Tuesday, October 28, 2008

Making New Beginnings On This Diwali

While Deepavali is popularly known as the "festival of lights" and "triumph of good over evil", a more appropriate significance is "the new year of luck and wealth". At least for me!

Especially since there are a lot of ideas that needs to be implemented in the coming year. For example, we have started building/designing modules for personal finance education. We are also building a Personal Finance Discussion Forum & a Financial Products Database

Personal Finance education is a relatively untouched area. And let me give you some dope why it's a bad idea to ignore it. Personal Finance looks at how an individual’s money and future is managed.It involves analyzing their current financial position, predicting short-term and long-term needs, and recommending a financial strategy. This may involve advice on retirement planning or pensions, wealth creation through stocks and mutual funds, children’s education, home loans, life insurance, and other investment.

So, don't you think it's a good idea to start building those modules for personal finance.

Wikis provide the tools for online collaboration and so we set up a wiki on this Diwali day to help us collaborate on this project.

We welcome your feedback, articles and suggestions to build the modules on personal finance. If you want to contribute by writing articles on a relevant subject, you are more than welcome.

Happy Diwali!

India's first online weekly on Personal Finance

Saturday, October 25, 2008

Pictualize's Take on the Credit Crisis

The team at “Pictualize” comprises of Aakanksha Gaur, Anirudh Maitra & Vineesh Kumar who feel strongly about conveying through pictures. Take a look at their fabulous presentation on credit crisis.

Credit Crisis Pictualized
View SlideShare presentation or Upload your own. (tags: presentation comic)

India's first online weekly on Personal Finance

Wednesday, October 22, 2008

Personal Finance Forum on PhpBB

On Sunday, I installed PhpBB Forum software on a subdomain of my personal finance website.

Though I am pretty satisfied with the theme/layouts, the success of the forum depends on users.

I don't really know if this forum will be actively used. I'm hoping it is.

Do take out some time and register. And then, share, discuss and ask personal finance questions & issues. Thanks

India's first online weekly on Personal Finance

Sunday, October 19, 2008

Time to Buy & Go to Sleep for 4-5 years

Rajiv Mundra has a keen eye for the markets and he has the following post on his Google Group. Post below the fold.

Time is coming to start buying now into the markets.

Anywhere from 2600 to 2000 can be bottom for our markets.

I am optimistic for 2600 holding the line, but if doesnot, thats ok too.. downside from there will be very limited with high upsides possible.

Reward vs risk will be in big favour 2600 onwards.

At 2600 Invest 15% Diversified mutual funds and 15% in midcap funds.

Wait for 1 month and if lower levels come say 2300 or 1900. Invest all rest amount.

If 2600 is not broken in NSE even after 1month, keep deploying 20-30% more in mutual funds every month.

Do not forget to be invested in midcaps. They will severely out-perform broad indices in 2-3 years.

This is a once in life buying opportunity. Same as 2003 lows. Buy while things are still cheap.

Equity markets bottoms out about 6 months before the real economy does.

Nifty Levels
My expectation 2600. (30% invest zone when hit for first time then buy more every month)

Slightly bad 2300 (50-60% invest zone when hit for first time, then buy rest every month)

Very bad 1900 (100% invest zone when hit for first time, no waiting to buy slowly, but at once)

Worst of Worst^100 Bad 1400-1500. (sell your house, car and clothes and mortgage yourself and buy stocks)

Some positives.
recall previous email sent 10-20 days back, saying it stocks are best bet till rupee is so weak.



India's first online weekly on Personal Finance

Friday, October 17, 2008

Financial Crisis

Latest Updates

Important Updates

CRISIL Analysis of Quality of FMP Portfolio

Fixed maturity plans (FMPs) constitute a quarter of the assets under management AUM) in the mutual fund industry. FMPs have also been the biggest contributor to the mutual fund industry’s growth so far in 2008. Recently there has been heightened apprehension about the quality of the FMPs’ investments and reports of investors seeking premature redemptions even by paying substantial exit loads. Against this background, CRISIL has carried out a quick analysis of the credit quality of FMP portfolios, even though it has outstanding credit quality ratings on less than 5 per cent of the 400 odd FMPs outstanding.

Says Roopa Kudva, Managing Director & Chief Executive Officer, CRISIL, “Portfolio data that is available with CRISIL for FMPs’ investments represents only 30 per cent of total AUM (50 per cent of the number of schemes) for this product. Here our analysis reveals that a high 85 per cent of these portfolios are invested in the highest safety AAA and P1+ rated instruments and government securities, which is indicative of strong credit quality. A full disclosure of investment portfolios of FMPs could, therefore enhance investor confidence in FMPs.”

CRISIL’s analysis further reveals that there are a number of FMPs whose portfolios are only invested in securities rated AAA and P1+. However, it is important to note that the sample size of this CRISIL study covered only 30 per cent of the AUM of all FMPs (50 per cent of the total number of schemes) because of the limited disclosure followed by a number of AMCs for this category of funds. While open ended funds in India typically follow a system of full portfolio disclosure on a monthly basis, this is not the case with FMPs. Says Krishnan Sitaraman, Head, CRISIL FundServices, “If the disclosure levels in FMPs were similar to those of open ended funds, investors would be fully aware of the credit ratings of the underlying investments. In this scenario, potentially redemptions could have been lower if the strong credit quality as seen above was maintained across FMPs. Monthly disclosure of portfolios in fact sheets could significantly increase transparency”

If the credit quality of FMPs’ investments is strong, then investors have much to gain by holding these investments to maturity. In this situation, it is actually premature redemptions which could lead to sub-optimal returns.
Fixed Maturity Plans (FMPs) have significantly gained in popularity in India as interest rates in India increased, and equity market returns diminished. With FMPs offering tax-adjusted returns that are higher than bank fixed deposits (FDs) of comparable maturity, AUMs under FMPs nearly quadrupled from levels two years ago. AUMs in FMPs at end September 2008 were about Rs.1.40 trillion1 (or
about US$ 28 billion). In 2008 thus far, over 800 schemes, aimed at both, the retail and institutional segments have mopped up Rs. 440 billion (or about US$10 billion) of investments.
Full portfolio disclosures with credit ratings of each investment or the credit quality rating of the FMP as a whole would help investors understand clearly which FMP portfolios have a higher risk profile. A higher risk profile could emanate either from taking exposure to instruments lower down in the ratings spectrum or through excessive exposures to sensitive sectors like real estate.

India's first online weekly on Personal Finance

Tuesday, October 14, 2008

Everything About ULIPs?

AboutUlips is ICICI Prudential Life's attempt to educate the online public about Unit Linked Insurance Plans (ULIPs).
I would have loved to see a comparison chart of ULIPs across all insurers showing the various allocation/ administration charges. I couldn't find anything of that sort there.
ULIPs really pinch on their costs. And the cost details aren't found anywhere!

Saturday, October 11, 2008

Get Real or Go Home

Sequoia Capital's presentation to its portfolio companies about how to try to survive an economic downturn. It's survival of the quickest or else you enter a death spiral, they say. Check it out!

Hat tip: Webyantra

India's first online weekly on Personal Finance

Financial Crisis v/s Any Other Crisis

A crisis is a crisis. Be it financial, that is raging furiously these days, or a personal crisis.

All crisis originates with some excess/wrong doings/ mistakes on the part of an individual or a company. The financial crisis has its origins in the sub prime lendings in the US and it is engulfing all and sundry. Likewise, a personal crisis too is an offshoot of some mistakes. Like Pravin Mahajan killing his own brother and pulling the entire Mahajan family into a crisis. Or the Ayushi murder case.

Everybody loves distress stories And then the media goes overboard since it knows that and it feeds on the raging fire.

Here are my thoughts on what to do in these troubled times:

  • Take it on your chin: Understand the reason and the direction from which the blow is coming and accept that blow. Instead of ducking issues or avoiding them. It will give you a perspective on how it is going to affect you and you can take some corrective actions. Like you could have gone for more allocation for liquid/gold funds. Or go for a SOS: Short only Strategy.
  • Put some wax in your ears: Media goes overboard with distress stories and your blood pressure shoots up too. All those stories in the name of analysis/insights do not solve the problem. Remember, there is a difference between discussing a problem and solving a problem. In times like this, it's a boon to be able to withdraw!
  • It's a catharsis: All crisis are lessons. Failures can be very good feedback if you are willing to look at it that way. It also gives you a perspective on past mistakes and the way out.
  • What goes down, comes up: I love the "Sine curve". Sometimes it goes up and then goes down, only to go up again. It's a continuous loop.

I am an eternal optimist. Are you one?

More Updates

India's first online weekly on Personal Finance

Thursday, October 9, 2008

10 Principles for Teaching Children about Money

Here are ten principles for teaching children about money written by R Padmanabhan (I found them posted on a Google Group):

  1. *Talk about money.* Every time money is involved, parents have a chance to teach their children the values and analysis behind their actions. Money is one of the important topics through which we communicate our wisdom and values to our children. Every purchase, investment, or donation can be a time to teach your children something about your values.
  2. *Talk openly about money.* Parent makes a mistake when they keep information from their children. The only way children learn what is a good deal and what is too expensive is by the experience of what their family earns and what items cost. Hiding this information robs children of the financial education they need.
  3. *Talk factually about money.* Many parents have strong emotions about money based on their childhood experiences. These emotions are always transmitted to children. Instead of helping children, they can cripple children from growing to make sound financial decisions.
  4. *Require chores; pay for optional work.* Everyone in the family has to help complete the work that needs to be done. If you want to pay your children, only pay them for optional work they can choose to do or not to do.
  5. *Provide children an allowance they can make real choices with.* Talk about money is important, but children need real-world lab experience to understand the consequences of their decisions. Consider giving them an allowance large enough so that they can purchase some of their own needs. Then continue to give them honest advice, and help them ask the right questions to make wise decisions based on their values.
  6.  *Help children prioritize purchases* Ask them if this purchase is better than other purchases they are considering making.
  7. *Help children comparison shop.* Help them consider issues such as cost, quality, and convenience. 
  8. *Require children wait before making large purchases* Adults should wait at least a month whenever they are making a large purchase. Children shouldn't be expected to wait that long. Here is a good rule of thumb: Children should be required to wait as many days as they are old in years before being allowed to make a large purchase (over a week's allowance). There is always tomorrow and over half the time they won't remember what attracted them to it in the first place. Developing this habit will help make them resistant to impulse buying.
  9. *Don't use money as a punishment. * Your priority should be helping to give your values to your children, not buy their outward behavior.
  10. *Don't loan your children money.* If their desired purchase is something they should be saving for, let them save for it. If you want to buy it for them for the value of the experience, buy it for them.

The principles are "If they want it, they have to save for it. If you want them to have it, you will buy it for them." Loaning your children money for items they want teaches them they aren't responsible and they don't have to prioritize.

Wednesday, October 8, 2008

Rs. 2.3 trillion of shareholder value lost in Indian Stock Markets in September

CRISIL reports:

The Indian equity market continued to slide in September 2008 with the S&P CNX NIFTY, registering its second sharpest fall since January 2008, declining around 10 per cent. It is estimated that Rs 2.3 trillion of shareholders' wealth eroded in the background of the situation in the US financial markets. On the contrary, the fall in the US markets was lower with the S&P 500 and Dow Jones both declining by around 9 per cent and 6 per cent respectively, while emerging markets lost around 18 per cent during the month.

Pessimism in the financial markets following the filing for bankruptcy by Lehman Brothers, Merrill Lynch's sell-off, the bail out of AIG and perceived uncertainty around the US bail-out package added to investor fears. Investor sentiment was also affected on news of the possibility of Fortis filing for bankruptcy, indicating problems in the European financial markets as well.

The BSE Realty Index and the BSE Metal Index were the most severely affected during the month dropping by 32 per cent and 25 per cent respectively. Concerns over slowing demand in the real estate market due to a liquidity crunch and increased cost of funding weighed in on investor sentiment in the realty sector.

Expectations of lower demand for commodities given the weaker global economic growth affected metal sector stocks." The FMCG and Oil and Gas sector indices, however, outperformed the overall market, declining 1.6 per cent and 7.6 per cent, respectively.

Moreover, although inflation numbers were in line with CRISIL estimates, the reported 7.1 per cent growth in Index of Industrial Production (IIP) for July 2008 bettered expectations. However, this failed to provide any positive trigger for the market. For the first two weeks of September 2008, the headline inflation appeared to have stabilised at around 12.10 per cent as against 12.49 per cent in August 2008.

While a 15 per cent decline in average crude oil prices during month provided some reprieve, the impact was partially negated by the 7 per cent decline in the value of the rupee against the dollar.

Going forward, rising crude oil and food prices are expected to keep an upward pressure on inflation. Further, global liquidity pressures affected FII investments in the country, adding to the weakness of Indian markets - during the month, net sales by FIIs were to the tune of Rs 82 billion.

India's first online weekly on Personal Finance

Tuesday, October 7, 2008

Self Styled Editor, Publisher, Broadcaster & Database Administrator!

Technology gives us amazing tools. And being a non techie, I get pretty excited about being able to do things which I wouldn't have imagined that I would ever do. Everything that I am doing now, was unthinkable just two years back (for me, ofcourse!).

So now I am 
I should stop since I just might be annoying you with my child-like excitement of playing with techie toys. 

But not before I tell you that I am playing with 
I am pretty excited about being able to embed it in my website done on Joomla CMS!

So after being an Editor, Publisher, Broadcaster, I am on way to become an Online Database Administrator!!

Sunday, October 5, 2008

Ranjan's Blog is changing yet again

This is another one of those countless revamps for this blog. It's two years since I started with a blogspot url that read "financexchange.blogspot.com" and then put it under mu custom domain "www.ranjanblog.com". The domain ranjanblog.com still shows a site under construction and my numerous mails to rediff for help has fallen on deaf ears :(

Over the two years, the title of the blog has seen countless variations. From the "Blog on Personal Finance & Business" to lines like "Get Rich or Die Trying", "You don't need to be a genius to manage your personal finances", "Take responsibility for your Personal Finance", etc.

Now it's a simple "Ranjan Varma's Blog". For Personal Finance, please visit India's first online weekly on Personal Finance, a website I have built which totally focuses on the subject.

I have refrained from talking about my other musings on this blog. From now on I'll take that liberty.

It's Navratra and I have been on a fruit fast for last 5 days. It's really a detox exercise that I've been doing for the last 5 years. Here's wishing everyone a very happy Navratras.