5.1
  • Standard Deviation (Fund/Category) : 1 Year - 12.9/13.4 | 3 Year - 14.4/15 | 5 Year - 15.7/16.19
10. Axis Long Term Equity Fund
  • Type: ELSS (Tax Saving) Fund
  • AUM: More than 16,500 crore 
  • Return: 1 Year - 23% | 3 Year - 7.77% | 5 Year - 22.96% 
  • Return Since Inception: 18.56%
  • Alpha (Fund/Category): 1 Year - 1.5/2.4 | 3 Year - 5/4.4 | 5 Year - 8.6/4.3
  • Standard Deviation (Fund/Category) : 1 Year - 12.5/12.4 | 3 Year - 12.3/14.2 | 5 Year - 13.4/14.8

MCLR and Bank Loan

Today, it has become very easy for a erson to buy a home, car, cell phones etc. because of the facility of bank loans. Maximum people apply for the bank loan when they buy their dream house. But it never ends there. Do you know anything about MCLR rates? How it affects your home loans or any loans which you have taken from your bank? What you should opt while taking a loan? 

In this article, I will clear all the questions related to MCLR. Read further to know it in detail:
What is MCLR?

The Marginal Cost of funds based Lending Rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend (give you the loan), except in some cases allowed by the RBI. It is an internal benchmark or reference rate for the bank. MCLR actually describes the method by which the minimum interest rate for loans is determined by a bank - on the basis of marginal cost or the additional or incremental cost of arranging one more rupee to the prospective borrower.

As the need for bettering the lending rate system was rising, the MCLR methodology for fixing interest rates was introduced by the Reserve Bank of India with effect from April 1, 2016. This new methodology replaces the old base rate system introduced in July 2010.

How does a MCLR-linked loan work?

Under the MCLR scheme, loans works differently from the base rate regime. Two terms you should familiarise yourself with is “Reset Clause” and “Spread”.

Reset ClauseOn the day your loan is sanctioned, the MCLR prevailing on that day will be applicable on your loan. There will be reset dates allotted to your loan, and the interest rate will change to the MCLR prevailing on the reset date. The periodicity for a reset is usually 1 year or lesser depending on the agreement with the bank.

For example, your loan is sanctioned on April 1st with a reset period of 1 year. The prevailing MCLR on 1st April 2016 is 10% per annum. This will be your interest rate for 1 year. If the rate falls to 8% during the year, this will not affect your rates. Your loan will continue at the same 10% as it is valid for 1 full year. On 1st April 2017, the interest rate will change to the prevailing rate on that day.

Spread - The loans linked to MCLR comes with a spread. Banks can spread their MCLR over 25 basis points. The spread, in simple terms, means the amount or margin that you have to pay over the MCLR. Banks are free to set the range of spread on different loans.

For Example, if the MCLR is 11%. But the rate of interest offered by the bank is 11.25%. The difference is the spread imposed by the bank, i.e., 0.25%.

Reasons for introducing MCLR

RBI decided to shift from base rate to MCLR because the rates based on marginal cost of funds are more sensitive to changes in the policy rates. This is very essential for the effective implementation of monetary policy. Prior to MCLR system, different banks were following different methodology for calculation of base rate/minimum rate - that is either on the basis of average cost of funds or marginal cost of funds or blended cost of funds. 

Thus, MCLR aims:
  • To improve the transmission of policy rates into the lending rates of banks.
  • To bring transparency in the methodology followed by banks for determining interest rates on advances.
  • To ensure availability of bank credit at interest rates which are fair to borrowers as well as banks.
  • To enable banks to become more competitive and enhance their long run value and contribution to economic growth.
Calculation of MCLR

The MCLR is a tenor linked internal benchmark (tenor means the amount of time left for the repayment of a loan). The actual lending rates are determined by adding the components of spread to the MCLR. Banks will review and publish their MCLR of different maturities, every month, on a pre-announced date.

The MCLR comprises of the following:

a) Marginal cost of funds which is a novel concept under the MCLR methodology comprises of Marginal cost of borrowings and return on networth, appropriately weighed. i.e.,

Marginal cost of funds = (92% x Marginal cost of borrowings) + (8% x Return on networth)

Thus, marginal cost of borrowings has a weightage of 92% while return on net worth has 8% weightage in the marginal cost of funds. Here, the weight given to return on networth is set equivalent to the 8% of risk weighted assets prescribed as Tier I capital for the bank. The marginal cost of borrowing refers to the average rates at which deposits of a similar maturity were raised in the specified period preceding the date of review, weighed by their outstanding balance in the bank’s books. i.e,

Rates offered on deposits of a similar maturity on the date of review/rates at which funds raised x Balance outstanding as a percentage of total funds (other than equity) as on any day, but not more than seven calendar days prior to the date from which the MCLR becomes effective.

b) Negative carry on account of Cash Reserve Ratio (CRR) - Negative carry on the mandatory CRR arises because the return on CRR balances is nil. Negative carry on mandatory Statutory Liquidity Ratio (SLR) balances may arise if the actual return thereon is less than the cost of funds.

c) Operating Cost associated with providing the loan product, including cost of raising funds, but excluding those costs which are separately recovered by way of service charges.

d) Tenor Premium- The change in tenor premium cannot be borrower specific or loan class specific. In other words, the tenor premium will be uniform for all types of loans for a given residual tenor.

Banks may publish every month the internal benchmark/MCLR for the following maturities:
  • Overnight MCLR,
  • One-month MCLR,
  • Three-month MCLR,
  • Six month MCLR,
  • One year MCLR.

MCLR for any other maturity which the bank considers fit.

Effects of MCLR

Regulation in Rate Changes - Under the old system of base rates, the RBI noticed the banks were prompt to increase interest rates on floating rate loans when the RBI increased rates. But on the other hand, when the RBI slashed rates, banks were slow to cut their rates. The aim of the MCLR system is to change this pattern and get banks to change their rates regularly according to the changes in cost conditions.

Effect on spreadThe RBI also noticed that banks would initially offer low interest rate loans at very low spreads. This would be appealing to the customer. But after a few months, the banks would increase the spread for no legitimate reason. Even if the base rate was not increased, the spread would be raised, therefore resulting in an unfair rise in interest rates for the customer. Under the MCLR, banks are required to set a spread chargeable to the customer at the time of sanctioning the loan. The spread cannot be increased unless the customer’s credit profile changes. Furthermore, banks have to reset the interest rates on loans at least once a year.

TransparencyOverall, the MCLR brings in more transparency for the customer. The pricing of floating rate loans will be clearer.

What kind of loans are linked to the MCLR?

All floating rate loans that were sanctioned from April 1st, 2016, are all based on the MCLR. For credit renewal as well, the MCLR was applied. Floating rate loans include:
  • Home loans
  • Loans against property
  • Corporate term loan
The MCLR is relevant only to banks. So any loan with a floating interest rate sanctioned from a bank will be linked to the MCLR. Some banks have also linked their auto loans and educational loans.

Base Rate vs MCLR


Base rate calculation is based on cost of funds, minimum rate of return, i.e margin or profit, operating expenses and cost of maintaining cash reserve ratio while the MCLR is based on marginal cost of funds, tenor premium, operating expenses and cost of maintaining cash reserve ratio. The main factor of difference is the calculation of marginal cost under MCLR. Marginal cost is charged on the basis of following factors - interest rate for various types of deposits, borrowings and return on net worth. Therefore MCLR is largely determined by marginal cost of funds and especially by deposit rates and repo rates.

Exemptions under MCLR

MCLR is applicable to almost all loans except fixed rate home loans, car loans and personal loans.

Loans that fall under Government Schemes where the banks are directed to charge a certain rate of interest are also exempt from MCLR.

MCLR is applicable only to banks. So loans that are taken from finance companies and houses will not fall under this system. The Non-Banking Financial companies include LIC Housing Finance, Dewan Housing (DHFL), HDFC, Indiabulls etc.


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Investing Teachings By Warren Buffet And Benjamin Graham

Nobody can time the market. Greed and Envy never pays well in markets. so just be prepared to wait for the best!

Term 'Investing' gives the immense sensation and feel of becoming rich but, is it that simple???

Legendary investors like Warren Buffet and Benjamin Graham used some teachings to achieve great success which you too can apply.

Here are the 10 Commandments:

Law Of Farm

The stock market is a device for transferring money from the impatient to the patient. - Warren Buffet

If you’re confident about your choice, just give it time.

Equity investments always take time to show growth. Of course, there’s a chance that the stocks or funds you invest in fail to deliver expected results, but often enough, stocks take time to appreciate in value. Acting in haste to remove a stock from your portfolio may turn out to be a reckless move that you repent at leisure.

Volatility Cannot Be Avoided

You should not expect a ride in the stock market to be uneventful. The stock market has always been a volatile space, and this gives fear in the hearts of many investors.

But it is precisely this volatility that could be exploited for gain if you follow some time-tested investment principles. You should invest in bearish times because they typically bounce back when the economic climate improves.

The ‘Best’ Time To Invest?

The best time to plant a tree was 20 years ago. The second best time is now.

There is no so called perfect time to start investment in market. There are opportunities everywhere if you’re willing to look. You’ll always find some undervalued stocks even in a bull market. And in a bear market, when inexperienced investors generally avoid buying stocks out of a fear that prices will plummet even lower, you can find great stocks at bargain prices. Take care not to get greedy. You should avoid buying overpriced stocks in the unfounded hope that their prices will go up further.

Guessing Tops and Bottoms Is A Waste Of Time

Every investor dreams of buying at the bottom and selling at the top. But this is impossible to achieve. A more realistic and achievable aim is to invest in fundamentally good stocks when their prices are low. Studies prove that staying invested over a stock market cycle and eliminating unnecessary punting is a recipe for a happy investor. It also makes you wealthier in the long run. You are better off studying investment strategy and finding new companies to invest in rather than trying to time the market.

Never Forget To Take A Look At Mutual Funds

It is imossible to time the market. Nobody can do it! Picking the right stocks for investment is really very hard work. This becomes more difficult when you aren’t good with numbers.

This is where equity mutual funds come in. These funds pool capital from multiple investors and invest on your behalf. They’re managed by highly qualified fund managers, offer a diversified portfolio and deliver great returns at a reasonable cost.
SIPs: The ‘Auto-Pilot’ of Investing

An ideal way to invest in mutual funds is via Systematic Investment Plans (SIPs). A fixed amount is invested in a mutual fund of your choice, on a predetermined date every month. SIPs help you to become a disciplined investor, and reduce some of the stress associated with timing the market.

Stock Valuations Vs. Stock Values

When the market goes up dramatically, many investors end up selling their holdings fearing a market correction. Never do such mistake! These investors often miss out on the opportunity to generate even more gains. Remember to stay invested in a stock as long as the company earnings and its fundamental valuation support the stock price. You should sell your stock only when you feel that its price have exceeded its value.

Look Elsewhere For Excitement?

Fluctuations in stock prices are exciting for some investors, horrible for others. Your investment decisions shouldn’t rely on these ups and downs. Stick with basic investment strategies. A quick fluctuation in the wrong direction could end up making you exit at a loss.

Envy  - The Enemy Of Investing

Envy must not influence your investment decisions. Avoid accepting the strategies of other investors around you in the hope of making a instant money. Their goals or investment horizons may be different from yours. Worse  -  they may have timed their investments well, and it may be a bad idea to do what they did now. Think hard before taking  your investment decisions and keep your own goals in mind while starting your investments.

First Emergency Fund Then Investments

The basic principle of equity investing is to give up something today for a better future. But, giving up too much can hurt you in an emergency when you need liquidity to pay a hospital bill, for instance, and your money is locked up in a fund. Invest only after setting aside your emergency fund which should be minimum about 6 months of your requirements. Equity investments may also suffer periodic declines in value. Don't panic! Be patient! This patience will be rewarded in the long run.

Get Started Now!

Investing with these mentioned principles can go a long way for you to build a successful and healthy portfolio. It’s also important to keep policy changes in mind when planning your investments such as the change in long term capital gains tax. A well-planned investment strategy based on sound principles can grow more rapidly than you think.

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Pay LIC Premium Online

LIC (Life Insurance Corporation of India) is the largest public sector life insurance company in India. Today, in this modern era of technology forget that old traditional premium payment method of standing in the queue or to visit premium collection centre in your busy life. Now, payment of your LIC policy premium is very easy, convinient and time saving on your finger tips. In this post today I will explain you the complete procedure to follow in order to pay premium online sitting at your home.

How To Pay LIC Premium Online Without Registration?

Here are the three very simple steps to follow:

a) Customer Validation
b) Premium Particulars
c) Payment
Procedure To Pay Your Premium Online

1) Visit the website: LIC of India
2) Click on “Pay Premium Online” tab.

Pay LIC Premium Online

3) Click on “Pay Direct (Without login)" option to pay LIC premium online without registration.

Pay LIC Premium Online

4) Now select the option "Renewal Premium/Revival".

Pay LIC Premium Online

5) Click on “Proceed” tab to complete the premium payment via three simple steps.
Pay LIC Premium Online

6) Now enter your Policy Number, Installment Premium, Date of Birth, Email Id, Mobile Number and the Captcha code.

Pay LIC Premium Online

7) Now click the "I Agree" box and then click on “Submit” button.
8) Next screen, you have to cross check the premium particulars. Here you can also add more policies to pay LIC premium simultaneously. Now click on “Proceed” button.

Pay LIC Premium Online

9) Here again you have to check your premium particulars like total number of policies and total amount of the premium and then click on “Check & Pay” tab.

Pay LIC Premium Online

10) Now choose the payment gateway from the given options and click on “Check & Pay” tab to proceed further.

Pay LIC Premium Online

11) Select how you want to pay, either via Net Banking or Credit card or Debit card or Wallet/ Cash card or UPI. After selection, click on “Make Payment” tab to pay LIC premium online.
12) After successful payment you will see a message on the screen as “Premium Payment is Successful !!!”. You can download the LIC premium receipt by clicking on the “Download Receipt” tab. You will also get your receipt in your email sent by LIC.

Pay LIC Premium Online

Some Key Points To Remember:
  • Please provide correct details, valid mobile number and email id. You will get a digitally signed receipt in your email for your further reference.
  • Online Payment should be made by the policy holder himself/ herself. No third party payment should be made using this mode of payment.
  • If the LIC premium amount is debited from your bank account but an error page displayed, then a digitally signed receipt will be sent to your email id within three working days after receiving the payment confirmation from your bank. You can report such instances HERE!
  • If you are re-trying, please check whether the amount is debited from your bank account or not for earlier transaction. If amount is debited from your account then do not pay again. LIC will send you a receipt within three working days.
  • You can also view transaction status on LIC website. You need to enter your policy number, transaction date and transaction type. 
Hope, now it will be easy for you to pay your LIC policy premiums online.

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