Pranamya Financial Services
SEBI Registered Investment Advisor
Pranamya Chronicles
Real Stories, Real Lessons
The short videos share the experiences of our clients and their financial journeys with us. Each story highlights the challenges they faced, the strategies we implemented, and the outcomes they achieved.
These experiences offer valuable lessons that anyone can learn from. After all, financial wisdom isn't just about personal experience—it’s also about learning from others’ successes and mistakes.
Tips for Rational Investment
Tips to Buy Stocks
Before purchasing shares, you must think like a business owner, not a gambler. Buying a stock is buying a piece of a company—and that decision must be driven by analysis, not noise. Here's a comprehensive, no-fluff checklist:
1. Understand the Business
Can you explain what the company does in one line?
Avoid businesses you don’t understand—Warren Buffett’s golden rule.
2. Revenue and Profit Consistency
Look at 5–10 years of sales and net profit trends.
Are revenues and profits growing steadily or erratically?
3. Margins Matter
Operating and net profit margins reveal efficiency.
Compare with peers—higher margins signal pricing power.
4. Return Ratios
ROE (Return on Equity) > 15% consistently = efficient business.
ROCE (Return on Capital Employed) = good indicator for capital-heavy businesses.
5. Debt Levels
Debt-to-Equity < 1 is ideal in most sectors.
High debt = high risk, especially in interest rate upcycles.
6. Cash Flow > Net Profit
Profitable companies should also generate positive operating cash flow.
If not, check for earnings manipulation or working capital stress.
7. Valuation Check
Don't overpay, even for quality. Look at:
PE Ratio (compare with sector)
PB Ratio (especially for banks, NBFCs)
EV/EBITDA for broader view
Use PEG Ratio for growth companies.
8. Promoter Holding and Pledging
High and stable promoter holding = confidence.
Pledged shares = red flag, especially above 10–15%.
9. Corporate Governance
History of fraud, related-party transactions, or frequent auditor changes? Walk away.
Look for consistency in dividend policy, transparency in reporting.
10. Industry Position and Moat
Is it a leader or a laggard? Market share trends matter.
Look for competitive advantages: brand, cost leadership, distribution network, etc.
11. Earnings Visibility
Are earnings predictable or lumpy?
Avoid companies with cyclical earnings unless you're timing the cycle consciously.
12. Peer Comparison
Compare with competitors on key metrics: growth, margins, returns, valuation.
Helps identify underpriced opportunities or avoid overhyped duds.
13. Dividend Track Record
Not essential, but regular dividends signal strong cash flows.
Useful if you're investing for income.
14. Recent News and Management Commentary
Read the latest concalls, annual reports, and interviews.
Sudden top-level exits, regulatory probes, or major capex announcements can be signals.
15. Technical Support (for entry timing)
Even long-term investors can use technicals for better entry points.
Look at support levels, RSI, or simple moving averages.
16. Liquidity
Low-volume stocks = difficult exits. Avoid unless you have high conviction and patience.
Tips to Buy Bonds
Buying bonds may seem “safe,” but that’s a misleading simplification. Bonds carry interest rate risk, credit risk, reinvestment risk, and more. If you're using them for stability or predictable income, you must be sharp about what you’re buying. Here's a businesslike checklist before buying bonds:
1. Type of Bond
Government Bonds (G-Secs): Virtually risk-free, lower yield.
Corporate Bonds: Higher yield, but carry credit risk.
Municipal Bonds: Tax benefits sometimes, but can have liquidity or credit issues.
PSU Bonds / Tax-Free Bonds: Safe and often offer decent post-tax returns.
2. Credit Rating
Look for ratings from CRISIL, ICRA, CARE, Fitch, etc.
Stick to AAA or AA-rated for low credit risk unless you're consciously taking on risk for yield.
Anything below A = red flag unless deeply analyzed.
3. Yield to Maturity (YTM)
This is your expected return if you hold till maturity, accounting for price paid and all future payments.
Don’t just look at coupon rate—look at YTM vs current interest rates.
4. Interest Rate Environment
If rates are expected to rise, long-duration bonds fall in value.
Match bond duration to your investment horizon.
Prefer shorter-duration bonds in rising rate cycles.
5. Liquidity
Can you sell the bond easily in the secondary market?
G-Secs and popular PSU bonds have better liquidity. Many corporate bonds don’t.
6. Tax Implications
Interest income is fully taxable at your slab rate.
Capital gains (if sold before maturity) taxed differently depending on holding period.
Look at post-tax returns, not just yield.
7. Call and Put Options
Callable bonds: Issuer can repay early—risk for you if rates fall.
Puttable bonds: You can exit early—good for you.
Always check call/put dates and conditions.
8. Payment Frequency
Monthly, quarterly, semi-annual, or annual?
Align with your cash flow needs, especially for retirees using Systematic Withdrawal Plans (SWP).
9. Risk of Default
Corporate bonds = business risk.
Look at company’s balance sheet strength, debt coverage ratios, cash flows.
Avoid bonds of companies under stress, even if they offer tempting yields.
10. Inflation Impact
Fixed coupon bonds lose purchasing power during high inflation.
Consider inflation-indexed bonds if available.
11. Accrued Interest and Dirty Price
In secondary market, you’ll pay dirty price (includes accrued interest).
Your real yield depends on that, not just quoted YTM.
12. Reinvestment Risk
If you get frequent interest payments, you need to reinvest at a good rate to meet expected return.
This is an often-ignored risk, especially in falling rate cycles.
13. Regulatory and Structural Protections
For listed bonds, there’s better disclosure and SEBI oversight.
Check if the bond is secured vs unsecured. Secured bonds have asset backing.
14. Match with Your Financial Goals
Use bonds for capital preservation, income, or diversification.
Don’t stretch tenure or credit risk just for a little extra yield
Tips to Buy Insurance
Key Factors to Consider When Choosing a Term Insurance Plan:
Claim Settlement Ratio (CSR): Indicates the percentage of claims an insurer has settled against the total claims received. A higher CSR reflects reliability.
Coverage Amount: Ensure the sum assured is adequate to cover your family's future financial needs, typically 10-15 times your annual income.
Policy Term: Choose a term that aligns with your financial obligations, such as until your retirement age or until major liabilities are settled.
Premium Affordability: Premiums should be affordable throughout the policy term without straining your finances.
Additional Riders: Consider optional add-ons like critical illness cover, accidental death benefit, or waiver of premium for enhanced protection.
Tips to Buy Health Insurance
Before purchasing health insurance, it's critical to approach it like any other financial product—with a clear understanding of your needs, risks, and long-term implications. Here’s a no-nonsense checklist of things you must consider before buying a policy:
1. Assess Your Coverage Needs
Consider your age, health condition, family medical history, and dependents.
For a family floater, factor in everyone’s age and risk profile.
2. Check the Sum Insured
Inflation in healthcare costs is real. Don’t go cheap on the cover.
Urban families should aim for at least ₹10–20 lakh; individuals for ₹5–10 lakh minimum.
3. Network Hospitals
Ensure your preferred hospitals are in the insurer’s cashless network.
Cashless facility beats reimbursement any day—especially in emergencies.
4. Understand Sub-Limits and Room Rent Cap
Policies with room rent limits or disease-specific sub-limits can reduce claim payouts drastically.
Prefer policies without sub-limits for smoother claims.
5. Look at Waiting Periods
Pre-existing diseases usually have a waiting period of 2–4 years.
Some policies waive this faster—check the fine print.
6. Check for Day-Care and OPD Coverage
More treatments are moving to day-care (no overnight stay).
OPD coverage (consultations, diagnostics, medicines) is a bonus but comes at a cost.
7. Compare Claim Settlement Ratios (CSR)
High CSR (>95%) is a green flag, but check Claim Amount Settlement Ratio too.
Review TPA vs in-house claims processing—in-house is faster and smoother.
8. Portability Option
Ensure you can port your policy to another insurer if service deteriorates.
Porting keeps your waiting period benefits intact.
9. Check Co-Payment Clauses
A co-pay clause means you pay a part of the claim—avoid unless you’re insuring seniors.
10. Look at Premium vs Benefits
Low premiums may hide restrictions.
Choose value, not price. A ₹1,000 saved yearly isn’t worth ₹1 lakh rejected at claim time.
11. Understand Exclusions
Every policy has permanent exclusions (e.g., cosmetic surgeries, experimental treatments).
Read them and be realistic—don’t buy on assumptions.
12. Restoration and Recharge Benefits
Good to have: automatic reinstatement of sum insured after exhaustion in a policy year.
Especially useful in family floaters.
13. No Claim Bonus (NCB)
Prefer policies that offer NCB without capping it too low or resetting it after one claim.
14. Buy Early
The earlier you buy, the cheaper and easier it is to get high coverage with fewer restrictions.
Don’t wait for illness to start shopping.