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In 2006, I made a commitment to gradually give all of my Berkshire Hathaway stock to philanthropic foundations. I couldn’t be happier with that decision.

Now, Bill and Melinda Gates and I are asking hundreds of rich Americans to pledge at least 50% of their wealth to charity. So I think it is fitting that I reiterate my intentions and explain the thinking that lies behind them.

First, my pledge: More than 99% of my wealth will go to philanthropy during my lifetime or at death. Measured by dollars, this commitment is large. In a comparative sense, though, many individuals give more to others every day.

Millions of people who regularly contribute to churches, schools, and other organizations thereby relinquish the use of funds that would otherwise benefit their own families. The dollars these people drop into a collection plate or give to United Way mean forgone movies, dinners out, or other personal pleasures. In contrast, my family and I will give up nothing we need or want by fulfilling this 99% pledge.

Moreover, this pledge does not leave me contributing the most precious asset, which is time. Many people, including — I’m proud to say — my three children, give extensively of their own time and talents to help others. Gifts of this kind often prove far more valuable than money. A struggling child, befriended and nurtured by a caring mentor, receives a gift whose value far exceeds what can be bestowed by a check. My sister, Doris, extends significant person-to-person help daily. I’ve done little of this.

What I can do, however, is to take a pile of Berkshire Hathaway stock certificates — “claim checks” that when converted to cash can command far-ranging resources — and commit them to benefit others who, through the luck of the draw, have received the short straws in life. To date about 20% of my shares have been distributed (including shares given by my late wife, Susan Buffett). I will continue to annually distribute about 4% of the shares I retain. At the latest, the proceeds from all of my Berkshire shares will be expended for philanthropic purposes by 10 years after my estate is settled. Nothing will go to endowments; I want the money spent on current needs.

This pledge will leave my lifestyle untouched and that of my children as well. They have already received significant sums for their personal use and will receive more in the future. They live comfortable and productive lives. And I will continue to live in a manner that gives me everything that I could possibly want in life.

Some material things make my life more enjoyable; many, however, would not. I like having an expensive private plane, but owning a half-dozen homes would be a burden. Too often, a vast collection of possessions ends up possessing its owner. The asset I most value, aside from health, is interesting, diverse, and long-standing friends.

My wealth has come from a combination of living in America, some lucky genes, and compound interest. Both my children and I won what I call the ovarian lottery. (For starters, the odds against my 1930 birth taking place in the U.S. were at least 30 to 1. My being male and white also removed huge obstacles that a majority of Americans then faced.) My luck was accentuated by my living in a market system that sometimes produces distorted results, though overall it serves our country well. I’ve worked in an economy that rewards someone who saves the lives of others on a battlefield with a medal, rewards a great teacher with thank-you notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions. In short, fate’s distribution of long straws is wildly capricious.

The reaction of my family and me to our extraordinary good fortune is not guilt, but rather gratitude. Were we to use more than 1% of my claim checks on ourselves, neither our happiness nor our well-being would be enhanced. In contrast, that remaining 99% can have a huge effect on the health and welfare of others. That reality sets an obvious course for me and my family: Keep all we can conceivably need and distribute the rest to society, for its needs. My pledge starts us down that course.

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Banks Act like Brokers

Customers are bound to be duped in such a scenario

There are two kinds of reactions that I’ve heard about the case of Citibank’s rogue relationship manager. On the one hand, there are those who sympathise with the victims. And on the other, there are those who basically say that a fool and his money are soon parted. I think the truth lies in between. They were people who could be expected to know that the way the financial world worked and yet they believed the incredible `special scheme’ that Puri was peddling.

I think there are two problems here. One is the a belief that magical returns can be guaranteed in the stock markets, if only one could find the right magician to cast the right spell. The basic defence that a sensible investor has against relationship managers’ fraudulent claims is the understanding that getting a guaranteed and sustained 2% a month is simply not possible. Such claims are like those graffiti ads scrawled on the walls in small towns promising sure-shot cures for AIDS and Cancer. You don’t have to go and examine the clinics to know that they are fake.

There’s a second reason why people believe such claims, and that’s the halo that banks deliberately create around these socalled wealth management services. The banks’ sales pitch for these services propagates the notion that there is a different level of returns that are available to their wealth management customers that are not accessible to ordinary mortals. These claims actually make it easy for scamsters like Puri to lure their victims.

The root cause for the losses that bank customers have faced is the halo that market risk bearing investments are wearing because they are being offered by a bank. As long as an entity can call itself a bank and yet act like a broker, customers will continue to be duped.

—-Dhirendra Kumar,

All About the New Pension Scheme

By Research Desk | Oct 15, 2010

NPS basics
The New Pension Scheme (NPS) is among the few products that will be eligible for tax deduction up to Rs 1 lakh once the direct tax code (DTC) kicks in. In a scenario where several products will lose the tax advantage, this regulatory nudge is likely to galvanise a lot more people into opening an NPS account. Here we explain at length the procedure for doing so.

When NPS was thrown open to the unorganised sector on May 1, 2009, there were a number of horror stories in the media about how opening an NPS account entailed a lot of hardship. Points-of-purchase (P-o-P) did not have dedicated staff, information was scarce, and worst of all, unscrupulous agents tried to steer you away from the NPS and towards pension schemes of insurance companies or towards Ulips.

Service standards have improved since those early days (at least in the metros). A visit to five P-o-Ps in central Delhi revealed that most of them now have dedicated staff members who explain the application procedure in detail to you.

The groundwork
First, find the nearest P-o-P. A Google search on the Internet yielded the following web page (http://www.scribd.com/doc/15083444/POPSP-Location-to-Open-New-Pension-Scheme-Account) that has the addresses of P-o-Ps across the country. Different types of entities act as P-o-Ps for NPS: public and private sector banks, brokerage houses, and players from the mutual fund industry (UTI, CAMS, and so on). Choose one depending on proximity to your home and a name that you are comfortable with.

Documentation
To download the form, go to http://www.npscra.nsdl.co.in. Click on Download. Different forms are available for different categories: central government employees, state government employees, autonomous bodies and so on. If you don’t work for any of these types of organisations, click on ‘All Citizens of India’ and then download ‘Composite application form for subscriber registration’.

A ‘Subscriber offer document’ is also available on this web page. Read it before filling up the form.

The form must be accompanied by proof of identity and proof of address. The offer document tells you which documents you need to submit for these purposes. Get two photostat copies made of the two documents. When you go to the P-o-P to submit your form, take the originals along for verification.

You also need to provide one coloured photograph.

At the time of opening the account you need to make an initial payment. This can be done either by cheque, cash or demand draft and must be for at least Rs 500. Every year you need to deposit at least Rs 6,000 in the tier I account. This amount may be deposited in minimum four contributions. If you wish to avoid the hassle of making the trip to the P-o-P’s office to deposit each contribution, give an ECS mandate.

NPS offers two accounts. Tier I is the pension account on which you get the tax deduction. But in this account you have almost no liquidity till retirement. Since many investors could regard this as a hindrance, PFRDA also offers a second account called the tier II account. This account allows you access to your investments as often as you want, but offers no tax benefit. You need to fill a separate form (available at the same location) to open this account.

Choices to be made
While filling up the registration form, you need to choose your asset allocation and a pension fund manager.

Asset allocation. Three types of funds are available: E is the equity fund; C invests in liquid funds, bank fixed deposits and corporate bonds; and G invests in government securities. You may invest your entire corpus in fund C or fund G, but you can only invest up to 50 per cent of your corpus in fund E (an equity-based index fund). You may also distribute your corpus among all the three funds.

Our advice is to invest the maximum permissible limit of 50 per cent of your corpus in fund E and spread the rest between C and G. Since your investment horizon in NPS is long, it is best to have the maximum possible exposure to equities.

If you do not make an active choice, your money will be invested in what is called the Autochoice-lifecycle fund. Here the maximum permitted 50 per cent is invested in equities till age 35, and thereafter equity exposure is reduced (and exposure to C and G is increased).

Pension fund manager. You will also have to choose a fund manager from the six appointed pension fund managers (PFMs). The NAVs of their funds are available at the PFRDA web site (www.pfrda.org.in/NAV). Since all the PFMs started out at the same time, it means that the fund with the higher NAV has given better returns.

You will be allowed one switch every year in May.

Retirement planning is a much ignored but vital part of managing your personal finances. NPS offers to manage your retirement funds at a very low cost (at 0.0009% fund management charge it is perhaps the lowest-cost pension fund in the world). For these two reasons alone – saving for retirement and low cost – everyone ought to open an NPS account. The tax benefit comes as the icing on the cake. Open the tier II account as well and treat it as a low-cost balanced or debt fund.

Dear Investor,

Welcome to Wudstreet Investment Services,

This Blog is dedicated to all those who want to understand wealth management from a financial planning aspect – which is a process driven approach to achieve individual’s financial goals.

Our tag line ” Plan and Achieve” provides us the requisite platform and focus to address all aspects of financial planning which would help us to create and sustain wealth for our investors.

Wealth according to dictionary.com is “State of being rich; prosperity; affluence:”

which according to many is only money, but wealth signifies a state of well-being with the efficient use of available resources to be happy ,to be at peace with oneself and others.

We would start addressing some of these aspects at definitive intervals which would be useful to one and all.

Thanking you,

Yours truly

Ravi.

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