Saturday, March 31, 2007

Allocating your Assets to Good Use



Asset Allocation (AA) sounds sophisticated, no? It assumes you have an asset to allocate and gives a boost to your ego, eh! Looks like a smart and sexy word for a thing as drab and dreary as planning your personal finance. And AA also gives you a feeling that you are holding some aces (AA) rolled up in your sleeves. It specially applies to the Financial Planners or Advisors.

But seriously, asset allocation is a useful concept to know. Simple too. And once you get your fundas clear about AA, you can use it to your advantage. It is the first step of adding value to your money or putting your money to good use.

Asset allocation is the percentage distribution of your money into equity, debt and liquid instruments. Equity, as you know, gives the highest growth but comes with the highest risk. Debt instruments are more or less guaranteed but give you a lesser return. Liquid money is your money in your savings account.

Let’s start with the thumb rule of AA. Your allocation to debt should be equal to your age. And as you age, the percentage in debt should increase too. In other words, your investments in equity should be (100- your age).

But AA should be much more dynamic than the above thumb rule. I feel that it should depend on your age and your risk appetite. Guys at 20-25 years of age may want to invest everything into equities and I think that is the right strategy.

And before you set off to do some AA for yourself, I would like you to ask the following questions to yourself:

  1. What is your risk appetite?
  2. What are your financial goals?
  3. When do you need the money?

And if you love ready made formulas, here's some from allocation strategies from John Bogle:

  • Older investor in distribution phase: 50% equity; 50% debt

  • Young investor in distribution phase: 60% equity; 40% debt

  • Older investor in accumulation phase: 70% equity; 30% debt

  • Young investor in accumulation phase: 80% equity; 20% debt

    Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Friday, March 30, 2007

Common Sense Investing Book by Bogle

The Little Book of Common Sense Investing is an amazing book by John Bogle. Read this about the book you can buy on Amazon
Investing is all about common sense. Owning a diversified portfolio of stocks and holding it for the long term is a winner’s game. Trying to beat the stock market is theoretically a zero-sum game (for every winner, there must be a loser), but after the substantial costs of investing are deducted, it becomes a loser’s game. Common sense tells us—and history confirms—that the simplest and most efficient investment strategy is to buy and hold all of the nation’s publicly held businesses at very low cost. The classic index fund that owns this market portfolio is the only investment that guarantees you with your fair share of stock market returns.

To learn how to make index investing work for you, there’s no better mentor than legendary mutual fund industry veteran John C। Bogle. Over the course of his long career, Bogle—founder of the Vanguard Group and creator of the world’s first index mutual fund—has relied primarily on index investing to help Vanguard’s clients build substantial wealth. Now, with The Little Book of Common Sense Investing, he wants to help you do the same.
Some excerpts from the book:
  • Index funds eliminate the risks of individual stocks, market sectors, and manager selection. Only stock market risk remains.
  • Don't allow a winners game to become a loser's game.
  • Fund investors are confident they can easily select superior fund managers. They are wrong.
  • The stock market is a giant distraction.
  • If the data do not prove that indexing wins, well, the data are wrong.
  • It's amazing how difficult it is for a man to understand something if he's paid a small fortune not to understand it.
  • The miracle of compounding returns is overwhelmed by the tyranny of compounding costs.
Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Picking Stocks in Real Estate Sector

One of the questions asked of my earlier post was how to choose a stock to invest in.

It is alright to say, " You can start with identifying a list of 10-15 companies out of 3-5 sectors which you know or which interests you. You can keep a tab on their management team, financials and future outlook and over a period of time, you will be able to take a call on them." I guess, it's good in theory.

How about we do an analysis of a sector and then take a look at some of its stocks. Let's take a look at the Real Estate/Infrastructure sector which is so much in the news.

When we do an industry analysis, what are the things we look at? Companies producing similar products are subsets of an Industry/Sector. For example, National Hydroelectric Power Company (NHPC) Ltd., National Thermal Power Company (NTPC) Ltd., Tata Power Company (TPC) Ltd., etc. belong to the Power Sector/Industry of India.

It is very important to see how the industry to which the company belongs is faring. Specifics like the effect of Government policy, future demand of its products etc. need to be checked. At times prospects of an industry may change drastically by any alterations in business environment. For instance, devaluation of rupee may brighten prospects of all export oriented companies. Investment analysts call this Industry Analysis.

To start with, let's look at some macro facts and observations about the industry.
  • The Tenth Five Year Plan has estimated a shortfall of 22.4 million dwelling units in the country. According to one estimate, over the next 10 to 15 years 80 to 90 million housing units will have to be constructed.
  • The investment required for constructing these dwelling units and for providing related infrastructure during this period will be of the order of $666 billion to $ 888 billion at roughly $33 billion to $44 billion per year ($1 billion = Rs 4,400 crore).
  • There is a steady growth in Housing Finance sector of approx. 30% over last four years. The rate of interest for housing finance has become reasonable and affordable which has resulted in more credit offtake and subsequent maturing of the housing industry. Even though there is an increase, the rates are still reasonable to my mind after factoring in the tax benefits.
  • Fiscal benefits provided by the Government of India have encouraged the end users and investors alike.
  • Income of the urban buyer has grown substantially. There is tremendous scope and growth in the Infrastructure Development.
  • Foreign investment by way of FDI has been approved. Emergence of professional builders in the market with proper accounting standards. There has been an emergence of rating systems for building projects.
  • The high growth of the real estate sector has led a lager financial institution to launch a dedicated real estate fund. These funds are simultaneously enticing large institutional investors as well as High Net worth Individual (HNIs) to expand their portfolio.
  • The award of ultra mega power projects and privatization of airports demonstrates a commitment at the highest level. So the momentum to build up roads, ports and urban infrastructure is building up for sure.
  • The JawaharLal Nehru Mational Urban Renewal Mission (JNNURM) initiative in 63 cities and urban transport projects will also drive up Investments in Infrastructure. Water Supply projects and sewerage projects would be part of the JNNURM.


So what do you think about the future of Infrastructure stocks in India? Ready to take a call?
There are three major stocks in the Infrastructure sector which are worth talking about: 1. Nagarjuna Construction (NJCC) 2. IVRCL and 3. HCC

Remember, do not go by the order book size alone, which is what many people do without understanding the intricacies. We need to understand the execution period of the order book, and the kind of margins that the company would make, given the kind of raw material prices at which it has booked these orders.

Even though it may look daunting, a little bit of research helps you in understanding the stocks as well as improving your general knowledge.

Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Wednesday, March 28, 2007

Trade Your Insurance Cover

When will we be able to distinguish between Insurance and Investment?
Now, Trading and assignment of life insurance policies to third parties has been allowed under a recent ruling of the Bombay High Court. Assigning a policy means that one can sell a life insurance policy to another person and all the benefits (including death, maturity proceeds, critical illness cover, accident benefits, permanent disability and others) automatically flow to the person who has bought the policy .
Several unethical practices can be carried out in the name of trading in life policies.
  • The life of the policyholder may be at great risk if the policy is assigned to someone else. “Only the life insured does not change — and it is here that the possibility of moral hazards creeps in. The person who buys the policy will gain if the seller dies a natural or an unnatural death.
  • The emergence of a possible grey market transaction during the modus operandi and the problems mount.
  • In a fiercely competitive life insurance maket, an agent can hardsell his company’s policy by asking the policyholder to forgo or sell off his existing policy by arranging a buyer.
  • There has been various instances of money laundering and there could be a lot of misuse.
  • Trading in policies go against principles of insurable interest and increases the moral hazards.

Editorials are welcoming the new ruling without understanding the difference between Insurance and Investment. A free and fair debate is desirable. What do you think?

Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Monday, March 26, 2007

Indian Tax Laws: Frequently asked questions

Like it or not, one has to pay taxes. The irony is that even when we get less than what we deserve, we have to pay more than what we ought to! Moreover, when you actually prod yourselves to do your taxes, the tedious calculations and the jargon makes you go numb. Even Albert Einstein sighed, “(on filing for tax returns). This is too difficult for a mathematician. It takes a philosopher.” Help is at hand. Click here and you get all your questions answered by a tax expert who doesn’t want to be named.

But I am waiting for the day when a range of services like filing taxes online will become available in India and taxes will no longer be one of the hardest things to do. I dream of a one stop service for all our tax situations. I think that submitting our tax returns electronically is faster and more convenient than paper filing.

There is a need for a web site like this. Any takers?
Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Index Funds Outsmart Fund Managers

Another fact which makes me champion ETFs:

Returns generated by actively managed equity funds will close the year with a growth of around 10%. While the Index funds or ETFs have offered a growth of 19.57 % for the same period. (Source: ValueResearch)

So why do we pay for the extra fund management charges by around 2%?

The major reason for ETFs not being popular is that the agent does not want to sell a product where he is not getting a good commission.

Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Significance of Internet Social Media

Rajiv Dingra has an informative and useful presentation on the significance of Internet social media for traditional companies. Rajiv discusses Web Advertising and Technology(WAT) on his blog and chronicles the rapid changes taking place on the web and the interactive advertising space.



Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Saturday, March 24, 2007

Aapka Rupya Sabse Keemti

Aapka Rupya Sabse Keemti (ARSK) will be an online community for the people of India sharing their knowledge and experience in respect of money matters. The community will focus on discussions and conversations on Mutual Funds, Stocks, Loans and Insurance.

Apart from discussions, the community will provide access to a news centre, knowledge centre and advanced financial tools and calculators.

  • Home
  • Community
  • News
  • Knowledge Centre
  • Tools/Calculators
  • Chat

The internet base in India is growing the fastest in the world. India is at the nerve centre of the technological changes hitting the electronic world. But it is important to realize that the internet marketing industry in the country is at the nascent stage.

Similarly, the financial services sector in India is growing in leaps and bounds. Worldwide, the financial services sector is the biggest even though it is fragmented.

Money is a bad master but a good servant. Whatever it is, it needs good management anyway. Personal finance is the management of money. Now, management of your money is obstructed by persistent (and sometimes annoying)agents and financial advisors, aggressive financial product companies with huge advertising budgets and our own ignorance of the knowledge required (and maybe the inertia?) to manage our money!!

What do you think of this idea? Well, this will be a kind of sandbox for me to write a plan for my idea. What you see is the executive summary of the plan.

Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Friday, March 23, 2007

Picking Stocks by Industry or Sector Analysis: Real Estate/Infrastructure

One of the questions to my earler post was how to pick stocks? It is allright to say that, " You can start with identifying a list of 10-15 companies out of 3-5 sectors which you know or which interests you. You can keep a tab on their management team, financials and future outlook and over a period of time, you will be able to take a call on them."
But I guess, it's good in theory. How about doing an analysis of a sector and then take a look at some stocks of that sector. Let's take a look at the Real Estate/Infrastructure sector which is so much in the news.
So when we do an industry analysis, what are the things we look at? Companies producing similar products are subset of an Industry/Sector. For example, National Hydroelectric Power Company (NHPC) Ltd., National Thermal Power Company (NTPC) Ltd., Tata Power Company (TPC) Ltd. etc. belong to the Power Sector/Industry of India. It is very important to see how the industry to which the company belongs is faring. Specifics like effect of Government policy, future demand of its products etc. need to be checked. At times prospects of an industry may change drastically by any alterations in business environment. For instance, devaluation of rupee may brighten prospects of all export oriented companies. Investment analysts call this as Industry Analysis.
To start with, let's look at some macro facts and observations about the industry.
  • The Tenth Five Year Plan has estimated a shortfall of 22.4 million dwelling units in the country. According to one estimate, over the next 10 to 15 years 80 to 90 million housing units will have to be constructed.
  • The investment required for constructing these dwelling units and for providing related infrastructure during this period will be of the order of $666 billion to $ 888 billion at roughly $33 billion to $44 billion per year ($ 1 billion = Rs 4,400 crore).
  • There is a steady growth in Housing Finance sector of approx.30 % over last four years.
    The rate of interest for housing finance has become reasonable and affordable which has resulted into more credit offtake and subsequent maturing of the housing industry. Even though there is an increase, the rates are still reasonable to my mind after factoring in the tax benefits.
  • Fiscal benefits provided by the Government of India have encouraged the end users and investors alike.
  • Income of the urban buyer has grown substantially.
  • There is tremendous scope and growth in the Infrastructure Development.
  • Foreign investment by way of FDI has been approved.
  • Emergence of professional builders in the market with proper accounting standards.Emergence of rating systems for building projects.
  • The high growth of the real estate sector has led a lager financial institution to launch a dedicated real estate fund. These funds are simultaneously enticing large institutional investors as well as High Net worth Individual (HNIs) to expand their portfolio.
  • The award of ultra mega power projects and privatisation of airports demonstrates a committment at the highest level. So the momentum to build up roads, ports and urban infrastructure is building up for sure.
  • The JawaharLal Nehru Mational Urban Renewal Mission (JNNURM) initiative in 63 cities and urban transport projects will also drive up Investments in Infrastructure. Water Supply projects and sewerage projects would be part of the JNNURM.

So what do you think about the future of Infrastructure stocks in India? Ready to take a call?

There are three major stocks in the Infrastructure sector which is worth talking about. 1. Nagarjuna Construction (NJCC) 2. IVRCL and 3. HCC

Remember, do not go by the order book size alone, which is what many people do without understanding the intricacies. We need to understand the execution period of the order book, and the kind of margins that the company would make, given the kind of raw material prices at which it has booked these orders.

Even though it may look daunting, a lil bit of research helps you in understanding the stocks as well as improving your general knowledge.

Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Tuesday, March 20, 2007

How to Add Value To Your Money

Some readers are asking me about where to invest. I have been guarded with my answers and try to evade with the observation that since everyone has different financial goals and risk appetite and so my recommendations may not work for him/her.

But when my elder brother asked me the question, I did not have an escape route. And a responsibility too. After all I can't vanish from him after a year or so!! ;)

Btw, it's also important to note that this elder brother is an IIT(D)/IIM(A) guy and can't be taken for a ride! And also that the IIT/IIM guys also need proper financial advice!!

Let's take a look at some of the popular options available which are Bonds, Stocks, Real Estate, Mutual Funds, Unit Linked Insurance Policy (ULIP) and Exchange Traded Funds (ETF). Now I'll try to rate them on four parameters of investing. i.e. 1. Growth, 2. Liquidity , 3. Security and 4. Expenses

  1. Growth: Stocks MFs and ETFs top the rankings here. Over a period of over 5 years, the CAGR is above 15% in comparison to 8% in Bonds. ULIPs begin to give a good growth only after 5 years or so because initially they are very expensive. Real estate is on a fairy run these days too.
  2. Liquidity: Again, Stocks, MFs and ETFs score heavily while Bonds and ULIPs have a lock in period or have substantial surrender charges. Real estate scores low here (u have to be lucky to get good buyers at the right time)
  3. Security: I would rate all of them at par over a long term of over 5 years. But you may get into a bad stock or real estate which are totally unsecured. Otherwise too, stocks and real estate are very volatile and can affect your blood pressure too!!
  4. Expenses: ETF is the least expensive with charges of around 0.5% compared to 2% from MFs and much more in ULIPs (especially in the initial years). Stocks too are the least expensive provided you get into the right stocks at the right time.

Based on this short analysis, I would recommend ETFs. Read more about ETFs here. But as I said earlier too, one man's meat could be another man's poison. Moreover the diversification rule says that one should not keep all your eggs/ apples (for the veggy!!) in one basket. So let us take a look at the investment options, one at a time.

  • Shares: Investing in the equity market directly is exciting and sexy. You are in the thick of things and learn many things in the process. Though the volatility and the information overload makes it a daunting task, investing in stocks is not rocket science. You can start with identifying a list of 10-15 companies out of 3-5 sectors which you know or which interests you. You can keep a tab on their management team, financials and future outlook and over a period of time, you will be able to take a call on them.
  • Real Estate: I feel that one has to be plain lucky to get into a good deal and be able to get the right buyer at the right price and time. I can't think of any other factor other than luck. So if you feel , you are blessed and have the right tip, go for it. Otherwise, it's a no no.
  • Mutual Funds: One should allocate time to investment decisions in proportion to our income generation goals. Also convenience and hassle free investing should be a major factor. Mutual Funds fit the bill where Fund Managers are into it full time. If you are able to identify fund managers who have consistently performed over last 3-5 years, nothing like it. The fund manager also has the muscle power of crores of Rupees and is able to take entry and exit decisions impartially. MFs continuously churn their portfolio. When MFs buy and sell stocks, they don't have to pay capital gains as you do when you churn. With Systematic Investment plans (SIP), you can start investing with as low as Rs 500 per month. But MFs have its own loading and administrative charges and the fund managers make merry on your hard earned money.
  • Exchange Traded Funds: While the index fund has given a one-year return of 42%, diversified equity schemes (MF) could only come up with 34% returns. Diversified equity funds usually have large expense ratios compared to index funds. For example, the expense ratio of Banking BeES, an index fund, is only 0.45, while it is anywhere between 2-2.50% for diversified equity schemes. That's why I recommend ETFs.
  • ULIPs: Unit linked insurance policies combine two products, i.e. Insurance and Mutual Funds. In the initial few years, ULIPs are damn expensive. But in case you don't want any hassles of investing, you have a tried and tested Insurance agent who is almost part of your family then ULIPs are for you.
  • Bonds: For those of you who are risk averse.

U can also read more on Mutual Fund, Equities, ULIPs.

Your comments help me in arranging my thoughts in a better way. I would like to post more detailed analysis on each of these and also spell out the steps to be taken.

Interested? Why don't you subscribe to my posts by email or RSS feeds



Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Tuesday, March 13, 2007

Look Before U Leap


DNA carries an informative article on buying Unit Linked Insurance poilcy (ULIPs), titled: It pays to stay away from ULIPs by Vivek Kaul.



The article talks about the level of transparency and other issues which one should look at before U L(ea)P.



Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Sunday, March 11, 2007

ULIPs Advertisement by LIC


This ad by LIC baffles me as well as makes me happy that some Financial product company has put an ad like this. Especially when you see it with the perspective of my previous post. Way to go LIC!




Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Saturday, March 10, 2007

Carnival of Money & Finance - March 17/18, 2007

Welcome to the March 18, 2007 edition of carnival of money & finance one day in advance since I'm not working tomorrow. I enjoyed reading posts from around the world. Hope you do too.

Depending on the day and time you apply for a payday loan , your cash advance can appear in your bank account the next business day.

Bill presents Saving On Taxes posted at Ask Uncle Bill, saying, "For the tax challenged"

Praveen presents Review of "The Rich Jerk" - Get It Free, Plus $1 posted at My Simple Trading System.

Trent presents Community Project: Public Domain Financial Library posted at Financial Education, saying, "Help us put together a great free resource!"

gamerz Space presents Gamerz Space posted at Gamerz Space.

Michelle presents How to purchase a rental property posted at Aridni

Craig S. Higdon presents What Is The Best Commercial Real Estate Loan? posted at Investment Property Insider.

Michelle presents Aridni’s Poetry Contest: Mixing Business with poetry posted at Aridni, saying, "Business blog hosting a poetry contest? Yeah... you wanna enter?"

Madeleine Begun Kane presents Man Can?t Live By Bread Alone ? Or Can He? posted at Mad Kane's Humor Blog.

Paul Michael presents The Dirty Secrets of Credit Cards posted at Wisebread, saying, "10 dirty secrets the credit card companies hide from you."

Erek Ostrowski presents Getting Out Of Debt (Part 2) posted at Verve Coaching.

Matt Hutter presents View Spending Annually Not Monthly posted at MattHutter.com, saying, "Article describing how to change your views to help reduce your spending."

Beth Dargis presents Too much debt posted at My Simpler Life.

Business Finance
Wilson Ng presents Profits Straight to the Bottom Line posted at Reflections of a BizDrivenLife, saying, "understanding better your cost structure in optimizing your finance and the bottom line"

Matthew Paulson presents How to Avoid Get Ripped-Off When Trying to Make Money Online posted at Getting Green.

Christopher J. Brunner presents Why Small Businesses are Gullible to Scams posted at GreatFX Business Cards, saying, "Sets out some of the reasons that scam artists take advantage of small business, and how to protect yourself."

wakish presents Wakish Wonderz » Interviews posted at Wakish Wonderz, saying, "GlobalCashClicks is yet another program/website which pays you for PTC, PTS or f or referals.
You are also able to join as an advertiser. I found this site to be interesting and most of all the owner is so friendly and likes to interact with his members. So, i could not resist carrying out an interview for you to enjoy."

Financial Planning
Wenchypoo presents The One Untold Secret to Getting Rich posted at Wisdom From Wenchypoo's Mental Wastebasket.

Wenchypoo presents Social Security Alternatives posted at Wisdom From Wenchypoo's Mental Wastebasket.

GrandMaster Hustler presents Hustler?s Buckets posted at Hustler's Blog.

Wenchypoo presents Skipping EVEN MORE Nickels and Dimes for Bigger Savings (Long and Updated) posted at Wisdom From Wenchypoo's Mental Wastebasket.

Michael Cook presents How to Find the Right Mortgage posted at Suite101: Buying/Selling a Home articles.

Ryle presents Financial Insecurity in America posted at The Thinking Men, saying, "This post discusses the current state of financial insecurity in America, and proposes a solution to help our children plan their finances better and ensure they don't make the same mistakes we did."

almomento presents How to Change Your Money Fate posted at BurstCreativity.



Bryan C. Fleming presents 6 Percent Online Savings Accounts posted at Bryan C. Fleming.

Phil B. presents Money Can Not Buy Happiness « Phil for Humanity posted at Phil for Humanity, saying, "A lot of people think that being rich will make them happy, but they are wrong! Here's why." I

Investing


Alan presents Risk Taking - Living life to the fullest posted at Made to Be Great.

H.S. Ayoub presents Acorda therapeutics: Pipeline Does Not Support Valuation posted at BioHealth Investor.

H.S. Ayoub presents Sirius Buys XM Radio: What Should Investors Do Now? posted at SciTech Investor.

Joshua Dorkin presents Vacant Rental Property or Bad Tenants? posted at Real Estate Investing For Real.

Ybother presents Top 10 Stock Picks posted at TodaysTen.com: Daily Top Ten List to jumpstart your knowledge, saying, "An introduction to the stockscouter rating used on MSN money. 333% in 6years!"

Alex at The RE Forum presents Refuting "Facts" at RealtyTimes.com posted at The RE Forum, saying, "Real estate news and trends, myth-busters, real estate law, real estate tax"

Market Poetry presents Abercrombie's Future posted at Market Poetry, saying, "Thx and good luck with the carnival!"

Ybother presents Top 10 Money Tips For Almost Everyone posted at TodaysTen.com: Daily Top Ten List to jumpstart your knowledge, saying, "10 easy to follow personal money tips that applies to almost everyone!"

Tom Hanna presents Financial Roadmap for March 5 to 9, 2007 posted at Financial Options, saying, "This will be a busy week with several items worth watching. The biggest will be the release of the Beige Book by the Federal Reserve, which examines a wealth of economic indicators as reported by each of the twelve Federal Reserve districts. Several labor market market indicators come out this week including the monthly employment situation report and two indexes of online help-wanted ads.

H.S. Ayoub presents Inovio Biomedical: Tumor Ablation Technology Tempting to Big Pharmas posted at BioHealth Investor.

H.S. Ayoub presents Regeneron: Interesting Technology, Valuation a Problem posted at BioHealth Investor.

Ybother presents Top 10 Reasons Wall Street Gives for the Stock Market Correction posted at TodaysTen.com: Daily Top Ten List to jumpstart your knowledge, saying, "Why did the stock market fall so suddenly and by so much? Wall street tries to explain"

Alvaro Fernandez presents » Best practice for top trading performance: biofeedback « Brain Fitness Revolution at SharpBrains posted at SharpBrains, saying, "A best practice, on investing and trading, by a top trading psychology expert."

Charles H. Green presents Trust Amongst the Investment Bankers posted at Trust Matters, saying, "There's no such thing as trust among investment bankers - or trusting investment bankers, and the reason is that they're more interested in the deal than the relationship."

David presents Becoming a Millionaire with Agloco posted at Worldwide Success.

Web Admin presents Investing in India - Fund Options posted at Stock-Net.com.

Steve Faber presents 4 Keys (and sub-keys) to a Successful Investment Strategy posted at DebtBlog.

H.S. Ayoub presents Thermogenesis: Volume, Stock Jump in Late Trading posted at BioHealth Investor.

H.S. Ayoub presents Potential Trouble Ahead For Big Biotechs posted at BioHealth Investor.

Mutual Funds
Zechary presents Chat to help people posted at Zechary White, saying, "You can help people just by chatting."

That concludes this edition. Submit your blog article to the next edition of carnival of money & finance using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.
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Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Friday, March 9, 2007

Belling the Financial Sector: How to Put Warning Bells?

Excerpts of an interesting article by Ravi Srinivasan in Hindustan Times

Our financial sector is also in urgent need of some unambiguous warnings. The other day, I happened to overhear my son (he is 10, and currently heavily into television advertisements) playing what appears to be a pretty popular game amongst children of his age group - they were "doing" their favourite commercials. One of them sounded like "mutual mbldfldmnbling".

Intrigued, I asked the kids to do it again. And it did not sound any different the second time around either After some patient questioning, I discovered that they were doing what they thought was a straight repetition of the statutory warning which the markets regulator has insisted funds add to their commercials.
The next time I watched one such ad, the warning did actually sound like Donald Duck on acid. The audio was unintelligible and the visual had gone in a flash. Now this might be satisfying the letter of the law, but comes nowhere close to the spirit.
Insurance ads are no better Their advisories are equally unintelligible even at normal speed. "Insurance is a subject matter of solicitation," they say. Excuse me, but I thought prostitution was a subject matter of solicitation (solicitation for sex is a punishable offence, by the way). Where does insurance come in? This reflects poorly on the user-friendliness of our regulatory checks and balances.
If you don't believe me, just ask any mutual fund investor who has just seen his investments take a battering in the markets and paid for the privilege by way of fund management fees whether he or she had been clearly warned about the risks of investing, even indirectly, in equities.
Caveat emptor is all very well, provided the caveat is clear And preferably, in plain English
Blog on Finance & Business

Reviews, Tips, Calculators with an Indian perspective.

Thursday, March 8, 2007

India Growth: Constraints and the Future

The Center for the Advanced Study of India organised a talk on Institutional Constraints and India's Economic Future with Shanta Devarajan Chief Economist, World Bank South Asia Region and Arvind Subramanian Division Chief, IMF Research Department on 23rd Feb., 07 at the University of Pennsylvania.

Read the detailed report on India at Wharton here . While Shanta Devarajan voiced his concerns (self proclaimed heretic concerns) about the lack of Infrastructure and Institutional reforms, Arvind Subramanian had the opinion that the Indian inefficiency is not all that bad as it is made out to be compared to other nations.

Being an optimist, I would like to remember the positives like our Telecom growth story, the exploding Internet (highest growth) and the visibility of political will in modernising the Airports as well as efforts to bring Investments in the Infrastructure sector.


Investing Gyan
Reviews, Tips, Calculators with an Indian perspective.

Wednesday, March 7, 2007

25 Golden Rules to Investing: Part II

I wrote about the first 5 golden rules to stock investing yesterday. I'm actually put off by the number (25!) as well as the myriad qualities you must have to become a good investor. For example, you must have an eye for detail as well as have an overview of the entire business. Perseverance, patience, determination, rational action, discipline are high sounding theoretical words and look very daunting to me. And all of them in one single person!!

So I'm putting them all together here (6-25) since I promised. Academic interest only, since I don't expect you and me to be a bundle of all 25 qualities!!

6. Successful traders buy into bad news and sell into good news.
7. Successful traders are not afraid to buy high and sell low.
8. Continually strive for patience, perseverance, determination, and rational action.
9. Limit your losses - use stops!
10. Never cancel a stop loss order after you have placed it!
11. Place the stop at the time you make your trade.
12. Never get into the market because you are anxious because of waiting.
13. Avoid getting in or out of the market too often.
14. The most difficult task in speculation is not prediction but self-control. Successful trading is difficult and frustrating. You are the most important element in the equation for success.
15. Always discipline yourself by following a pre-determined set of rules.
16. Remember that a bear market will give back in one month what a bull market has taken three months to build.
17. Don't ever allow a big winning trade to turn into a loser. Stop yourself out if the market moves against you 20% from your peak profit point.
18. Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.
19. Split your profits right down the middle and never risk more than 50% of them again in the market.
20. The key to successful trading is knowing yourself and your stress point.
21. The difference between winners and losers isn't so much native ability as it is discipline exercised in avoiding mistakes.
22. Speech may be silver but silence is golden. Traders with the golden touch do not talk about their success.
23. Dream big dreams and think tall. Very few people set goals too high. A man becomes what he thinks about all day long.
24. Accept failure as a step towards victory.
25. Have you taken a loss? Forget it quickly. Have you taken a profit? Forget it even quicker!


Investing Gyan

Reviews, Tips, Calculators with an Indian perspective.

Tuesday, March 6, 2007

Golden Rules for Investing in Stocks

Nadeem Sama points out to the 25 golden rules of Investing in stocks. Is it possible for mortals like me to follow them? So instead of all the 25, I reproduce only 5 at one go!

  1. Plan your trades. Trade your plan.
  2. Keep records of your trading results.
  3. Keep a positive attitude, no matter how much you lose.
  4. Don't take the market home.
  5. Forget your College degree and trust your instincts.

Pretty basic. But easier said than done, eh? I like the one about trusting your instincts!

I'll come back with 5 more in the next post about golden rules.

Investing Gyan

Reviews, Tips, Calculators with an Indian perspective.

Letting Out Some Nice Ideas

An engineer working towards his Masters degree in Business Administration, Anand has an amazing range of ideas to share. His blog, Nice Ideas is his way of letting out a few things he wanted to tell.

The blog has an amazing array of topics covered. Right from funny pictures, hilarious and creative stories, Anand also points out to some creative way of spamming in MyBlogLog community.

Anand also has a blog on Internet Business Strategies which talks about the Internet and the possibilities of marketing it right. Anand is currently busy with making a new website for technology blogs. It is called TechMein.com

But he promises to be back on Nice Ideas. He has so many 'Nice Ideas' to share with you all...

Investing Gyan

Reviews, Tips, Calculators with an Indian perspective.

Monday, March 5, 2007

Insurance Companies Beat Mutual Funds in Their Own Game

ULIP is a bestseller today. Unit Linked Insurance policy is an insurance policy where the funds are invested in the Capital market and the policyholder bears all the investment risks.

Insurance companies are falling over each other to bring out ULIPs in new and attractive packages, thanks to it being accepted across India in huge numbers. More than 80% of the new premium income of Insurance companies come from ULIPs today.

But shouldn't this product be left to Mutual Funds who have been dealing with investments in the capital market with much more transparency and disclosures? Well, the Insurance companies have only added the insurance angle and are charging separately for that too.

Let's look at the charges for investing in a ULIP. Generally, a Mutual Fund charges 2.5% as entry load and 1-2% as Fund Management charges.

  1. Premium allocation charges: Companies charge from 5% to 70% as premium allocation charges in the first year. Ofcourse it comes down in the second and third year but still is substantial. This means that only the balance percentage will be invested in funds and the charge goes into commission and other administrative charges.
  2. The Mortality Charge of the Life Insurance Coverage: This is common for all the companies and depends on their mortality table.
  3. Fund Management Charge ranges from 0% to 2% depending on the Insurance company.
  4. Policy Administration Charges
  5. Sum Assured charge
  6. Surrender charges

Last but definitely not the least, the commission ranges from 10% to 32% for your friendly advisor. Companies also run schemes where they take high performing advisors to Singapore, Brazil et al.

And the investors will be taken to the cleaners!!

Investing Gyan
Reviews, Tips, Calculators with an Indian perspective.

Sunday, March 4, 2007

Happy Holi To You: LAGE RAHO to me!


होली मुबारक हॊ

Wishing you a very happy and colorful Holi!

होली ऎसा त्यॊहार है जब हम सारे गम भुल कर रन्गॊ मे दूब जाते है.

यह मेरे लिये एक मॊका है जब मै अपने बुरी आदते हॊलिका अग्नि को समर्पित कर दू . मेरा मन्त्र :

"LAGE RAHO"!!!!


L stands for a demon called Lust
A
stands for a demon called Anger
G
stands for a demon called Greed
E
stands for my Ego

and
R
endeavour to Replace them
A attempt to Anticipate them
H is to Honour them
O is to be able to Order them out!



I have tried this earlier too. Hope I get lucky this time!!




Investing Gyan
Reviews, Tips, Calculators with an Indian perspective.

Union Budget for Real Estate Sector

Below are the aspects of the Union Budget 2007 that are relevant to the real estate sector brought to you courtesy Magicbricks

  • Tourism infrastructure to get an allocation of Rs.520 crore as against Rs.423 crore last year
  • Five year tax holiday for two, three, four star hotels and convention centres with a seating capacity of 3,000 in NCT of Delhi, Gurgaon, Ghaziabad, Faridabad & Gautam Budh Nagar.
  • Initiatives would provide impetus to growth of hospitality sector in NCR region in view of the upcoming Common wealth games.
  • Allocation for National Highway Development programme to be stepped up from Rs. 9,955 crore to Rs.12,600 crore.
  • Work on Golden Quadrilateral road project nearly complete. Considerable progress made on North-South, East-West corridor and likely to be completed by 2009.
  • Tax free bonds to be issued by state-owned urban local bodies.
  • Northeastern region will get Rs.405 crore for highway development.
  • Road-cum-rail project over Brahmaputra in Bogibil, Assam.
  • Total Budget for the Northeastern region raised from Rs.12,041 crore to Rs.14,365 crore.
  • New Industrial Policy for the northeastern region to be in place before March 31.
  • Section 80 IB not mentioned at all.
  • Modified VAT applicable to developers.
  • Commercial rentals included in Service tax.
  • Textile parks: Allocation up from Rs.189cr to Rs. 425cr.
  • MAT extended to IT companies.
  • Annual target of 15 lakh houses under Bharat Nirmal Programme to be exceeded.
  • Benefits of investment in venture capital funds confined to IT, bio-technology, nano-technology, seed research, dairy among some others.
  • Excise duty on cement reduced from Rs.400 per tonne to Rs.350 per tonne for cement bags sold at Rs.190 per bag at retail market. Those sold above Rs.190 will attract excise duty of Rs.600 per tonne.
  • Indian investors to be allowed investment in overseas capital markets through mutual funds. Mutual funds to set up Infrastructure Fund schemes.
  • Rs.150 crore to be given to Ministry of Youth and Sports for Commonwealth Games and Rs.350 crore to the Delhi Government for the purpose.
  • Rs.50 crore to be provided for the Commonwealth Youth Games in Pune.
  • Export duty on iron ore and concentrate at the rate of Rs.300 per tonne. Excise duty for plywood reduced from 16 per cent to eight per cent.
Investing Gyan
Reviews, Tips, Calculators with an Indian perspective.

Saturday, March 3, 2007

MONKEY Mutual Funds

DNA has an interesting article on naming a MF: Naming funds is a monkey business. Some excerpts.....

Fifteen cigarettes into the morning and it was still eluding Ravi. He had to come up with a name for the new mutual fund scheme his asset management company (AMC) was about to launch.

The AMC planned to launch an equity scheme, which was similar to some of its existing ones. To make it look different, and comply with the regulatory requirement of a scheme being genuinely different, they had planned to make it closed-ended for three years and open-ended thereafter. But his boss now wanted another level of differentiation built in - an interesting name!

Ravi’s suggestion that they call it the Multiple Opportunities in a New Knowledge Economy Fund (M.O.N.K.E.Y.) had been rejected on the ground that it did not sound serious enough.

I guess the name is the only differentiator among the MFS rushing in. My views on MFs can be seen here


Investing Gyan
Reviews, Tips, Calculators with an Indian perspective.

Friday, March 2, 2007

JobOkPlease: A Job Site For Students and Fresh Grads


Rasmi Bansal is the Editor and Publisher of a popular youth magazine called JAM - Just Another Magazine. JAM magazine has just launched Jobokplease.com. A job site whose USP is opportunities for students and fresh graduates.

Rashmi Bansal took time to answer some questions on the idea, process and the targets in respect of her jobsite. As she says, "It's always more a question of self-belief and 'daring to do' rather than lack of funds which prevents you.If you are convinced about your idea and business model, just do it."

The answers are enlightening. All the best, Rashmi.

1. What is JobOkPlease?
Jobokplease.com is a job site for students and freshers. The USP is that we're featuring jobs in categories like part-time jobs, freelance jobs, projects, vacation jobs and also 'first jobs' for fresh grads. Every young person out there could do with a little extra pocket money - as well as the exposure to the working world. Companies too are looking for young talent but don't know where or how to find it. So there is definitely a need out there, from both employers and jobseekers.

2. Why'd you name it that?
The JAM team brainstormed and came up with several names. We liked this one because it cued jobs and yet has a touch of irreverence to it which is the JAM hallmark. Also, the name was available across all domains (.com, .net, .inetc!)

3. Where did the idea come from? What is the researchyou have done on the business model?
Way back in 1996 JAM kicked off a summer internships' program where we placed bright young people in some excellent companies. These were the kind of interesting jobs which were generally not open to undergraduate students. Companies we tied up with included Leo Burnett, Euro RSCG, TV18, Sony Music,rediff.com, Hindustan Lever, and so on.

The JAM internships program was hugely successful - it attracted some of the best young minds. For some it was actually a life-changing experience. An engineering student, for example, shifted to journalism while a guy doing hotel management joined advertising instead.

Internships was a program we conducted for many years as a brand-building exercise for JAM and a service toour readers. In the last couple of years we found employers were coming on their own and wanting to advertise jobs with us. As a small publication without a dedicated classified department we found it uneconomical to accept these job listings as too much administration was involved for a very nominal revenue.

So we decided to shift the process to the internet. As employers are now familiar with and used to posting on jobsites we would not have to educate them. And the job site market reaching a more mature stage there is room now for niche brands like ours. The business model already exists - we are only creating a new vertical within it which is in sync with the audience we have been catering to through JAM magazine and jammag.com - the youth aged 16-24.

3A.Tell us how you go about constructing a job boardlike this once you have the idea?
The development and design was in-house.

4. I guess you have some success from offlineparticipation in the past. Do u think an onlinejobboard of this kind will click?
We already have 50 registered employers and 35 jobs in diverse roles and industries, from advertising and journalism to software and even NGOs. If you count no. of openings the jobs are actually 300+, however what we are more keen on is quality, not quantity of jobs.We've also attracted about 1500 jobseekers. We are now kicking off a promotional campaign for JobOkPlease among young people -at college festivals, through stickers and posters on campuses.

There will also be cross-promotions. Every issue of JAM will feature hot job listings and these jobs automatically appear on the JAM homepage www.jammag.com. We are growing the site organically,and I would evaluate its success only in another month or two. This is the seeding stage."

5. How did you actually build JobOkPlease (how muchdid it cost, where do you host, what did you need to do in terms of paperwork, coding, finding people, etc)?
As I mentioned, everything was done in-house by our existing design and development team. I can't get into specifics.

5A. How do u find the funds?
It's more a quesion of time and bandwidth than funds.The team very clear what it wanted - a clean,focussed, youthful looking site - and hence we had no expensive re-iterations. Of course small bugs keep getting discovered which we keep fixing!

6. What are your goals with JOP? I mean the number of registrations, (jobseeker and employer) and the revenue targets.
By the end of 2007 I would like to see 500 employers, 3500 jobs and 15,0000 registered jobseekers. More than that would be a bonus :) Once the site achieves a critical mass, I am sure revenues will follow.

7. How do you market JOP?
As I mentioned, we are now kicking off a promotional campaign for JObokplease among young people -at College festivals, through stickers and posters on campuses.There will also be cross-promotions. Every issue ofJAM magazine will feature hot job listings and these jobs automatically appear on the JAm homepagewww.jammag.com. There are also other plans in the pipeline.

8. What would you say to a young person who wants to do something entrepreneurial?
It's always more a question of self-belief and 'daringto do' rather than lack of funds which prevents you. If you are convinced about your idea and business model, just do it.

9. What qualities do you look for when hiring? Whatis your team like, in terms of numbers and experience?
The right skill set as well as an optimistic, problem solving attitude. The JAM team is 30 in number but across a wide set of roles and functions, hence difficult to give you a profile. On the one hand we have senior, experienced people, on the other we regularly take in freshers. But the mindset across the board is youthful.

10. How much weightage/importance do you give to finding the funds vis a vis the idea?
Like I said... funds come when the idea is strong and you have the guts to implement it!

Thanks Rashmi!The answers are enlightening.

Investing Gyan
Reviews, Tips, Calculators with an Indian perspective.

Thursday, March 1, 2007

Take the Pledge of Entrepreneurship




Visit National Entrepreneurship Network

Investing Gyan
Reviews, Tips, Calculators with an Indian perspective.

Simple Calculators for Simplifying your Finances


Look at some tools and calculators for your personal finance decisions







  1. Magic of compounding

I'll come back with more!



Investing Gyan
Reviews, Tips, Calculators with an Indian perspective.