Saturday, March 23, 2013



Saturday Morning Musings

“Put all your eggs in one sturdy basket – and keep an eye on the basket”.

If you are a defence officer, serving or retired, from the army, navy or air force, or a soldier, sailor or airman, you know that the money you earn is truly hard-earned money.

Also, by their very nature, attitude and temperament, most defence personnel are not money-minded. Military persons are not money-smart. In view of their way of life, soldiers are not financially astute.

A money-minded individual will never join the military – he will prefer to open his own business, become an entrepreneur and make money rather than earn a salary by working for someone else.

Even if a money-smart person decides to work, he will take up a job in the financial world or in an industry where his career prospects are much better and where he can earn much more money than in the defence forces.

A quintessential soldier has another curious quality – he will be ready to risk his life but he is averse to taking financial risk.

Thus, he looks for safe risk-free investments.

Owing the nature of his job, a defence person is posted to remote desolate areas or on a ship on the high seas where he may not even have immediate access to information on stock markets – in many cases he may not even have internet access or reliable swift communication facilities. This makes it difficult for a defence person to keep track of equity related investments.

In view of remote postings and frequent transfers, investing in real estate entails too many hassles.

You have to keep regular track of various property taxes, society charges, water and electricity charges, rentals and lease paperwork (in case you have rented or leased out your flat).

Owning to your physical absence for the entire time, renting or leasing your house has an element of risk too. 

Also remember that real estate property investment is indivisible (you cannot sell 10% of your flat) and illiquid (selling property is very cumbersome process).

And if you have invested in land it is very difficult to protect and look after your land since you are posted so far away.

What a defence person wants is hassle-free investments.

And for a soldier, investing in equity and real estate involve a lot of hassle because of the nature and requirements of his job.

In a nutshell the two essential attributes of financial planning for defence personnel are:

1. Risk-free Investments

2. Hassle-free Investments

While you are in service it is best to invest your savings in your Provident Fund (DSOP Fund or Defence Services Officers Provident Fund).

The DSOP Fund is probably the safest place to put your money and is a totally risk-free investment.

It is a totally hassle-free investment too since your subscription instalment gets automatically cut from your monthly pay and is immediately credited every month to your Provident Fund Account.

Also, wherever you are located, tracking your investment is easy since details of your DSOP Fund investments are given to you every month on your payslip.

Investing in DSOP Fund has tax benefits too – you get tax rebate on your investment in your Provident Fund and even the interest you earn is tax-free. Thus, you are saved income tax hassles too. Also, in view of cumulative interest, the returns are quite good too.

Let us reiterate the financial planning “mantra”:

“Put all your eggs in one sturdy basket – and keep an eye on the basket”.

Provident Fund fits the bill because the DSOP (Provident) Fund is indeed a very “sturdy” basket and it is very easy for you to “keep an eye” on this “basket”.

RETIREMENT – Financial Planning for Veteran Ex-Serviceman

And what do you do after retirement?

When you retire you may get a substantial sum of money including the accumulated savings in your DSOP Provident Fund and other retirement benefits like gratuity etc.

So what do you do with all that money?

Simple – just put your money in a Fixed Deposit in a Nationalised Bank (preferably the State Bank of India) [Risk-free] and give standing instructions for crediting Quarterly or Monthly Interest to your Savings Account [Hassle-free].

In case you have a pension and do not require monthly interest income, you can open a Multi Option Deposit (MOD) Account (a savings accounts with benefits of Fixed deposit higher rate of interest) where your money is automatically swept in or swept out on Last-In-First-Out (LIFO) basis as per your requirement. This too is hassle-free since all operations and renewals are done automatically.

When you retire you want peace of mind.

Investment in Equity and Mutual Funds, Trading in Stocks and Shares, is not only a risky proposition but involves a lot of hassle as you have to constantly keep track of and monitor your investments.

If you put your life savings into investments which are risky and involve hassles, your peace of mind will be disturbed because of the anxiety caused by the financial risk and the bother caused by the hassle in money management.

This will result in stress and disturb the tranquillity of retirement bliss.

Yes, you may make more money in the stock market.

But then, is it worth making money at the cost of disturbing your peace of mind, especially in the evening years of your life.

Tell me, after a certain age, what is the point of making more money? 

Can you carry all that money with you to heaven when you take leave of this world and depart for your heavenly abode?

Copyright © Vikram Karve 2013
Vikram Karve has asserted his right under the Copyright, Designs and Patents Act 1988 to be identified as the author of this work. 
© vikram karve., all rights reserved.

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About Vikram Karve

A creative person with a zest for life, Vikram Karve is a retired Naval Officer turned full time writer and blogger. Educated at IIT Delhi, IIT (BHU) Varanasi, The Lawrence School Lovedale and Bishops School Pune, Vikram has published two books: COCKTAIL a collection of fiction short stories about relationships (2011) and APPETITE FOR A STROLL a book of Foodie Adventures (2008) and is currently working on his novel and a book of vignettes and an anthology of short fiction. An avid blogger, he has written a number of fiction short stories and creative non-fiction articles on a variety of topics including food, travel, philosophy, academics, technology, management, health, pet parenting, teaching stories and self help in magazines and published a large number of professional  and academic research papers in journals and edited in-house journals and magazines for many years, before the advent of blogging. Vikram has taught at a University as a Professor for 15 years and now teaches as a visiting faculty and devotes most of his time to creative writing and blogging. Vikram Karve lives in Pune India with his family and muse - his pet dog Sherry with whom he takes long walks thinking creative thoughts.

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1 comment:

Unknown said...

That's realy useful one...Thanks

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