In it's 6^th and the last of this fiscal's bi-monthly monetary policy review, RBI kept the Repo rate unchanged at 6%, three times in a row, announced on 7th Feb 2018. What does it mean for the common man?, is the question to be answered in the following passage. But before moving on to the impact of the rate, let's understand what does Repo rate mean?

So, Repo Rate is the rate at which RBI lends money to commercial banks, generally against government securities. Repo Rate is used by the Central Bank to control the level of inflation in the country. When the Repo rate is low, banks get money at cheaper rates and consequently the lending rates also fall, which leads to increased supply of money in the economy thus accelerating inflation; and vice versa, the Repo rate is increased when the inflationary pressure is high in the economy.

Now we have some key takeaways from this Monetary Policy Review for the common man:

> Inflation: The retail inflation accelerated to a 17 month high of 5.21% in the month of December 2017. The RBI has raised its forecasts for CPI inflation to 5.1% for the March quarter and to 5.1-5.6% for the first half of FY 2019, before stabilizing to around 4.5-4.6%.

> Loans: The interest rates have taken the downward staircase since the last 3 years, and a stable repo rate means they aren't changing course any soon. Low and constant Repo rate means it's an opportunity for prospective home buyers as they can continue to avail loans from banks at cheaper rates.

> Deposit Rates: Like Lending rates, deposit rates are also caught on the downward trend. 1 year Fixed Deposit rates have fallen from the 8.5% range to a mere 6.5% range from 2014 to 2017 for all major banks, and apparently the scenario for the upcoming months also look muted. Similar is the plight of other traditional investments like PPF, NSC or fixed deposits with shorter or longer investment periods.

In light of the above situation, it may not be wise to keep your money in banks or other low interest bearing instruments.

- Liquid Funds for parking your savings: It'll be a better bet to park your extra cash or Emergency money in Liquid Mutual Funds, than letting them sit in your savings account for a meagre 4%. Liquid Funds can fetch you better returns than your savings account, plus it offers high level of liquidity also. In some funds, you can get your money in your bank account within 30 minutes of placing the redemption request.

- Short Term debt funds for lower horizon investments: When you have a short investment horizon of around 3 years, Short Term Debt Mutual Funds offer a better alternative to Fixed Deposits or other traditional investments, by offering marginally better returns as well as by offering indexation benefit which significantly reduces the investor's tax liability on capital gains.

- Equity Mutual Funds for longer term investments: After the recent announcement of Long Term Capital Gains Tax on returns from Equity, in the Union Budget this year, investors are skeptical about Equity. Just to put this into perspective, the tax will be levied at a modest rate of 10% and that too on the returns earned over Rs 1 lakh. So, if the returns from your Equity MF investment are 15%, 13.5% is still yours. Hence, Equity continues to remain an attractive investment option for long term investing, because of substantially higher returns than all other asset classes even after providing for taxes.

We know many successful people and it is often our desire to achieve the success that our idols have achieved. However, matching success is not an easy thing, even though we may follow their footsteps.It is not about acting or doing things but is more about absorbing the wisdom and implementing this wisdom to our lives. In this article, we fathom the minds of a few great personalities and bring to you the pearls of wisdom on being and living wealthy.

"If a rich man is proud of his wealth, he should not be praised until it is known how he employs it." - Socrates
Being wealthy in itself is not something to be very proud of. After all, wealth can be acquired by a variety of means or even by luck. The real question is how you manage and employ your wealth. Great fortunes can be wasted or lost or kept idle with the passage of time. Wealth can act as a great tool or medium through which one may pursue things that lead to value creation in money or in kind. When it comes to investing too, employing money rightly is critical as wrong investment decisions will only erode your wealth over time. There is a risk that you may also lose opportunity to build your wealth. Often, the risk is not doing anything is higher than doing something. Socrates thus believed that a person would be better praised for what he is doing with his wealth rather than how much he holds.

Socrates (470-399 BC) was a classical Greek philosopher and credited as one of the founding fathers of western philosophy.

"If you know how to spend less than you get, you have the philosopher's stone". - Benjamin Franklin
At the heart of wealth creation is the idea of spending less than what you earn. Another way to look at it is that a money saved is money earned. This sounds very easy and often heard. But in practice it can be hard to do and hence the need to remind ourselves of it again. With higher spending, most of us find ourselves left with reduced savings and high debts in present times and an already committed future income. This a big alarm to us all and big hurdle in creating wealth. Financial discipline and controlled consumption are very important if one ever dreams of being wealthy.

Benjamin Franklin (1706 -1790) was one of the Founding Fathers of the United States and also known as the 'The First American'. A very dynamic personality whose image is visible on 100 dollar bills, he was an author, printer, politician, scientist, musician, inventor, civic activist and a diplomat.

"Individuals who cannot master their emotions are ill-suited to profit from the investment process." - Benjamin Graham
Our emotions can blind us while taking important investment decisions. Human nature is highly driven by fear, greed & hope which deviates us from taking the right decisions. Truly, a person who is emotional cannot practice decision making with objectivity, patience and common sense. Decisions taken in emotion would generally be self destructive. For success in investing, is is important to be able to shut down the emotional part within ourselves. An unemotional & disciplined investment approach,is a key to building long-term wealth.

Benjamin Graham (1894-1976) was a British born, American economist, professor & professional investor. He is regarded as the father of 'value investing' approach and had many great followers, including Warren Buffett.

"You only have to do a very few things right in your life so long as you don't do too many things wrong". Warren Buffett.
Creating wealth is easy and can be done by any person. It is also something that does not require one to be an expert stock analyst or to be very informed or something that requires lot of effort. The simple, basic and yet powerful principles of wealth creation like investing in right asset classes, investing for long term, keeping emotions at bay, etc. can really help create true wealth. One doesn't need to be expert product choosers or market timers to create wealth. The way and the amount of wealth created by Warren is a testimony to this fact. As long as we follow these basic principles and not do something very stupid that wipes out our wealth, we will be well off. Avoiding mistakes is thus more important and something that we should all keep in mind when we make any financial decision.

Warren Buffett (born 1930) is an American business magnate, investor & philanthropist. Widely regarded as one of the most successful investors in the world, he is the chairman and CEO of Berkshire Hathaway and is among the richest in the world. He is known for his long-term and value investing philosophy to create wealth.

"Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in the corrections themselves." - Peter Lynch
Markets are highly volatile in nature. Market fluctuations often cause investors to change their investment plans. Often we try to time the markets and move in and out of investments to profit from the market movements. However, it is almost impossible to predict how markets would behave. By attempting to do so, investors often also lose out on the returns they could have earned had they stayed put. Timing the market should never be the objective of an investor as it is the business of a speculator or a trader. Frequent changes in portfolio also comes at a cost. It is thus better to channel our energy to earn realistic returns over a longer horizon rather than aim for short term benefits.

Peter Lynch (born 1944) is a stock investor, author & a philanthropist. He earned fame in the investment world with his success as researcher & fund manager at Fidelity Investments.

"Money was never a big motivation for me, except as a way to keep score. The real excitement is playing the game." - Donald Trump
Another truth about becoming and staying wealthy is doing what you like most. It would only mean that you are doing something with passion and something that you are willing to learn and only become good at. At the heart of it you are not really chasing money but making money follow you by being good at what you are doing. It is also something that will ensure that you are on the right path and with much greater possibilities to create wealth in future. Further, money can be used to keep track of how well we are doing, acting as a tool for reference and comparison in many ways. When it comes to wealth management, the joy of managing and seeing your wealth grow over time would perhaps give a greater satisfaction than from just holding a fixed quantum of wealth. There is a strong case for you to start liking the process of wealth management today.

Donald J. Trump is the 45th President of the United States, (born 1946) is an American business magnate, real estate developer and author. His lifestyle and the role in the famous reality show 'The Apprentice' on NBC made him a celebrity.

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Another year full of surprises and shocks, has formally come to an end. Although, the introduction of GST did create ripples, businesses were hit for some time, but we are on a recovery mode. 2017 was one of the best years for Indian Equity Markets since the 2008 global recession. The markets were on a roll, with the major indices delivering more than 25% return for this year, the mutual funds industry witnessed equity inflows of Rs 178,878 Cr in the year 2017. Things are going great. Certainly, investors have made money during the year, and now it's time to start gearing up for the next year. At this point, we have penned down a list of steps, some do's and dont's which can help you get the maximum out of the year 2018 and onwards financially.

Don't Redeem your long term investments for the markets are trading high: Your long term investments should not be left at the mercy of the 2008 recession or the 2017 boom. Many market gurus are propagating that this is the "market peak" and it's the "right time" to liquidate your investments. Well, we don't know whether this is the peak, and we are sure neither do they. The markets are forever subject to volatility, they might correct or they might surge. Our long term goals cannot be achieved if we start timing the volatile markets. If you liquidate the investment kept for your daughter's wedding, which was up 50% from the time you invested, hoping to re-invest when the markets correct. What if the markets do not correct any soon, or even if they do, how would you know when they are at their lowest, what if the money you redeemed vanishes while meeting your current liquidity needs. Although, your 10 lacs did come back to you as 15 lakhs, but your daughter's wedding goes for a toss.

Don't stop your SIP's: On the same logic as above, it is not prudent to stop your SIP's. The Rupee Cost Averaging will work to average out the cost of your investment whether this is the peak or whether Indian markets continue with the bull run. And your uninterrupted long term investments will ensure that you make the most of the Power of Compounding, while controlling the cost with Rupee Cost Averaging. The idea behind the SIP mode of investing is imparting discipline and peace of mind to the investor by saving him the stress caused by constantly checking as to what would be the right time to invest and redeem.

Stay away from:

• Gold: Gold one of the most trusted and sought after investment product is gradually losing its sheen, for the simple reason, people aren't making money, it's reflecting in the gold import volume also, which is consistently on the decline since 2011. Gold prices have remained flat over the past few years. And apparently, there are no signs of a quick turnaround in 2018, so avoid investing in Gold. Restrict gold purchase to the once in a while impulsive purchase of an exquisite jewelery piece only. Don't buy gold hoping to get a return from it.
• Real Estate: Another favourite of Indian investors isn't an attractive investment opportunity for this year also. Like gold, property prices have also remained stagnant for most parts of the country, in fact in some places, the prices have alleviated. Plus the RERA Act and the government restrictions imposed on real estate, as it was earlier a safe haven for parking black money has further smudged the sector. So, at this point in time, apart from the house you are acquiring for self use, limit your investment Portfolio's exposure to Realty.
• Traditional Debt instruments: The interest rates are consistently falling, and it makes no sense to invest your hard earned money in a fixed deposit for a meagre 6-7% return. The after tax return may not be even able to cover the inflation cost. In fact, the government has announced the last cut on small savings rate (PPF, NSC and KVP) just a week back. So, stay away from FD's and other low return yielding products, instead look at bonds, debt Mutual Funds if you want to keep your risk low, while generating better, tax efficient returns.

Review your home loan: When the deposit rates are falling, so are the loan interest rates. So, if you have an ongoing home loan, ensure you are being levied the new reduced rates. Meet your banker, and seek options for reducing the interest rates, like switching to the adjustable interest rate option, or switching to a lower interest rate plan, etc. Follow the Plan of Action and have a happy and a prosperous New Year!

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