Friday, July 13, 2012
Invest in Silver, now?
Why you should invest in Silver now?
While everybody’s gushing about the returns gold has delivered over the past four years, it’s the yellow metal’s poorer cousin that has been winning the race. Silver prices have jumped from Rs 16,525 per kg in 2008 to Rs 75,020 per kg in 2011, a gain of 354%.
However, over the past few months Silver prices have dropped to a more affordable level of Rs 54,000 per kg. Does this mean the potential in silver is already exhausted?
"There is still some steam left in silver. Bullion is expected to go up, so silver prices too shall rise steadily in the medium to long term," says Jayant Manglik, president, retail distribution, Religare Broking.
What’s pushing the prices up?
Silver’s easy availability, diversified use and lower price relative to gold places it high in the list of industrial and investor preference. Silver is malleable, ductile, strong and can endure high temperatures, making it ideal to use in various industries, from electronics to pharma.
Over the past century, technological explosion has magnified the scale of its usage. Its demand is outpacing the supply and leading to large gaps, which is one of the reasons why silver prices have been zooming up. Since 2008, the price rise has been further propelled by the global economic uncertainty and the depreciation of the rupee due to the US economy outpacing the European Union.
Central banks and their governments across the globe have stopped selling their silver reserves in the world marketplace, thereby freezing the supply, which, has caused silver to become more scarce and valuable. When there is lack of confidence in fiat money and the financial system, silver can be a hedge against inflation.
During global turmoil, central bankers devalue their currency and the best way to escape this is to stick with gold and silver. Also, mining of the metal is expected to become more limited due to scarcity constraints in the future.
Silver is a precious metal and an industrial metal, and both sectors are dynamic and volatile in nature.
The smallest movement can cause large variations, so silver may incur moderate price fluctuations in the short run. However, the white metal mirrors gold and in the long run, gold prices may escalate, leading to a positive trickledown effect on silver prices.
"The Chinese economy is expected to bounce back from its downturn with an aim to increase industrial output, so its demand for silver would also shoot up," says Naveen Mathur, associate director, commodities and currencies, Angel Broking.
How to invest
If you want to invest in the white metal, here’s a look at the various ways you can do it.
Coins and bars: These can be bought from jewellery stores at prevailing market rates. Decorative coins involve making charges, though these are much lower than what jewellers charge for gold ornaments, but you will not be able to recoup the charges when you sell the coins. A problem is that if you make a sizeable investment, it may be difficult to find a big storage space to keep these secure.
E-silver: The uniformity in the price of silver across the nation and the success of E-gold encouraged the National Spot Exchange Limited (NSEL) to launch E-silver in April 2010. The silver is 99.9% pure and is available in small denominations of 100 gm and its multiples.
E-silver can be stored in your demat account so you don’t have to worry about finding a secure storage space. You can also opt for the SIP (systematic investment plan) route to invest in e-silver through the online trading platform of the NSEL or through a broker.
This will help you benefit from rupee cost averaging without having to track the markets regularly. Also, SIPs inculcate discipline that enables you to build wealth over time. Whenever you want to redeem your investment, the NSEL will provide the silver to you in physical form.
Silver futures: Trading in silver futures is similar to that for gold. Silver futures provide the advantage of leverage position. To avoid the hassles of delivery, you must offset the futures contract before the maturity date is reached.
US Silver ETFs and mining companies: Currently, silver exchange traded funds (ETFs) are not available in India. However, keen investors can put their money in silver ETFs that are available in the US. They can also buy stocks of silver mining companies that are listed on the Dow or Nasdaq.
Friday, July 6, 2012
How employers can help staff save tax beyond 80C
by VIVEK KARWA, CPFA., CFPCM , Financial Chronicle 5/7/2012
source: http://wrd.mydigitalfc.com/personal-finance/how-employers-can-help-staff-save-tax-beyond-80c-507
Indian tax laws allow an individual to invest up to Rs 1,00,000 in a list of investments that qualify under section 80C and help the taxpayer save taxes of up to 30 per cent if the person is in the highest slab along with the cess. The intent of the law is to force individuals to invest at least for the sake of saving tax, but, the main purpose is to create savings for future needs. India does not have social security schemes, hence, it becomes even more important for every individual to save. We are seeing a gradual shift from guaranteed benefits to a contributory benefits system for many public and private sector employees.
Employees leaving organisations prematurely bring liabilities to the company in form of compensations during accidents/death, and such premature exits from the workplace also causes great amount of financial stress to the employee and his family because income stops abruptly.
Companies invest heavily in training its employees so that they learn the processes quickly and can start yielding returns in a short span of time. The biggest problem today is attrition.
Companies can take some initiatives to create loyal employees in addition to benefits mandated by law like PF or ESI. Since the amounts received by mandated laws are very marginal, companies may look at other options where the employees can protect their families, save higher taxes over and above the section 80C and help the employee save for future needs.
Group insurance: This is the cheapest form of insurance that most companies offer employees to protect families in case of premature death. The premiums can be paid by the company and in some cases, contributions are made by the employees also.
Keyman or key person insurance: A company may sign up for key man insurance on the life of certain employee or employees who may be contributing significantly to the business by virtue of experience, contacts, knowledge or expertise, who might be a loss to the company by quitting. The insurance compensates the company to the extent of cover taken on the employee’s life. Like the group insurance, this policy also is a term cover, and the company can claim the premium paid as an expense in its books.
The key difference between the group insurance and keyman’s insurance is that in the former the employee’s nominee gets the sum assured and in the latter, the company is compensated for the keyperson’s loss.
Employer employee insurance (EEI): This is a unique insurance product through which an employer can give his employee all three benefits – protection, tax savings and savings at the same time and earn an employee’s company loyalty.
There are no specially designed products under this scheme. Regular insurance products, both traditional and Ulips, can be purchased under this scheme.
For EEI, the employer, while signing the contract with the insurer, mentions the number of years the premiums will be paid by the employer on behalf of the employee and the number of years the policy will continue wherein the employee would remain covered.
The premiums paid by the company can be claimed as expense under section 37(1) of the IT Act. No tax is charged in the hands of employee either, if the employee after assignment decides to continue paying premiums, he will enjoy section 80C benefit also. The death claims will be tax free in the hands of the nominee under section 10(10D). If it’s a traditional insurance product, the surrender value (SV) is generally very low. The SV is generally calculated as 30 per cent of all the premiums paid, less the first year premium.
Tuesday, March 27, 2012
How too much gold is a drag on Indian economy
Posted by MarketFastFood on 26/03/2012
Tina Edwin, Economic Times 25/3/2012
source: http://m.economictimes.com/markets/commodities/how-too-much-gold-is-a-drag-on-indias-economy/articleshow/12395863.cms
The India-gold love affair is now facing a close scrutiny from the government. The budget has doubled import duty on bullion and non-standard gold to 4% and 10%, respectively, and slapped a 1% cess on unbranded jewellery. FM’s message is clear: reduce gold’s allure and head off Indians to other investments. For, too much gold is a drag on India’s economy. Here’s how:
The BIG Hoard – 20,000 tonnes
According to the World Gold Council, that’s approximately how much gold you’d find if you put together the store of individuals, institutions and the RBI at the end of 2011. Of this, 933.4 tonnes were added last year. Valued at Rs 27,000 per 10 grams, this stockpile is worth roughly Rs 54 lakh crore, 60% of the nominal GDP of India in 2011-12. Only a fraction, about 557.8 tonnes, is held by the RBI and constitutes 10.5% of India’s forex reserves.
But We Don’t Use Most Of It
2:1 is the ratio of gold to gross domestic capital formation. Had Indians bought more goods and services instead of gold, capital formation (economists’ term for fresh investments) would have been higher than Rs 26.92 lakh crore for 2010-11. How? Higher demand would push companies to expand capacity or invest in greenfield projects to build some items they currently import.
And Gold Doesn’t Work On Its Own
6.8:1 is the approximate ratio of the value of gold holdings to financial savings of households. Investments in financial instruments such as fixed deposits, insurance and equities release funds for productive activities by both the government and corporate sector. Gold does nothing but idle in safes or bank deposit boxes.
Yet, even though gold prices soared, household purchases did not decline proportionately. Instead, financial savings took a hit, falling to Rs 7.68 lakh crore in 2010-11 from `8.35 lakh crore in 2009-10. Inadequate banking infrastructure is to blame too: most of rural India cannot access financial instruments and has no choice but to buy gold as savings.
Plus, Gold Saps Precious Resources
Gold is the third largest component of India’s import bill beaten only by crude oil and capital goods. Crude keeps the economy running and capital goods help produce other goods, build infrastructure and keep growth rolling. But gold’s contribution to the economy is minuscule. Yet we spent $33.9 billion in 2010-11 to meet 92% of the gold demand. This year, the bill is likely to inflate to $58 billion, according to estimates of the Prime Minister’s Economic Advisory Council (EAC).
Gold Also Further Skews Numbers That Matter
Gold Imports as a % of GDP
1.7 in 2008-09
2.1 in 2009-10
2.0 in 2010-11
3.1 in 2011-12
12% is the estimated proportion of gold in the current year’s import bill of $479 billion. The trade deficit is likely to be $175 billion. If we imported less gold, the trade deficit would be less ugly. As a result, the current account deficit would have looked better and reduced depreciation pressure on the rupee. Import of gold also leads to imprudent use of foreign exchange earnings. A Macquaire Research report says the country’s net gold imports widened the current account deficit by 40 to 130 bps between 2007-08 and 2010-11.
So Will Import Duties End India’s Love Affair With Gold?
Unlikely. The World Gold Council believes there may be a very short-term impact on demand. In the long run, this increase will not matter. This is because the fundamental reasons for buying gold jewellery, rooted in Indian culture and weddings, remain unchanged. The demand for gold as an investment, driven by the need to protect against inflation, ease of liquidity and as a monetised asset to secure loans, will also be unaffected.
Some shining factoids
557.75 tonnes – Is RBI’s gold cache. Of this, 265.49 tonnes are held at Bank of England and Bank for International Settlement.
300% - Is the increase in gold holding of ETFs between 2009 and 2011. Now the stockpile is about 30 tonnes.
0.47 grams – Was India’s per capita consumption of gold jewellery in 2011.
Posted by MarketFastFood on 26/03/2012
Tina Edwin, Economic Times 25/3/2012
source: http://m.economictimes.com/markets/commodities/how-too-much-gold-is-a-drag-on-indias-economy/articleshow/12395863.cms
The India-gold love affair is now facing a close scrutiny from the government. The budget has doubled import duty on bullion and non-standard gold to 4% and 10%, respectively, and slapped a 1% cess on unbranded jewellery. FM’s message is clear: reduce gold’s allure and head off Indians to other investments. For, too much gold is a drag on India’s economy. Here’s how:
The BIG Hoard – 20,000 tonnes
According to the World Gold Council, that’s approximately how much gold you’d find if you put together the store of individuals, institutions and the RBI at the end of 2011. Of this, 933.4 tonnes were added last year. Valued at Rs 27,000 per 10 grams, this stockpile is worth roughly Rs 54 lakh crore, 60% of the nominal GDP of India in 2011-12. Only a fraction, about 557.8 tonnes, is held by the RBI and constitutes 10.5% of India’s forex reserves.
But We Don’t Use Most Of It
2:1 is the ratio of gold to gross domestic capital formation. Had Indians bought more goods and services instead of gold, capital formation (economists’ term for fresh investments) would have been higher than Rs 26.92 lakh crore for 2010-11. How? Higher demand would push companies to expand capacity or invest in greenfield projects to build some items they currently import.
And Gold Doesn’t Work On Its Own
6.8:1 is the approximate ratio of the value of gold holdings to financial savings of households. Investments in financial instruments such as fixed deposits, insurance and equities release funds for productive activities by both the government and corporate sector. Gold does nothing but idle in safes or bank deposit boxes.
Yet, even though gold prices soared, household purchases did not decline proportionately. Instead, financial savings took a hit, falling to Rs 7.68 lakh crore in 2010-11 from `8.35 lakh crore in 2009-10. Inadequate banking infrastructure is to blame too: most of rural India cannot access financial instruments and has no choice but to buy gold as savings.
Plus, Gold Saps Precious Resources
Gold is the third largest component of India’s import bill beaten only by crude oil and capital goods. Crude keeps the economy running and capital goods help produce other goods, build infrastructure and keep growth rolling. But gold’s contribution to the economy is minuscule. Yet we spent $33.9 billion in 2010-11 to meet 92% of the gold demand. This year, the bill is likely to inflate to $58 billion, according to estimates of the Prime Minister’s Economic Advisory Council (EAC).
Gold Also Further Skews Numbers That Matter
Gold Imports as a % of GDP
1.7 in 2008-09
2.1 in 2009-10
2.0 in 2010-11
3.1 in 2011-12
12% is the estimated proportion of gold in the current year’s import bill of $479 billion. The trade deficit is likely to be $175 billion. If we imported less gold, the trade deficit would be less ugly. As a result, the current account deficit would have looked better and reduced depreciation pressure on the rupee. Import of gold also leads to imprudent use of foreign exchange earnings. A Macquaire Research report says the country’s net gold imports widened the current account deficit by 40 to 130 bps between 2007-08 and 2010-11.
So Will Import Duties End India’s Love Affair With Gold?
Unlikely. The World Gold Council believes there may be a very short-term impact on demand. In the long run, this increase will not matter. This is because the fundamental reasons for buying gold jewellery, rooted in Indian culture and weddings, remain unchanged. The demand for gold as an investment, driven by the need to protect against inflation, ease of liquidity and as a monetised asset to secure loans, will also be unaffected.
Some shining factoids
557.75 tonnes – Is RBI’s gold cache. Of this, 265.49 tonnes are held at Bank of England and Bank for International Settlement.
300% - Is the increase in gold holding of ETFs between 2009 and 2011. Now the stockpile is about 30 tonnes.
0.47 grams – Was India’s per capita consumption of gold jewellery in 2011.
Wednesday, February 29, 2012
Robin Sharma - Secrets of success
The 73 Best Lessons I’ve Learned for Leadership Success in Business and Life ?By Robin Sharma, author of the international bestseller “The Leader Who Had No Title”
1. You can really Lead Without a Title.
2. Knowing what to do and not doing it is the same as not knowing what to do.
3. Give away what you most wish to receive.
4. The antidote to stagnation is innovation.
5. The conversations you are most resisting are the conversations you most need to be having.
6. Leadership is no longer about position – but passion. It’s no longer about image but impact. This is Leadership 2.0.
7. The bigger the dream, the more important to the team.
8. Visionaries see the “impossible” as the inevitable.
9. All great thinkers are initially ridiculed – and eventually revered.
10. The more you worry about being applauded by others and making money, the less you’ll focus on doing the great work that will generate applause. And make you money.
11. To double your net worth, double your self-worth. Because you will never exceed the height of your self-image.
12. The more messes you allow into your life, the more messes will become a normal (and acceptable) part of your life.
13. The secret to genius is not genetics but daily practice married with relentless perseverance.
14. The best leaders lift people up versus tear people down.
15. The most precious resource for businesspeople is not their time. It’s their energy. Manage it well.
16. The fears you run from run to you.
17. The most dangerous place is in your safety zone.
18. The more you go to your limits, the more your limits will expand.
19. Every moment in front of a customer is a gorgeous opportunity to live your values.
20. Be so good at what you do that no one else in the world can do what you do.
21. You’ll never go wrong in doing what is right.
22. It generally takes about 10 years to become an overnight sensation.
23. Never leave the site of a strong idea without doing something to execute around it.
24. A strong foundation at home sets you up for a strong foundation at work.
25. Never miss a moment to encourage someone you work with.
26. Saying “I’ll try” really means “I’m not really committed.”
27. The secret of passion is purpose.
28. Do a few things at mastery versus many things at mediocrity.
29. To have the rewards that very few have, do the things that very few people are willing to do.
30. Go where no one’s gone and leave a trail of excellence behind you.
31. Who you are becoming is more important than what you are accumulating.
32. Accept your teammates for what they are and inspire them to become all they can be.
33. To triple the growth of your organization, triple the growth of your people.
34. The best leaders are the most dedicated learners. Read great books daily. Investing in your self-development is the best investment you will ever make.
35. Other people’s opinions of you are none of your business.
36. Change is hardest at the beginning, messiest in the middle and best at the end.
37. Measure your success by your inner scorecard versus an outer one.
38. Understand the acute difference between the cost of something and the value of something.
39. Nothing fails like success. Because when you are at the top, it’s so easy to stop doing the very things that brought you to the top.
40. The best leaders blend courage with compassion.
41. The less you are like others, the less others will like you.
42. You’ll never go wrong in doing what’s right.
43. Excellence in one area is the beginning of excellence in every area.
44. The real reward for doing your best work is not the money you make but the leader you become.
45. Passion + production = performance.
46. The value of getting to your goals lives not in reaching the goal but what the talents/strengths/capabilities the journey reveals to you.
47. Stand for something. Or else you’ll fall for anything.
48. Say “thank you” when you’re grateful and “sorry” when you’re wrong.
49. Make the work you are doing today better than the work you did yesterday.
50. Small daily – seemingly insignificant – improvements and innovations lead to staggering achievements over time.
51. Peak performers replace depletion with inspiration on a daily basis.
52. Take care of your relationships and the sales/money will take care of itself.
53. You can’t be great if you don’t feel great. Make exceptional health your #1 priority.
54. Doing the difficult things that you’ve never done awakens the talents you never knew you had.
55. As we each express our natural genius, we all elevate our world.
56. Your daily schedule reflects your deepest values.
57. People do business with people who make them feel special.
58. All things being equal, the primary competitive advantage of your business will be your ability to grow Leaders Without Titles faster than your industry peers.
59. Treat people well on your way up and they’ll treat you well on your way down.
60. Success lies in a masterful consistency around a few fundamentals. It really is simple. Not easy. But simple.
61. The business (and person) who tries to be everything to everyone ends up being nothing to anyone.
62. One of the primary tactics for enduring winning is daily learning.
63. To have everything you want, help as many people as you can possibly find get everything they want.
64. Understand that a problem is only a problem if you choose to view it as a problem (vs. an opportunity).
65. Clarity precedes mastery. Craft clear and precise plans/goals/deliverables. And then block out all else.
66. The best in business spend far more time on learning than in leisure.
67. Lucky is where skill meets persistence.
68. The best Leaders Without a Title use their heads and listen to their hearts.
69. The things that are hardest to do are often the things that are the best to do.
70. Every single person in the world could be a genius at something, if they practiced it daily for at least ten years (as confirmed by the research of Anders Ericsson and others).
71. Daily exercise is an insurance policy against future illness. The best Leaders Without Titles are the fittest.
72. Education is the beginning of transformation. Dedicate yourself to daily learning via books/audios/seminars and coaching.
73. The quickest way to grow the sales of your business is to grow your people.
1. You can really Lead Without a Title.
2. Knowing what to do and not doing it is the same as not knowing what to do.
3. Give away what you most wish to receive.
4. The antidote to stagnation is innovation.
5. The conversations you are most resisting are the conversations you most need to be having.
6. Leadership is no longer about position – but passion. It’s no longer about image but impact. This is Leadership 2.0.
7. The bigger the dream, the more important to the team.
8. Visionaries see the “impossible” as the inevitable.
9. All great thinkers are initially ridiculed – and eventually revered.
10. The more you worry about being applauded by others and making money, the less you’ll focus on doing the great work that will generate applause. And make you money.
11. To double your net worth, double your self-worth. Because you will never exceed the height of your self-image.
12. The more messes you allow into your life, the more messes will become a normal (and acceptable) part of your life.
13. The secret to genius is not genetics but daily practice married with relentless perseverance.
14. The best leaders lift people up versus tear people down.
15. The most precious resource for businesspeople is not their time. It’s their energy. Manage it well.
16. The fears you run from run to you.
17. The most dangerous place is in your safety zone.
18. The more you go to your limits, the more your limits will expand.
19. Every moment in front of a customer is a gorgeous opportunity to live your values.
20. Be so good at what you do that no one else in the world can do what you do.
21. You’ll never go wrong in doing what is right.
22. It generally takes about 10 years to become an overnight sensation.
23. Never leave the site of a strong idea without doing something to execute around it.
24. A strong foundation at home sets you up for a strong foundation at work.
25. Never miss a moment to encourage someone you work with.
26. Saying “I’ll try” really means “I’m not really committed.”
27. The secret of passion is purpose.
28. Do a few things at mastery versus many things at mediocrity.
29. To have the rewards that very few have, do the things that very few people are willing to do.
30. Go where no one’s gone and leave a trail of excellence behind you.
31. Who you are becoming is more important than what you are accumulating.
32. Accept your teammates for what they are and inspire them to become all they can be.
33. To triple the growth of your organization, triple the growth of your people.
34. The best leaders are the most dedicated learners. Read great books daily. Investing in your self-development is the best investment you will ever make.
35. Other people’s opinions of you are none of your business.
36. Change is hardest at the beginning, messiest in the middle and best at the end.
37. Measure your success by your inner scorecard versus an outer one.
38. Understand the acute difference between the cost of something and the value of something.
39. Nothing fails like success. Because when you are at the top, it’s so easy to stop doing the very things that brought you to the top.
40. The best leaders blend courage with compassion.
41. The less you are like others, the less others will like you.
42. You’ll never go wrong in doing what’s right.
43. Excellence in one area is the beginning of excellence in every area.
44. The real reward for doing your best work is not the money you make but the leader you become.
45. Passion + production = performance.
46. The value of getting to your goals lives not in reaching the goal but what the talents/strengths/capabilities the journey reveals to you.
47. Stand for something. Or else you’ll fall for anything.
48. Say “thank you” when you’re grateful and “sorry” when you’re wrong.
49. Make the work you are doing today better than the work you did yesterday.
50. Small daily – seemingly insignificant – improvements and innovations lead to staggering achievements over time.
51. Peak performers replace depletion with inspiration on a daily basis.
52. Take care of your relationships and the sales/money will take care of itself.
53. You can’t be great if you don’t feel great. Make exceptional health your #1 priority.
54. Doing the difficult things that you’ve never done awakens the talents you never knew you had.
55. As we each express our natural genius, we all elevate our world.
56. Your daily schedule reflects your deepest values.
57. People do business with people who make them feel special.
58. All things being equal, the primary competitive advantage of your business will be your ability to grow Leaders Without Titles faster than your industry peers.
59. Treat people well on your way up and they’ll treat you well on your way down.
60. Success lies in a masterful consistency around a few fundamentals. It really is simple. Not easy. But simple.
61. The business (and person) who tries to be everything to everyone ends up being nothing to anyone.
62. One of the primary tactics for enduring winning is daily learning.
63. To have everything you want, help as many people as you can possibly find get everything they want.
64. Understand that a problem is only a problem if you choose to view it as a problem (vs. an opportunity).
65. Clarity precedes mastery. Craft clear and precise plans/goals/deliverables. And then block out all else.
66. The best in business spend far more time on learning than in leisure.
67. Lucky is where skill meets persistence.
68. The best Leaders Without a Title use their heads and listen to their hearts.
69. The things that are hardest to do are often the things that are the best to do.
70. Every single person in the world could be a genius at something, if they practiced it daily for at least ten years (as confirmed by the research of Anders Ericsson and others).
71. Daily exercise is an insurance policy against future illness. The best Leaders Without Titles are the fittest.
72. Education is the beginning of transformation. Dedicate yourself to daily learning via books/audios/seminars and coaching.
73. The quickest way to grow the sales of your business is to grow your people.
Thursday, February 23, 2012
Why is the wedding ring worn on fourth finger?
Have you ever wondered why married couples wear wedding rings on their forth finger or ring finger? There is a nice Chinese explanation regarding this.
Each finger symbolizes a relationship in your life :
· Thumb represents your parents
· Index finger represents your siblings
· Middle finger represents your self
· Ring finger represents your life partner
· Little finger represents children
Now, put your palms together and bend both of your middle fingers. Hold middle fingers back-to-back and hold all other four fingers tip-to-tip.
Now, if you try to separate your thumbs which represents your parents, you can! According to the Chinese, this is because your parents are not destined to live with you forever. You can also open your index finger because your sibling which is your brothers and/or sisters are going to left you to have there separate life or maybe build their own family. You can also open your little finger that represents your children. Your children will also be building their own separate lives and settle themselves someday with a family of their own.
Finally, try to separate your ring finger. You can't since as a husband and wife, you are destined to be together for better, for worse, for richer, for poorer, in sickness or in health, to love and to cherish 'till death separate you both.
Have you ever wondered why married couples wear wedding rings on their forth finger or ring finger? There is a nice Chinese explanation regarding this.
Each finger symbolizes a relationship in your life :
· Thumb represents your parents
· Index finger represents your siblings
· Middle finger represents your self
· Ring finger represents your life partner
· Little finger represents children
Now, put your palms together and bend both of your middle fingers. Hold middle fingers back-to-back and hold all other four fingers tip-to-tip.
Now, if you try to separate your thumbs which represents your parents, you can! According to the Chinese, this is because your parents are not destined to live with you forever. You can also open your index finger because your sibling which is your brothers and/or sisters are going to left you to have there separate life or maybe build their own family. You can also open your little finger that represents your children. Your children will also be building their own separate lives and settle themselves someday with a family of their own.
Finally, try to separate your ring finger. You can't since as a husband and wife, you are destined to be together for better, for worse, for richer, for poorer, in sickness or in health, to love and to cherish 'till death separate you both.
Wednesday, February 22, 2012
MUMBAI: Rashmi Patel, a housewife and insurance agent with the country's largest insurance company, has switched her moonlighting. She now sells other financial products such as credit card and loan products of a private sector bank. The Rajkot resident is among the lakhs of insurance agents who have either switched their profession or have faced licence cancellation due to lower commission.
In the first three quarters of the financial year 2011-12, more than 3 lakh active insurance agents have quit the profession. Insurance companies such as Life Insurance Corporation of India (LIC), ICICI Prudential and HDFC Life have seen mass exodus owing to lesser incentive to agents when compare with other similar sophisticated industries.
Individual agents are the traditional channel for selling life insurance products and contribute over 50% of new sales. The percentage of new business premium collection from this channel has dropped from 55 % to 44% as the number of agents has come down to 23.78 lakh in December 2011 from 27.10 lakh last year.
"We have to increase reward for agents. I think we should figure out how to increase the productivity of agents. At present, an agent sells 18 policies on an average in a year. We have to see how we can increase it to 25 policies," Insurance Regulatory and Development Authority, or Irda, chairman J Hari Narayan said. This will ensure better income for agents, he said.
Agents are abandoning the profession after the regulator reduced commissions and introduced a host of stringent norms making insurance products, especially unit-linked insurance plans, or Ulips, less lucrative. Insurance products, including pension plans, have vanished from the market after the new norms were implemented.
"The global average life of agents is 4-5 years. A lot of agents return to their previous jobs, join a broker, start selling mutual funds after leaving the insurance sector," said Anil Jha, an agent with LIC.
Insurance companies are also asking agents to leave if they fail to meet targets. Targets for agents are set on the basis of the number of policies sold and premium earned.
In 2010-11, over 10 lakh agents vacated the space as the business turned less alluring due to the cap on charges on unit-linked insurance plans, which were selling like hot cake. Now, agents earn 5% to 7% commission on Ulips as against 12% to 18% before the changes were introduced.
The total premium collected by the industry has decreased by 3% to Rs 1,80,240 crore from Rs 1,86,396 crore. New business income fell 17% to Rs 71,953 crore from Rs 86,698 crore mainly due to absence of pension products. As per provisional data, the total new premium collected under the individual pension category was RS 1,008 crore in the December 2011 quarter as against Rs 18,417 crore in the same period of the previous fiscal year.
In the first three quarters of the financial year 2011-12, more than 3 lakh active insurance agents have quit the profession. Insurance companies such as Life Insurance Corporation of India (LIC), ICICI Prudential and HDFC Life have seen mass exodus owing to lesser incentive to agents when compare with other similar sophisticated industries.
Individual agents are the traditional channel for selling life insurance products and contribute over 50% of new sales. The percentage of new business premium collection from this channel has dropped from 55 % to 44% as the number of agents has come down to 23.78 lakh in December 2011 from 27.10 lakh last year.
"We have to increase reward for agents. I think we should figure out how to increase the productivity of agents. At present, an agent sells 18 policies on an average in a year. We have to see how we can increase it to 25 policies," Insurance Regulatory and Development Authority, or Irda, chairman J Hari Narayan said. This will ensure better income for agents, he said.
Agents are abandoning the profession after the regulator reduced commissions and introduced a host of stringent norms making insurance products, especially unit-linked insurance plans, or Ulips, less lucrative. Insurance products, including pension plans, have vanished from the market after the new norms were implemented.
"The global average life of agents is 4-5 years. A lot of agents return to their previous jobs, join a broker, start selling mutual funds after leaving the insurance sector," said Anil Jha, an agent with LIC.
Insurance companies are also asking agents to leave if they fail to meet targets. Targets for agents are set on the basis of the number of policies sold and premium earned.
In 2010-11, over 10 lakh agents vacated the space as the business turned less alluring due to the cap on charges on unit-linked insurance plans, which were selling like hot cake. Now, agents earn 5% to 7% commission on Ulips as against 12% to 18% before the changes were introduced.
The total premium collected by the industry has decreased by 3% to Rs 1,80,240 crore from Rs 1,86,396 crore. New business income fell 17% to Rs 71,953 crore from Rs 86,698 crore mainly due to absence of pension products. As per provisional data, the total new premium collected under the individual pension category was RS 1,008 crore in the December 2011 quarter as against Rs 18,417 crore in the same period of the previous fiscal year.
Monday, January 30, 2012
How to choose a course on stock market
Posted by MarketFastFood on 30/01/2012
What to look out for while choosing a course on stock market investments
NIKHIL WALAVALKAR, Economic Times 30/1/2012
source: http://economictimes.indiatimes.com/personal-finance/savings-centre/analysis/what-to-look-out-for-while-choosing-a-course-on-stock-market-investments/articleshow/11680441.cms
Legends of stock market allure many individuals to try their hands on equities. But, barring a few, many end up losing their hard-earned money in the market. Some retire hurt, but some don’t give up and queue up to sign up for courses that are designed to help novices in the market. The queue gets longer especially when the market is in bad shape.
"Short duration courses dealing with the basics of stock market have been in demand for some time now," says Vinod Nair, head – academics and product development, BSE Institute. Many institutions and individuals are offering short-duration courses that are supposed to help individuals to get it right in the stock market.
What is on offer
Typically, an average investor would want to learn every ‘money making trick’ in a weekend. No wonder, there are many courses that are conducted on weekends. Sure, you also have the option of a three-month course. One can start with courses dealing with the basics of stock market: what is a stock market; how does it function. There are also courses that are focused on one aspect of investing, say, fundamental analysis.
A course of fundamental analysis will typically deal with industry analysis, financial analysis and valuation of companies. If you have been investing or trading for some time and aware of the operational aspects of the game, you can consider them. If you are fairly aware of fundamental analysis and keen to go deeper, you can look at financial modeling course that helps you build your own earnings models to project a company’s financials using the spreadsheet. Put simply, you have to first identify your requirement before going for a course.
For example, if you are comfortable trading using price behaviour of securities, go for a technical analysis course. If you believe in financial numbers, look for options in fundamental analysis. But since there is a problem of plenty – choose wisely.
How to choose
Professionally-managed institutes clearly define the objectives of a course and the ideal audience for the course. "Do not get carried away by tall claims lodged by some self-proclaimed experts to market their courses," says Chandrashekhar Thakur, head – investor education, Central Depository Services.
You should choose a course only when your requirements and the objectives of the course match. Go with a course that clearly outlines the course content. "Check if the course coverage is comprehensive and includes concepts, tools and techniques and relevant regulatory issues," says Vinod Nair.
If you have some doubts about the course content do get it clarified before you opt for the course. "You should also check the teaching approach used. Whether it is just an information download or does it use hands on exercises and current case studies," adds Vinod Nair. Go with a course that takes real life case studies. You can get this information from ex-students.
"Do check the credentials of the faculty conducting the course," adds Chandrashekhar Thakur. Role of faculty is more important since these are application-oriented course. Professional bodies with long-standing track record ensure faculties with rich market experience in respective domains. But when it comes to individuals or little known institutes, conducting courses, you have to exercise caution.
"If you are opting for a technical analysis course, check the track record of the faculty as a technical analyst. Especially his recommendations and views at critical junctures can give you an insight," says Nooresh Merani, chief executive officer, Analyse India Market Solutions. With the advent of electronic media such as websites and blogs, this is very much possible nowadays. Professional technical analysts do keep a time stamped record of recommendations on their websites or free blogs.
Infrastructure also matters a lot. If you have enrolled for a financial modeling course, the institute should provide each participant a computer in the classroom. Better confirm the same before enrolling, otherwise you have to carry your laptop with you. In case of a technical analysis course, the institute should offer you some handholding in terms of which charting software to buy after the course. The institute should also offer some post course assistance.
"Students need help from faculty after completing the course for clearing their doubts. Sometimes refresher courses at no extra cost work better," says Nooresh Merani. Some institutes also offer students online forums and groups to discuss doubts, trades and investment ideas with faculties and fellow students. If you are new to markets, this makes a lot more sense.
A course conducted for a day or two would be priced anything between Rs 3,000 and Rs 12,000. Long-duration programmes are priced between Rs 15,000 and Rs 25,000. If you are going for a technical analysis course, do consider the cost of charting software, which is priced in the range of Rs 10,000 and Rs 25,000 a year. It may look obvious to account for, but still, you need a computer and a broadband internet connection to trade using charting software.
The Road Ahead
"Nobody becomes an expert overnight. A good course gives you knowledge and enables you to use it in your favour," says a fund manager, who does not want to be named. Give yourself time to absorb what you have learnt in the course and gradually apply it in the market. Most courses will also offer some inputs on risk management and money management that bring in some discipline. Use your knowledge, be disciplined and patient, and you will be rewarded.
Posted by MarketFastFood on 30/01/2012
What to look out for while choosing a course on stock market investments
NIKHIL WALAVALKAR, Economic Times 30/1/2012
source: http://economictimes.indiatimes.com/personal-finance/savings-centre/analysis/what-to-look-out-for-while-choosing-a-course-on-stock-market-investments/articleshow/11680441.cms
Legends of stock market allure many individuals to try their hands on equities. But, barring a few, many end up losing their hard-earned money in the market. Some retire hurt, but some don’t give up and queue up to sign up for courses that are designed to help novices in the market. The queue gets longer especially when the market is in bad shape.
"Short duration courses dealing with the basics of stock market have been in demand for some time now," says Vinod Nair, head – academics and product development, BSE Institute. Many institutions and individuals are offering short-duration courses that are supposed to help individuals to get it right in the stock market.
What is on offer
Typically, an average investor would want to learn every ‘money making trick’ in a weekend. No wonder, there are many courses that are conducted on weekends. Sure, you also have the option of a three-month course. One can start with courses dealing with the basics of stock market: what is a stock market; how does it function. There are also courses that are focused on one aspect of investing, say, fundamental analysis.
A course of fundamental analysis will typically deal with industry analysis, financial analysis and valuation of companies. If you have been investing or trading for some time and aware of the operational aspects of the game, you can consider them. If you are fairly aware of fundamental analysis and keen to go deeper, you can look at financial modeling course that helps you build your own earnings models to project a company’s financials using the spreadsheet. Put simply, you have to first identify your requirement before going for a course.
For example, if you are comfortable trading using price behaviour of securities, go for a technical analysis course. If you believe in financial numbers, look for options in fundamental analysis. But since there is a problem of plenty – choose wisely.
How to choose
Professionally-managed institutes clearly define the objectives of a course and the ideal audience for the course. "Do not get carried away by tall claims lodged by some self-proclaimed experts to market their courses," says Chandrashekhar Thakur, head – investor education, Central Depository Services.
You should choose a course only when your requirements and the objectives of the course match. Go with a course that clearly outlines the course content. "Check if the course coverage is comprehensive and includes concepts, tools and techniques and relevant regulatory issues," says Vinod Nair.
If you have some doubts about the course content do get it clarified before you opt for the course. "You should also check the teaching approach used. Whether it is just an information download or does it use hands on exercises and current case studies," adds Vinod Nair. Go with a course that takes real life case studies. You can get this information from ex-students.
"Do check the credentials of the faculty conducting the course," adds Chandrashekhar Thakur. Role of faculty is more important since these are application-oriented course. Professional bodies with long-standing track record ensure faculties with rich market experience in respective domains. But when it comes to individuals or little known institutes, conducting courses, you have to exercise caution.
"If you are opting for a technical analysis course, check the track record of the faculty as a technical analyst. Especially his recommendations and views at critical junctures can give you an insight," says Nooresh Merani, chief executive officer, Analyse India Market Solutions. With the advent of electronic media such as websites and blogs, this is very much possible nowadays. Professional technical analysts do keep a time stamped record of recommendations on their websites or free blogs.
Infrastructure also matters a lot. If you have enrolled for a financial modeling course, the institute should provide each participant a computer in the classroom. Better confirm the same before enrolling, otherwise you have to carry your laptop with you. In case of a technical analysis course, the institute should offer you some handholding in terms of which charting software to buy after the course. The institute should also offer some post course assistance.
"Students need help from faculty after completing the course for clearing their doubts. Sometimes refresher courses at no extra cost work better," says Nooresh Merani. Some institutes also offer students online forums and groups to discuss doubts, trades and investment ideas with faculties and fellow students. If you are new to markets, this makes a lot more sense.
A course conducted for a day or two would be priced anything between Rs 3,000 and Rs 12,000. Long-duration programmes are priced between Rs 15,000 and Rs 25,000. If you are going for a technical analysis course, do consider the cost of charting software, which is priced in the range of Rs 10,000 and Rs 25,000 a year. It may look obvious to account for, but still, you need a computer and a broadband internet connection to trade using charting software.
The Road Ahead
"Nobody becomes an expert overnight. A good course gives you knowledge and enables you to use it in your favour," says a fund manager, who does not want to be named. Give yourself time to absorb what you have learnt in the course and gradually apply it in the market. Most courses will also offer some inputs on risk management and money management that bring in some discipline. Use your knowledge, be disciplined and patient, and you will be rewarded.
Sunday, January 29, 2012
RBI monetary policy: It’s time to change three gears
Posted by MarketFastFood on 29/01/2012
Indranil Sen Gupta, Economic Times 25/1/2012
source: http://articles.economictimes.indiatimes.com/2012-01-25/news/30662952_1_forex-reserves-monetary-policy-policy-rates
We welcome the Reserve Bank of India’s growing focus on protecting growth from fighting inflation. Monetary policy should change in three ways. First , policy rates need to cycle down to support growth. Second, RBI needs to reduce the money market liquidity deficit to ease pressure on lending rates instead of adding to it.
Finally, we expect RBI to rebuild forex reserves instead of strengthening the rupee to fight imported inflation. We are relieved to see governor Subbarao signal a possible rate cut in March. In fact, growth is flashing red lights: loan demand has fallen to 17% from 21.4% in March 2011 and December GDP growth will likely slip to 6-6 .5% levels.
After all, India is perhaps the only economy in the world in which lending rates have pierced their 2008-peak . What about inflation? We agree with RBI that the present relief could be temporary . In fact, we expect inflation to rebound in mid-2012 after the government hikes coal, oil and power prices.
Flagellating ourselves by killing India’s growth, however, will not pull down global oil prices. Not surprisingly, every other BRIC central bank has been easing already. We are quite confident that core inflation (ie, inflation adjusted for weather, oil and metal price shocks) will come off. With growth falling below the economy’s potential of 8%, corporates are losing pricing power.
Can we get past the mid-year rebound in inflation? One way could be to hike oil prices on Budget day itself. Sure, this will push up inflation by about 100 bps to 8% by March 2012 from our base case. Yet, markets will then see inflation falling straight to 5.5% in March 2013. This will also allow RBI to steadily cut rates without fearing a rebound in inflation.
We are happy that RBI cut CRR by 50 bps to bring down money market liquidity deficit to ease pressure on rates. In fact, we hope that it later buys more government paper via OMOs to bring the money market liquidity deficit to its targeted Rs 60,000 crore from Rs 1,50,000 crore now.
After all, monetary growth, at 16.5%, is running below the optimal 17.5% levels consistent with 8% growth. Finally, we expect RBI to revert to building up forex reserves as insurance cover . After all, the import cover (ie: months of imports that forex reserves can fund) has fallen to 7.7 months, the least since 1997.
We appreciate that RBI could not buy forex reserves because it was trying to fend off imported inflation with a strong rupee at a time of high current account deficit. But, the recent crisis has shown that high forex reserves help as markets respect the fact that the Reserve Bank carries a big stick. The RBI must, at the earliest opportunity, recoup the $45 billion it has sold since 2008.
Posted by MarketFastFood on 29/01/2012
Indranil Sen Gupta, Economic Times 25/1/2012
source: http://articles.economictimes.indiatimes.com/2012-01-25/news/30662952_1_forex-reserves-monetary-policy-policy-rates
We welcome the Reserve Bank of India’s growing focus on protecting growth from fighting inflation. Monetary policy should change in three ways. First , policy rates need to cycle down to support growth. Second, RBI needs to reduce the money market liquidity deficit to ease pressure on lending rates instead of adding to it.
Finally, we expect RBI to rebuild forex reserves instead of strengthening the rupee to fight imported inflation. We are relieved to see governor Subbarao signal a possible rate cut in March. In fact, growth is flashing red lights: loan demand has fallen to 17% from 21.4% in March 2011 and December GDP growth will likely slip to 6-6 .5% levels.
After all, India is perhaps the only economy in the world in which lending rates have pierced their 2008-peak . What about inflation? We agree with RBI that the present relief could be temporary . In fact, we expect inflation to rebound in mid-2012 after the government hikes coal, oil and power prices.
Flagellating ourselves by killing India’s growth, however, will not pull down global oil prices. Not surprisingly, every other BRIC central bank has been easing already. We are quite confident that core inflation (ie, inflation adjusted for weather, oil and metal price shocks) will come off. With growth falling below the economy’s potential of 8%, corporates are losing pricing power.
Can we get past the mid-year rebound in inflation? One way could be to hike oil prices on Budget day itself. Sure, this will push up inflation by about 100 bps to 8% by March 2012 from our base case. Yet, markets will then see inflation falling straight to 5.5% in March 2013. This will also allow RBI to steadily cut rates without fearing a rebound in inflation.
We are happy that RBI cut CRR by 50 bps to bring down money market liquidity deficit to ease pressure on rates. In fact, we hope that it later buys more government paper via OMOs to bring the money market liquidity deficit to its targeted Rs 60,000 crore from Rs 1,50,000 crore now.
After all, monetary growth, at 16.5%, is running below the optimal 17.5% levels consistent with 8% growth. Finally, we expect RBI to revert to building up forex reserves as insurance cover . After all, the import cover (ie: months of imports that forex reserves can fund) has fallen to 7.7 months, the least since 1997.
We appreciate that RBI could not buy forex reserves because it was trying to fend off imported inflation with a strong rupee at a time of high current account deficit. But, the recent crisis has shown that high forex reserves help as markets respect the fact that the Reserve Bank carries a big stick. The RBI must, at the earliest opportunity, recoup the $45 billion it has sold since 2008.
Friday, January 27, 2012
How to Save for Retirement
Posted by MarketFastFood on 27/01/2012
B.Venkatesh, Business Line
source: http://www.thehindubusinessline.com/features/investment-world/money-wise/article2820472.ece
Last week, I had an interesting conversation with a friend who is in his fifties. He recently realised that he has not saved enough for his retirement.
He jokingly remarked that his son was his retirement investment! Fortunately, my friend is skilful and can work past 60 if he wants to. But the point is that many of us do not save enough for retirement. Why?
Consider this. You are invited to a party, which is loaded with junk food. You would love to indulge but your doctor has advised you to reduce weight.
What will you do? If you indulge, you are just one of the many who do not have self-control. Why do we find it difficult to resist temptation?
We are always at war inside our head, our present-self fights with our future-self. And our present-self often wins. The reason is not far to seek.
Suppose you are offered cola, chips and pizza. The fact is that your present-self enjoys such food. And your present-self cannot gauge the impact of such food on your health, because the after-effects are typically felt sometime in the future. So, you discount the future.
That is, today’s pleasure is more important to you than the pain in the distant future. Your future-self loses the war.
TODAY VS TOMORROW
The behaviour is the same when it comes to saving for retirement. The war in this case is between current consumption and savings.
You can either have a good lifestyle today. Or cut your current lifestyle to save for the future. We typically choose to have a good lifestyle today!
Fortunately, research in behavioural finance suggests that people can be nudged to save more. In one experiment, subjects were divided into two groups.
One group was shown a virtual image of how they will look in old age. The other group was shown young faces resembling themselves.
Both groups were then given some money and asked to allocate the amount among several alternatives including spending and retirement. The group which saw their older-self allocated more money towards retirement than the other group! Why?
We tend to save less because we are emotionally detached from our future-self and, hence, from saving for retirement. The experiment made the subjects look at their older-self. And that triggered their emotions, prompting them to save more.
While you cannot virtually see your older-self, you can make friends with old people just to understand the problems faced by retirees.
That could, perhaps, prompt you to save more. But be sure to set-up auto-debit facility to channel your savings; for if you stop relating to your older-self, you may not save enough!
Posted by MarketFastFood on 27/01/2012
B.Venkatesh, Business Line
source: http://www.thehindubusinessline.com/features/investment-world/money-wise/article2820472.ece
Last week, I had an interesting conversation with a friend who is in his fifties. He recently realised that he has not saved enough for his retirement.
He jokingly remarked that his son was his retirement investment! Fortunately, my friend is skilful and can work past 60 if he wants to. But the point is that many of us do not save enough for retirement. Why?
Consider this. You are invited to a party, which is loaded with junk food. You would love to indulge but your doctor has advised you to reduce weight.
What will you do? If you indulge, you are just one of the many who do not have self-control. Why do we find it difficult to resist temptation?
We are always at war inside our head, our present-self fights with our future-self. And our present-self often wins. The reason is not far to seek.
Suppose you are offered cola, chips and pizza. The fact is that your present-self enjoys such food. And your present-self cannot gauge the impact of such food on your health, because the after-effects are typically felt sometime in the future. So, you discount the future.
That is, today’s pleasure is more important to you than the pain in the distant future. Your future-self loses the war.
TODAY VS TOMORROW
The behaviour is the same when it comes to saving for retirement. The war in this case is between current consumption and savings.
You can either have a good lifestyle today. Or cut your current lifestyle to save for the future. We typically choose to have a good lifestyle today!
Fortunately, research in behavioural finance suggests that people can be nudged to save more. In one experiment, subjects were divided into two groups.
One group was shown a virtual image of how they will look in old age. The other group was shown young faces resembling themselves.
Both groups were then given some money and asked to allocate the amount among several alternatives including spending and retirement. The group which saw their older-self allocated more money towards retirement than the other group! Why?
We tend to save less because we are emotionally detached from our future-self and, hence, from saving for retirement. The experiment made the subjects look at their older-self. And that triggered their emotions, prompting them to save more.
While you cannot virtually see your older-self, you can make friends with old people just to understand the problems faced by retirees.
That could, perhaps, prompt you to save more. But be sure to set-up auto-debit facility to channel your savings; for if you stop relating to your older-self, you may not save enough!
Power of Compounding
Posted by MarketFastFood on 27/01/2012
source: http://www.investmentkit.com/articles/category/financial-planning/
You must have heard this ad nauseam that disciplined investing and a long-term perspective hold rich rewards for the patient investor. Not convinced? Try answering this quick riddle. If a person saves 5,000 a month in an investment that earns 12%, his corpus at the end of 30 years will be 1.52 crore. Now, if he changes his plan and:
a. chooses an option that earns 9% annualised returns
b.reduces investment to 3,000 a month
c. reduces tenure to 25 years. The question is, in which of the three options will his corpus be the lowest?
The correct answer is C, wherein his corpus would be 84.31 lakh compared to 85.1 lakh with option A and 91.56 lakh with option B. Reducing returns by 3 percentage points or the investment amount by 40% did not have as much a bearing on the final amount as the reduction of the tenure from 30 to 25 years. The last five years were crucial for the power of compounding.
The gains from compounding are initially modest but they gather strength as the years pass. The longer the money stays invested, the faster it grows. As the graphic shows, a 25-year-old person saving a modest 2,000 will have a corpus three times bigger than someone who starts saving four times as much at age 45.
The importance of an early start cannot be stressed enough. Here are some eye-popping statistics that illustrate how crucial the first 5-10 years are.
What the 25-year-old investor puts away in the first five years will account for 44% of his total corpus at 60. His investments in the next five years will account for 25% of his wealth. The investments in the remaining 25 years will account for the balance 31% of the corpus. In other words, even if he stops adding to his investments after 10 years (when he is 35 years old), his corpus would grow to 75.33 lakh by the time he is 60. In stark contrast, the 45-year-old investor would have invested four times the amount for 15 years and would still have a corpus half the size.
Many young people keep procrastinating their investment plans. They should know that with each passing year, they are foregoing the opportunity to benefit from the extraordinary power of compounding. The best way to ensure financial nirvana is to start saving today. The amount you can save is not as important as getting started early.
What is crucial here is the discipline of not dipping into the corpus before you reach the financial goal. Do not withdraw from your investment because it would dilute the effect of compounding. Many investors make the mistake of choosing the dividend option of a fund when they are actually saving for a longterm goal. Go for the dividend option only if you require the periodic payouts.
It’s also important to continue investing regularly. The systematic investment plans (SIPs) offered by mutual funds ensure that a fixed amount flows into your investment kitty every month. Automate the process by setting up an ECS (electronic clearing service) with your bank. This will ensure that even if you forget to invest in a particularly busy month, your bank won’t .
Also Read: http://vridhi.co.in/wealth-creation/
Posted by MarketFastFood on 27/01/2012
source: http://www.investmentkit.com/articles/category/financial-planning/
You must have heard this ad nauseam that disciplined investing and a long-term perspective hold rich rewards for the patient investor. Not convinced? Try answering this quick riddle. If a person saves 5,000 a month in an investment that earns 12%, his corpus at the end of 30 years will be 1.52 crore. Now, if he changes his plan and:
a. chooses an option that earns 9% annualised returns
b.reduces investment to 3,000 a month
c. reduces tenure to 25 years. The question is, in which of the three options will his corpus be the lowest?
The correct answer is C, wherein his corpus would be 84.31 lakh compared to 85.1 lakh with option A and 91.56 lakh with option B. Reducing returns by 3 percentage points or the investment amount by 40% did not have as much a bearing on the final amount as the reduction of the tenure from 30 to 25 years. The last five years were crucial for the power of compounding.
The gains from compounding are initially modest but they gather strength as the years pass. The longer the money stays invested, the faster it grows. As the graphic shows, a 25-year-old person saving a modest 2,000 will have a corpus three times bigger than someone who starts saving four times as much at age 45.
The importance of an early start cannot be stressed enough. Here are some eye-popping statistics that illustrate how crucial the first 5-10 years are.
What the 25-year-old investor puts away in the first five years will account for 44% of his total corpus at 60. His investments in the next five years will account for 25% of his wealth. The investments in the remaining 25 years will account for the balance 31% of the corpus. In other words, even if he stops adding to his investments after 10 years (when he is 35 years old), his corpus would grow to 75.33 lakh by the time he is 60. In stark contrast, the 45-year-old investor would have invested four times the amount for 15 years and would still have a corpus half the size.
Many young people keep procrastinating their investment plans. They should know that with each passing year, they are foregoing the opportunity to benefit from the extraordinary power of compounding. The best way to ensure financial nirvana is to start saving today. The amount you can save is not as important as getting started early.
What is crucial here is the discipline of not dipping into the corpus before you reach the financial goal. Do not withdraw from your investment because it would dilute the effect of compounding. Many investors make the mistake of choosing the dividend option of a fund when they are actually saving for a longterm goal. Go for the dividend option only if you require the periodic payouts.
It’s also important to continue investing regularly. The systematic investment plans (SIPs) offered by mutual funds ensure that a fixed amount flows into your investment kitty every month. Automate the process by setting up an ECS (electronic clearing service) with your bank. This will ensure that even if you forget to invest in a particularly busy month, your bank won’t .
Also Read: http://vridhi.co.in/wealth-creation/
Wednesday, January 25, 2012
Josh’s Twenty Common Sense Investing Rules
Source: http://www.thereformedbroker.com/2012/01/23/joshs-twenty-common-sense-investing-rules/
I get a lot of inquiries about investment help from people that aren’t suitable for what I do or people who simply don’t yet meet our minimums. I hate having to turn folks away, especially loyal readers or people that truly need assistance and can’t find anywhere to get it in an unbiased way.
So with that in mind, I’m laying out my Twenty Common Sense Investing Rules. Please understand that these are not intended to be taken as Iron Law applicable in all situations nor are they meant to be specifically geared toward any one person. This list of rules is simply my accumulated common sense, learned in victory and defeat (lots of defeat) and it can be applied to a plain vanilla portfolio within one day.
The below is for ordinary investors, not professional traders or those aspiring to become professional traders…
1. Buy mid-sized and large stocks that are growing earnings and revenue
2. Buy large and mega-sized stocks that are paying consistent dividends and have low debt-to-equity ratios
3. Read the news on your stocks once a week maximum, once a month minimum
4. The moment a stock disappoints you or makes you wish you hadn’t bought it, sell it. Immediately and regardless of price. Life is too short to hope a bad decision reverses itself
5. Don’t get In or Out of the market, but modulate your exposure up and down as a function of what you think is happening. Your guess based on all the available news and indicators is as good as anyone else’s – and it is more important than anyone else’s for sure because it is your money on the line
6. You should be willing to take a 20% drawdown on every dollar you have in the stock market. Obviously being down 20% is not the goal, but it’s the reality – it can happen at any time. It’s not a permanent loss but you need to invest as though it could be
7. Don’t buy stocks trading over 30 times earnings or under 7 times earnings – something is wrong in both cases. Stay away from anything not trading on a US exchange. Avoid the 52-week low list – a loser is a loser
8. Don’t buy stocks with market caps under $500 million unless you are playing and can afford to lose 100% of that money
9. Sell any stock with a controversial development or red flag no matter what. Let someone else be the hero that swoops in on a mispriced, misunderstood security. You can cheer them on from the safety of the sidelines. Earnings restatements, auditor resignations, massive unexpected earnings misses, filing delays, fraud allegations etc are all automatic sells. Let’s not act like there aren’t 8000 other stocks to choose from in the market
10. Use ETFs to own sectors that are in favor as opposed to individual stocks, when a huge positive trend becomes apparent – you’ll get the upside without the single-stock risk. The aging population and increasing demand for energy are big, fat pitches – it’s hard to swing and miss if you own big swathes of these industries via an ETF, make your life easier
11. Avoid all mutual funds except for asset allocators (balanced funds or go-anywhere can be very useful for investors). Anything based on a discipline (value, growth) or a sector (tech, financial) or a cap size (large, small) is going to underperform its benchmark over the long-term, mean revert versus its peers and cost you more than you need to spend in internal expenses. This is fact not opinion
12. Don’t try to be a trader unless that’s going to be your full-time gig. Trading as a hobby is not the same as being a trader – and it’s less fun than you might think. If you’ve decided to become a trader, find a method and stick with it until you can do it regularly
13. Pay no attention to people who are always pessimistic. The dirty secret is that even when things are terrible, they aren’t that bad. 2008 was the worst sell-off and economic conundrum in 70 years and it only took 18 months for the market to come all the way back. If you fell asleep in 2007 and woke up now five years later, your diversified portfolio including dividend income and unrealized gains/losses looks like nothing ever happened at all
14. Pay no attention to people who are always optimistic. They are selling something. if someone can’t admit that things suck every once in a while, their cheerfulness has an ulterior motive. Or they belong in an insane asylum
15. The financial media wants you to think you are missing out on something and that you need to tune in or click to get up to speed. Pay attention only if you are generally interested and get some entertainment value out of it, most of the time the headlines and segments are dreamed up by editors and producers who need something interesting to talk about each day. And that’s fine, everybody has to earn a living – but don’t think anyone is keeping you informed as a public service
16. Don’t follow gurus. Don’t buy software. Don’t buy DVDs. Don’t listen to "Gut Traders". Read books by and about people who’ve been successful in the market – but only if you’re interested. They won’t help you become a better investor if you don’t care that much to begin with
17. Remind yourself about the difference between investors and traders: Investors make trades when necessary, traders make trades in the course of doing business – that is what they do for a living and your goals are different than theirs. You don’t get paid out on closed positions or a daily p&l statement.
18. Don’t trade for excitement even though trading can be exciting at times
19. Don’t trade angry or for revenge (this stock owes me!)
20. When you finally do become wealthy, hire other people to do this for you and watch them. Go about enjoying the short time we all have left on earth away from the screen. Kiss your kids and play tennis and read books and get drunk during the day just because and go to Australia for a month and buy that car you drove in high school – fix it up and take your sweetheart for a ride. Don’t spend that time reading about inverse correlations between German bund yields and the gold/oil ratio.
Look, the market always goes up given enough time. It is very hard to find a decade during which returns were negative even though we’re just coming off one now. Stocks go up three out of four years and declines of twenty percent peak-to-trough are extremely rare (declines of 50% are even rarer still and are always a buying opportunity). So for new or smaller investors the name of the game is to stay in, do smart things while you’re in and avoid blowing up. It’s that simple.
Source: http://www.thereformedbroker.com/2012/01/23/joshs-twenty-common-sense-investing-rules/
I get a lot of inquiries about investment help from people that aren’t suitable for what I do or people who simply don’t yet meet our minimums. I hate having to turn folks away, especially loyal readers or people that truly need assistance and can’t find anywhere to get it in an unbiased way.
So with that in mind, I’m laying out my Twenty Common Sense Investing Rules. Please understand that these are not intended to be taken as Iron Law applicable in all situations nor are they meant to be specifically geared toward any one person. This list of rules is simply my accumulated common sense, learned in victory and defeat (lots of defeat) and it can be applied to a plain vanilla portfolio within one day.
The below is for ordinary investors, not professional traders or those aspiring to become professional traders…
1. Buy mid-sized and large stocks that are growing earnings and revenue
2. Buy large and mega-sized stocks that are paying consistent dividends and have low debt-to-equity ratios
3. Read the news on your stocks once a week maximum, once a month minimum
4. The moment a stock disappoints you or makes you wish you hadn’t bought it, sell it. Immediately and regardless of price. Life is too short to hope a bad decision reverses itself
5. Don’t get In or Out of the market, but modulate your exposure up and down as a function of what you think is happening. Your guess based on all the available news and indicators is as good as anyone else’s – and it is more important than anyone else’s for sure because it is your money on the line
6. You should be willing to take a 20% drawdown on every dollar you have in the stock market. Obviously being down 20% is not the goal, but it’s the reality – it can happen at any time. It’s not a permanent loss but you need to invest as though it could be
7. Don’t buy stocks trading over 30 times earnings or under 7 times earnings – something is wrong in both cases. Stay away from anything not trading on a US exchange. Avoid the 52-week low list – a loser is a loser
8. Don’t buy stocks with market caps under $500 million unless you are playing and can afford to lose 100% of that money
9. Sell any stock with a controversial development or red flag no matter what. Let someone else be the hero that swoops in on a mispriced, misunderstood security. You can cheer them on from the safety of the sidelines. Earnings restatements, auditor resignations, massive unexpected earnings misses, filing delays, fraud allegations etc are all automatic sells. Let’s not act like there aren’t 8000 other stocks to choose from in the market
10. Use ETFs to own sectors that are in favor as opposed to individual stocks, when a huge positive trend becomes apparent – you’ll get the upside without the single-stock risk. The aging population and increasing demand for energy are big, fat pitches – it’s hard to swing and miss if you own big swathes of these industries via an ETF, make your life easier
11. Avoid all mutual funds except for asset allocators (balanced funds or go-anywhere can be very useful for investors). Anything based on a discipline (value, growth) or a sector (tech, financial) or a cap size (large, small) is going to underperform its benchmark over the long-term, mean revert versus its peers and cost you more than you need to spend in internal expenses. This is fact not opinion
12. Don’t try to be a trader unless that’s going to be your full-time gig. Trading as a hobby is not the same as being a trader – and it’s less fun than you might think. If you’ve decided to become a trader, find a method and stick with it until you can do it regularly
13. Pay no attention to people who are always pessimistic. The dirty secret is that even when things are terrible, they aren’t that bad. 2008 was the worst sell-off and economic conundrum in 70 years and it only took 18 months for the market to come all the way back. If you fell asleep in 2007 and woke up now five years later, your diversified portfolio including dividend income and unrealized gains/losses looks like nothing ever happened at all
14. Pay no attention to people who are always optimistic. They are selling something. if someone can’t admit that things suck every once in a while, their cheerfulness has an ulterior motive. Or they belong in an insane asylum
15. The financial media wants you to think you are missing out on something and that you need to tune in or click to get up to speed. Pay attention only if you are generally interested and get some entertainment value out of it, most of the time the headlines and segments are dreamed up by editors and producers who need something interesting to talk about each day. And that’s fine, everybody has to earn a living – but don’t think anyone is keeping you informed as a public service
16. Don’t follow gurus. Don’t buy software. Don’t buy DVDs. Don’t listen to "Gut Traders". Read books by and about people who’ve been successful in the market – but only if you’re interested. They won’t help you become a better investor if you don’t care that much to begin with
17. Remind yourself about the difference between investors and traders: Investors make trades when necessary, traders make trades in the course of doing business – that is what they do for a living and your goals are different than theirs. You don’t get paid out on closed positions or a daily p&l statement.
18. Don’t trade for excitement even though trading can be exciting at times
19. Don’t trade angry or for revenge (this stock owes me!)
20. When you finally do become wealthy, hire other people to do this for you and watch them. Go about enjoying the short time we all have left on earth away from the screen. Kiss your kids and play tennis and read books and get drunk during the day just because and go to Australia for a month and buy that car you drove in high school – fix it up and take your sweetheart for a ride. Don’t spend that time reading about inverse correlations between German bund yields and the gold/oil ratio.
Look, the market always goes up given enough time. It is very hard to find a decade during which returns were negative even though we’re just coming off one now. Stocks go up three out of four years and declines of twenty percent peak-to-trough are extremely rare (declines of 50% are even rarer still and are always a buying opportunity). So for new or smaller investors the name of the game is to stay in, do smart things while you’re in and avoid blowing up. It’s that simple.
RBI Third Quarter Review Highlights
Posted by MarketFastFood on 24/01/2012
Source: Franklin Templeton Mutual Fund
At its third quarter review of the FY12 monetary policy today, RBI has announced the following changes –
Monetary Measures:
Reduced Cash Reserve Ratio (CRR) by 50 bps to 5.50%
Repo rate has been maintained at 8.50%
Consequently the Reverse Repo rate and the Marginal Standing Facility rate stand unchanged at 7.50% and 9.50% respectively
Policy move in line with expectations – central bank adopts cautious stance, given upside risks to inflation and high fiscal deficit.
The CRR cut will inject about Rs.32,000 crore liquidity in the system and help reduce ongoing liquidity stress amidst high government borrowing and slowdown in capital flows.
Has revised GDP growth projections downwards to 7.0% from 7.6% earlier, factoring in the sluggish investment activity and global uncertainties. Expects GDP growth to be relatively stronger in FY13.
Has retained WPI projections for March 2012 at 7% – the recent moderation in inflation is primarily due to drop in prices of seasonal food items and high base effect. Upside risks to inflation persist from elevated global crude oil prices, weak rupee and fiscal situation.
Non-food credit growth forecasts revised downwards to 16% from 18%, given lower demand for credit.
Looking ahead, the bank has indicated liquidity management will be a priority for the bank in the current environment. A reversal in monetary policy cycle will depend on sustainable decline in inflation and policy actions to contain fiscal deficit.
Posted by MarketFastFood on 24/01/2012
Source: Franklin Templeton Mutual Fund
At its third quarter review of the FY12 monetary policy today, RBI has announced the following changes –
Monetary Measures:
Reduced Cash Reserve Ratio (CRR) by 50 bps to 5.50%
Repo rate has been maintained at 8.50%
Consequently the Reverse Repo rate and the Marginal Standing Facility rate stand unchanged at 7.50% and 9.50% respectively
Policy move in line with expectations – central bank adopts cautious stance, given upside risks to inflation and high fiscal deficit.
The CRR cut will inject about Rs.32,000 crore liquidity in the system and help reduce ongoing liquidity stress amidst high government borrowing and slowdown in capital flows.
Has revised GDP growth projections downwards to 7.0% from 7.6% earlier, factoring in the sluggish investment activity and global uncertainties. Expects GDP growth to be relatively stronger in FY13.
Has retained WPI projections for March 2012 at 7% – the recent moderation in inflation is primarily due to drop in prices of seasonal food items and high base effect. Upside risks to inflation persist from elevated global crude oil prices, weak rupee and fiscal situation.
Non-food credit growth forecasts revised downwards to 16% from 18%, given lower demand for credit.
Looking ahead, the bank has indicated liquidity management will be a priority for the bank in the current environment. A reversal in monetary policy cycle will depend on sustainable decline in inflation and policy actions to contain fiscal deficit.
Monday, January 23, 2012
Investment Options for 2012
Posted by MarketFastFood on 23/01/2012
Money Money Money
Stocks, bonds, gold or real estate this year?
Raghuvir Srinivasan, The Hindu 22/1/2012
source: http://www.thehindu.com/arts/magazine/article2816957.ece
Someone’s sitting in the shade today because someone planted a tree a long time ago.
Warren Buffett, legendary investor.
If you are someone who tried to follow this advice in 2011, chances are that the seed that you planted failed to even germinate! Given the turmoil in global financial markets, it would have been a challenge even for the Oracle of Omaha, as Warren Buffett is known, to multiply his money in 2011. Why talk about lesser mortals like us?
So, what does the picture look like in 2012? Should you buy stocks? Or should you be conservative and go for debt options such as fixed deposits and bonds issued by government companies? Or will it be wise to stick to that time-tested investment — gold? Let’s examine how the picture looks for each of these investment options.
Stocks: Investing wisely
The last year was a wash-out in the stock markets. No matter how savvy an investor you were, it was very difficult to make decent money as the market was on a consistent downtrend. Yet, with most major stocks lying battered and bruised at the moment, you may actually be sitting on a good buying opportunity now.
As Warren Buffett once said, the time to get interested in the stock market is when no one else is. The mistake we often do as investors is to get excited about stocks when everyone around us is excited too. Herd mentality is a dangerous attitude to have in the stock market, as often those who generate the excitement about all the wrong stocks exit them quickly leaving the rest holding duds.
The stock markets are now dull due to reasons such as high interest rates, slowing economic growth and the problems in major economies worldwide. However, we seem to be at the cusp of a change for the better, at least in the limited context of India. Interest rates have probably peaked and they can only fall from hereon, which is good news for borrowers. We will have an indication of the Reserve Bank of India’s thinking on this later this month when it announces its monetary policy.
Industrial growth is on a roller-coaster but given that ours is a consumption-driven economy, a fall in interest rates will set off a virtuous cycle of higher demand, rise in output and growth in investment to meet the demand. This should be good news for the stock market.
So, it may make sense to start investing systematically in carefully chosen shares now. The stock market is dominated by big players such as mutual funds and foreign institutional investors. Volatility in prices has considerably increased, making it a dangerous place for small investors like you and me to directly invest in shares.
It may, therefore, be prudent to invest in the stock market via mutual funds. Choose diversified funds or those that track the major indices. If you don’t need regular dividends, then invest in growth schemes that will offer you a higher return over the long term.
However, if you prefer investing directly in the stock market, choose blue-chip stocks that form part of the major indices such as the BSE Sensex or the Nifty, which is made up of shares of 50 top companies. Most of the blue-chips that constitute the indices are now available at attractive prices.
One word of caution though. Don’t put money that you might need in the next one year in the stock market. You need to give more than a year for your investment in shares to generate a good return. And yes, unless you can watch the shares that you invested in decline by half without having a heart attack, you should not be investing in shares. Those are words of wisdom, again from Warren Buffett.
Debt instruments: The safer bet
This is an opportune time to invest in debt instruments such as fixed deposits, bonds issued by different companies and in mutual funds that invest in debt. Interest rates are probably at their peak level and it will be a good idea to lock into these rates now for the next 2-3 years.
A number of companies are offering good rates of 10-11 per cent on fixed deposits now. Pick only the ‘AAA’ rated companies which are the safest even if the interest offered is relatively lower compared to an ‘AA’ rated company. Of course, interest on these deposits is taxable. So, if you are someone in the 30 per cent tax bracket, your post-tax return will be between 7 and 7.7 per cent only, which is lower than the inflation rate.
A slew of bond offers from government companies are now in the market. The National Highways Authority of India (NHAI) and Power Finance Corporation (PFC) closed their offers last week. With an interest rate of 8.2 per cent for a 10-year term, these bonds offered the twin advantages of being tax free (interest) and also liquidity in the sense that you can sell them in the market if you needed funds urgently.
Never mind if you missed these two offers. There are equally good ones that are open for investment now. IDFC, an infrastructure finance company, and L&T are currently in the market with bond offers. These 10-year secured bonds offer 8.70 per cent interest which is taxable. This means that for someone in the highest tax bracket, the post-tax yield will be just 6.09 per cent. But the benefit is that up to Rs. 20,000 of your investment is eligible for tax deduction under section 80CCF of the Income Tax Act.
There are also unsecured bonds currently on offer from Rural Electrification Corporation and IFCI offering 8.95 per cent and 9.09 per cent interest respectively, which is again taxable but the investment is eligible for 80CCF deduction. Though unsecured, these bonds can be considered for investment since the companies are ‘AAA’ rated with the government being their dominant shareholder.
Don’t forget bank fixed deposits too. If you already have invested in them, ask for a reset of the interest rates. This will mean that you will have to invest for a fresh term from now but it will be worth it because rates are expected to fall and when your deposit matures a few months from now, you might get a lower rate if you choose to reinvest.
Interest from some long-term bank deposits of five years or more is exempt from tax. Also remember, most banks and some companies offer a higher interest rate for deposits made by senior citizens.
Gold: The perennial favourite
Gold is an evergreen investment option and certainly THE choice during difficult times. For Indians, gold has traditionally been the first investment choice, ahead of stocks, debt or real estate. While the yellow metal is no doubt a safe investment, a couple of points need to be noted.
First, returns on gold may not always be attractive. Take the case of 2011. Gold price, in dollar terms, appreciated by just about 11 per cent, though in rupee terms it returned 33 per cent. The higher returns in rupees was because of the depreciation of the currency vis-à-vis the dollar. Assuming that the rupee had remained stable or even appreciated versus the dollar, the returns picture might have been different.
The second point is about a more practical problem. While it is easy to buy gold, either as coins or as biscuits or bars from authorised banks, it is not so easy to sell the same. Banks do not buy back gold coins or biscuits even if they were the same pieces sold by them. While the option of going to your family jeweller is certainly there, he will again not give you money in return. You will have to buy jewellery of equivalent value from him and, again, he will not give you the prevailing market price for the gold that you sell to him. There will be a discount on the price; maybe it will be smaller if you are well known to him.
Liquidity, therefore, is an issue with investment in gold. The asset is one for long-term investment with an eye on your child’s marriage or education. It is certainly not for rolling over short-term cash surpluses. If you still prefer gold for short-term investment, you could go for gold exchange traded funds (ETF) where you invest in paper based on gold. While you can benefit from appreciation in gold price, you are not required to purchase an equivalent quantity of gold. You can trade in gold ETFs just as you trade in company shares.
Real estate
This is the trickiest of all investment options but if you get it right it will offer returns incomparable to any other. If you are unfortunate enough to get it wrong, then it can boomerang badly too. Real estate is a long-term investment by its very nature and the initial investment is, often, on the higher side.
Real estate mutual funds have yet to take off in India due to several issues but when they eventually do, they will offer a good avenue for those interested in an exposure to this asset class. Real estate prices are inextricably linked to interest rates and the prevailing high interest rate regime has put this asset class in the pale. Yet, given the long-term economic growth potential of India, real estate can only appreciate.
Attractive options
As we start 2012, stocks and debt appear the most attractive of the investment options. Those of you who are risk-averse and don’t mind relatively lower returns can opt for the many debt instruments that are now available. Remember, you need to lock into them the next few weeks when many bond offers open to get the best returns.
Stocks are for those who seek returns that beat inflation many times over and understand that the investment is risky per se. Given that the market is at a low now, you can start accumulating the right stocks with some advice from professional money managers. Always follow a systematic strategy of buying in small lots over a period of time which evens out price swings. Here’s to happy investing in 2012.
Posted by MarketFastFood on 23/01/2012
Money Money Money
Stocks, bonds, gold or real estate this year?
Raghuvir Srinivasan, The Hindu 22/1/2012
source: http://www.thehindu.com/arts/magazine/article2816957.ece
Someone’s sitting in the shade today because someone planted a tree a long time ago.
Warren Buffett, legendary investor.
If you are someone who tried to follow this advice in 2011, chances are that the seed that you planted failed to even germinate! Given the turmoil in global financial markets, it would have been a challenge even for the Oracle of Omaha, as Warren Buffett is known, to multiply his money in 2011. Why talk about lesser mortals like us?
So, what does the picture look like in 2012? Should you buy stocks? Or should you be conservative and go for debt options such as fixed deposits and bonds issued by government companies? Or will it be wise to stick to that time-tested investment — gold? Let’s examine how the picture looks for each of these investment options.
Stocks: Investing wisely
The last year was a wash-out in the stock markets. No matter how savvy an investor you were, it was very difficult to make decent money as the market was on a consistent downtrend. Yet, with most major stocks lying battered and bruised at the moment, you may actually be sitting on a good buying opportunity now.
As Warren Buffett once said, the time to get interested in the stock market is when no one else is. The mistake we often do as investors is to get excited about stocks when everyone around us is excited too. Herd mentality is a dangerous attitude to have in the stock market, as often those who generate the excitement about all the wrong stocks exit them quickly leaving the rest holding duds.
The stock markets are now dull due to reasons such as high interest rates, slowing economic growth and the problems in major economies worldwide. However, we seem to be at the cusp of a change for the better, at least in the limited context of India. Interest rates have probably peaked and they can only fall from hereon, which is good news for borrowers. We will have an indication of the Reserve Bank of India’s thinking on this later this month when it announces its monetary policy.
Industrial growth is on a roller-coaster but given that ours is a consumption-driven economy, a fall in interest rates will set off a virtuous cycle of higher demand, rise in output and growth in investment to meet the demand. This should be good news for the stock market.
So, it may make sense to start investing systematically in carefully chosen shares now. The stock market is dominated by big players such as mutual funds and foreign institutional investors. Volatility in prices has considerably increased, making it a dangerous place for small investors like you and me to directly invest in shares.
It may, therefore, be prudent to invest in the stock market via mutual funds. Choose diversified funds or those that track the major indices. If you don’t need regular dividends, then invest in growth schemes that will offer you a higher return over the long term.
However, if you prefer investing directly in the stock market, choose blue-chip stocks that form part of the major indices such as the BSE Sensex or the Nifty, which is made up of shares of 50 top companies. Most of the blue-chips that constitute the indices are now available at attractive prices.
One word of caution though. Don’t put money that you might need in the next one year in the stock market. You need to give more than a year for your investment in shares to generate a good return. And yes, unless you can watch the shares that you invested in decline by half without having a heart attack, you should not be investing in shares. Those are words of wisdom, again from Warren Buffett.
Debt instruments: The safer bet
This is an opportune time to invest in debt instruments such as fixed deposits, bonds issued by different companies and in mutual funds that invest in debt. Interest rates are probably at their peak level and it will be a good idea to lock into these rates now for the next 2-3 years.
A number of companies are offering good rates of 10-11 per cent on fixed deposits now. Pick only the ‘AAA’ rated companies which are the safest even if the interest offered is relatively lower compared to an ‘AA’ rated company. Of course, interest on these deposits is taxable. So, if you are someone in the 30 per cent tax bracket, your post-tax return will be between 7 and 7.7 per cent only, which is lower than the inflation rate.
A slew of bond offers from government companies are now in the market. The National Highways Authority of India (NHAI) and Power Finance Corporation (PFC) closed their offers last week. With an interest rate of 8.2 per cent for a 10-year term, these bonds offered the twin advantages of being tax free (interest) and also liquidity in the sense that you can sell them in the market if you needed funds urgently.
Never mind if you missed these two offers. There are equally good ones that are open for investment now. IDFC, an infrastructure finance company, and L&T are currently in the market with bond offers. These 10-year secured bonds offer 8.70 per cent interest which is taxable. This means that for someone in the highest tax bracket, the post-tax yield will be just 6.09 per cent. But the benefit is that up to Rs. 20,000 of your investment is eligible for tax deduction under section 80CCF of the Income Tax Act.
There are also unsecured bonds currently on offer from Rural Electrification Corporation and IFCI offering 8.95 per cent and 9.09 per cent interest respectively, which is again taxable but the investment is eligible for 80CCF deduction. Though unsecured, these bonds can be considered for investment since the companies are ‘AAA’ rated with the government being their dominant shareholder.
Don’t forget bank fixed deposits too. If you already have invested in them, ask for a reset of the interest rates. This will mean that you will have to invest for a fresh term from now but it will be worth it because rates are expected to fall and when your deposit matures a few months from now, you might get a lower rate if you choose to reinvest.
Interest from some long-term bank deposits of five years or more is exempt from tax. Also remember, most banks and some companies offer a higher interest rate for deposits made by senior citizens.
Gold: The perennial favourite
Gold is an evergreen investment option and certainly THE choice during difficult times. For Indians, gold has traditionally been the first investment choice, ahead of stocks, debt or real estate. While the yellow metal is no doubt a safe investment, a couple of points need to be noted.
First, returns on gold may not always be attractive. Take the case of 2011. Gold price, in dollar terms, appreciated by just about 11 per cent, though in rupee terms it returned 33 per cent. The higher returns in rupees was because of the depreciation of the currency vis-à-vis the dollar. Assuming that the rupee had remained stable or even appreciated versus the dollar, the returns picture might have been different.
The second point is about a more practical problem. While it is easy to buy gold, either as coins or as biscuits or bars from authorised banks, it is not so easy to sell the same. Banks do not buy back gold coins or biscuits even if they were the same pieces sold by them. While the option of going to your family jeweller is certainly there, he will again not give you money in return. You will have to buy jewellery of equivalent value from him and, again, he will not give you the prevailing market price for the gold that you sell to him. There will be a discount on the price; maybe it will be smaller if you are well known to him.
Liquidity, therefore, is an issue with investment in gold. The asset is one for long-term investment with an eye on your child’s marriage or education. It is certainly not for rolling over short-term cash surpluses. If you still prefer gold for short-term investment, you could go for gold exchange traded funds (ETF) where you invest in paper based on gold. While you can benefit from appreciation in gold price, you are not required to purchase an equivalent quantity of gold. You can trade in gold ETFs just as you trade in company shares.
Real estate
This is the trickiest of all investment options but if you get it right it will offer returns incomparable to any other. If you are unfortunate enough to get it wrong, then it can boomerang badly too. Real estate is a long-term investment by its very nature and the initial investment is, often, on the higher side.
Real estate mutual funds have yet to take off in India due to several issues but when they eventually do, they will offer a good avenue for those interested in an exposure to this asset class. Real estate prices are inextricably linked to interest rates and the prevailing high interest rate regime has put this asset class in the pale. Yet, given the long-term economic growth potential of India, real estate can only appreciate.
Attractive options
As we start 2012, stocks and debt appear the most attractive of the investment options. Those of you who are risk-averse and don’t mind relatively lower returns can opt for the many debt instruments that are now available. Remember, you need to lock into them the next few weeks when many bond offers open to get the best returns.
Stocks are for those who seek returns that beat inflation many times over and understand that the investment is risky per se. Given that the market is at a low now, you can start accumulating the right stocks with some advice from professional money managers. Always follow a systematic strategy of buying in small lots over a period of time which evens out price swings. Here’s to happy investing in 2012.
Twenty Trading Rules
Posted by MarketFastFood on 24/01/2012
source: Fwd Email
Few Trading Rules using Technical Charts which may be of use to Pure Traders! Investors should stay away from these. Trading Charts if used sensibly can be utilised for Long Term Investors also.
1. Forget the news, remember the chart. You’re not smart enough to know how news will affect price. The chart already knows the news is coming.
2. Buy the first pullback from a new high. Sell the first pullback from a new low. There’s always a crowd that missed the first boat.
3. Buy at support, sell at resistance. Everyone sees the same thing and they’re all just waiting to jump in the pool.
4. Short rallies not selloffs. When markets drop, shorts finally turn a profit and get ready to cover.
5. Don’t buy up into a major moving average or sell down into one. See #3.
6. Don’t chase momentum if you can’t find the exit. Assume the market will reverse the minute you get in. If it’s a long way to the door, you’re in big trouble.
7. Exhaustion gaps get filled. Breakaway and continuation gaps don’t. The old traders’ wisdom is a lie. Trade in the direction of gap support whenever you can.
8. Trends test the point of last support/resistance. Enter here even if it hurts.
9. Trade with the TICK not against it. Don’t be a hero. Go with the money flow.
10. If you have to look, it isn’t there. Forget your college degree and trust your instincts.
11. Sell the second high, buy the second low. After sharp pullbacks, the first test of any high or low always runs into resistance. Look for the break on the third or fourth try.
12. The trend is your friend in the last hour. As volume cranks up at 3:00pm don’t expect anyone to change the channel.
13. Avoid the open. They see YOU coming sucker
14. 1-2-3-Drop-Up. Look for downtrends to reverse after a top, two lower highs and a double bottom.
15. Bulls live above the 200 day, bears live below. Sellers eat up rallies below this key moving average line and buyers to come to the rescue above it.
16. Price has memory. What did price do the last time it hit a certain level? Chances are it will do it again.
17. Big volume kills moves. Climax blow-offs take both buyers and sellers out of the market and lead to sideways action.
18. Trends never turn on a dime. Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise always finds sellers.
19. Bottoms take longer to form than tops. Fear acts more quickly than greed and causes stocks to drop from their own weight.
20. Beat the crowd in and out the door. You have to take their money before they take yours, period.
Few Additional Rules:
MONEY: Never trade with money you cannot afford to lose
TREND: Always ride the trend and never try to decide a trend
SELECTION: Always select the stocks, for there are always bullish stocks in a bearish market and bearish stocks in a bullish market.
TIMING: Never initiate your trade at the opening bell, wait for a market to make initial high and lows
QUANTITY: Always while trading keep the amount same in each trade and not the quantity, ex: if have trade 50000/- in one, trade 50000/- in another rather than trading 100 shares in each trades
LEARNING: Blaming market is trying to hide your mistakes from yourselves,making fool of one’s self, thereby losing an opportunity to learn, markets are never wrong, the blame lies with trader.
INTROSPECTION: Always introspect at the end of every trading day, next day will work wonders.
R/R RATIO: Never ever enter a trade where the risk to reward ratio is less than 1:4
NO OF TRADES: Always trade in 2 to 3 stocks at any given point of time, how lucrative the market be, be master of some than being jack of all, keep buffering profits, you’ll find stock markets a wonderful place to be in…
STOP LOSS: Stop loss is essence for trading, never trade without a stop loss
AVERAGING: Averaging has no place in day trading, either u get out of the trade with the stop loss getting triggered or get the target
SUCCESS: Always use trailing stop loss, when the trade initiated, starts bearing results, to get maximum profit.
GREED: Always be ready to take the profits home, if the initial trades have worked for you, be ready to go home , do not trade for the broker
CONFIDENCE: If the markets are not making you confident do not trade, just for the sake of trading , wait for clear signals
RUMORS: Never trade on news or rumours, always follow the levels, remember, news does not make levels, it just triggers levels.
LEVELS: Never get panicked or exited by the happenings on the screen, stick to the levels and stop loss, else you’ll always end up loser
Posted by MarketFastFood on 24/01/2012
source: Fwd Email
Few Trading Rules using Technical Charts which may be of use to Pure Traders! Investors should stay away from these. Trading Charts if used sensibly can be utilised for Long Term Investors also.
1. Forget the news, remember the chart. You’re not smart enough to know how news will affect price. The chart already knows the news is coming.
2. Buy the first pullback from a new high. Sell the first pullback from a new low. There’s always a crowd that missed the first boat.
3. Buy at support, sell at resistance. Everyone sees the same thing and they’re all just waiting to jump in the pool.
4. Short rallies not selloffs. When markets drop, shorts finally turn a profit and get ready to cover.
5. Don’t buy up into a major moving average or sell down into one. See #3.
6. Don’t chase momentum if you can’t find the exit. Assume the market will reverse the minute you get in. If it’s a long way to the door, you’re in big trouble.
7. Exhaustion gaps get filled. Breakaway and continuation gaps don’t. The old traders’ wisdom is a lie. Trade in the direction of gap support whenever you can.
8. Trends test the point of last support/resistance. Enter here even if it hurts.
9. Trade with the TICK not against it. Don’t be a hero. Go with the money flow.
10. If you have to look, it isn’t there. Forget your college degree and trust your instincts.
11. Sell the second high, buy the second low. After sharp pullbacks, the first test of any high or low always runs into resistance. Look for the break on the third or fourth try.
12. The trend is your friend in the last hour. As volume cranks up at 3:00pm don’t expect anyone to change the channel.
13. Avoid the open. They see YOU coming sucker
14. 1-2-3-Drop-Up. Look for downtrends to reverse after a top, two lower highs and a double bottom.
15. Bulls live above the 200 day, bears live below. Sellers eat up rallies below this key moving average line and buyers to come to the rescue above it.
16. Price has memory. What did price do the last time it hit a certain level? Chances are it will do it again.
17. Big volume kills moves. Climax blow-offs take both buyers and sellers out of the market and lead to sideways action.
18. Trends never turn on a dime. Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise always finds sellers.
19. Bottoms take longer to form than tops. Fear acts more quickly than greed and causes stocks to drop from their own weight.
20. Beat the crowd in and out the door. You have to take their money before they take yours, period.
Few Additional Rules:
MONEY: Never trade with money you cannot afford to lose
TREND: Always ride the trend and never try to decide a trend
SELECTION: Always select the stocks, for there are always bullish stocks in a bearish market and bearish stocks in a bullish market.
TIMING: Never initiate your trade at the opening bell, wait for a market to make initial high and lows
QUANTITY: Always while trading keep the amount same in each trade and not the quantity, ex: if have trade 50000/- in one, trade 50000/- in another rather than trading 100 shares in each trades
LEARNING: Blaming market is trying to hide your mistakes from yourselves,making fool of one’s self, thereby losing an opportunity to learn, markets are never wrong, the blame lies with trader.
INTROSPECTION: Always introspect at the end of every trading day, next day will work wonders.
R/R RATIO: Never ever enter a trade where the risk to reward ratio is less than 1:4
NO OF TRADES: Always trade in 2 to 3 stocks at any given point of time, how lucrative the market be, be master of some than being jack of all, keep buffering profits, you’ll find stock markets a wonderful place to be in…
STOP LOSS: Stop loss is essence for trading, never trade without a stop loss
AVERAGING: Averaging has no place in day trading, either u get out of the trade with the stop loss getting triggered or get the target
SUCCESS: Always use trailing stop loss, when the trade initiated, starts bearing results, to get maximum profit.
GREED: Always be ready to take the profits home, if the initial trades have worked for you, be ready to go home , do not trade for the broker
CONFIDENCE: If the markets are not making you confident do not trade, just for the sake of trading , wait for clear signals
RUMORS: Never trade on news or rumours, always follow the levels, remember, news does not make levels, it just triggers levels.
LEVELS: Never get panicked or exited by the happenings on the screen, stick to the levels and stop loss, else you’ll always end up loser
Wednesday, January 11, 2012
Higher Education
21 Oct 2011.
Teaching Quality is poor in higher education institutions: Prof. Balagurusamy Comments
The students cannot be blamed for lack of employability because quality of teaching is poor in most of the higher education institutions said E. Balagurusamy, Member (Education), State Planning Commission, Tamil Nadu. He was addressing a one-day interface programme, ICTACT Bridge, organised by the ICT Academy of Tamil Nadu in association with NASSCOM to “focus on employability skills”.
"Our findings show that majority of teachers in many engineering colleges are in mediocre category. When the teachers themselves are lacking employability skills, how can we expect their students to be employable? So, the correction has to start from the level of teachers. It is time to have a serious look at the quality of teachers employed in various engineering colleges and arts and science colleges as well,” he said.
Dr. Balagurusamy who had had earlier served as Vice-Chancellor of Anna University, said that nearly 50 per cent of engineering colleges in Tamil Nadu came under “poor category” in teaching-learning process.
He also took a dig at the IT companies for focusing more on communication and soft skills and not giving more importance to technical skills among students when they recruit candidates through campus recruitment.“It is the IT sector that is destroying other sectors in India. Economic development cannot happen with IT field alone. The country needs ‘blue collar' jobs also along with “white collar” positions and we have to give priority to enhance the technical base of our students along with communication skill,” he said.
He emphasized that focus on students' employability must start from the school level itself, “Knowledge, skills and attitude are the three main pillars of education. Skill development initiatives are not meant for IT companies alone. Manufacturing sector also is pivotal for a nation's development,” he added that the “disconnect” between industry and education must be removed by all means.
[Source: The Hindu]
Teaching Quality is poor in higher education institutions: Prof. Balagurusamy Comments
The students cannot be blamed for lack of employability because quality of teaching is poor in most of the higher education institutions said E. Balagurusamy, Member (Education), State Planning Commission, Tamil Nadu. He was addressing a one-day interface programme, ICTACT Bridge, organised by the ICT Academy of Tamil Nadu in association with NASSCOM to “focus on employability skills”.
"Our findings show that majority of teachers in many engineering colleges are in mediocre category. When the teachers themselves are lacking employability skills, how can we expect their students to be employable? So, the correction has to start from the level of teachers. It is time to have a serious look at the quality of teachers employed in various engineering colleges and arts and science colleges as well,” he said.
Dr. Balagurusamy who had had earlier served as Vice-Chancellor of Anna University, said that nearly 50 per cent of engineering colleges in Tamil Nadu came under “poor category” in teaching-learning process.
He also took a dig at the IT companies for focusing more on communication and soft skills and not giving more importance to technical skills among students when they recruit candidates through campus recruitment.“It is the IT sector that is destroying other sectors in India. Economic development cannot happen with IT field alone. The country needs ‘blue collar' jobs also along with “white collar” positions and we have to give priority to enhance the technical base of our students along with communication skill,” he said.
He emphasized that focus on students' employability must start from the school level itself, “Knowledge, skills and attitude are the three main pillars of education. Skill development initiatives are not meant for IT companies alone. Manufacturing sector also is pivotal for a nation's development,” he added that the “disconnect” between industry and education must be removed by all means.
[Source: The Hindu]
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