An article on house loan from an IM reader

Pre-payment and Pre-closure penalty on housing loan:

Housing loans are one of the biggest mortgages you are going to take in your life. Taking a housing loan can change the direction or way of life of a middle class family. Since buying houses isn't like walking around the mall and grabbing them off the shelf, there is a particular science to it that you need to at least take the time to understand; consequence if you don't: Face a big hole in your pocket. For middle to low income group of people in India, it's not fun at all. Truly speaking how many of us have been given opportunity, even if it is given had patience to go through the loan agreement or offer letter or loan product brochure completely.

On availing Housing Loan we the borrowers pledging not only the house that we are buying or constructing out of that loan but also our rights to planning for our better future. All Financial Institutions are invariably charging rather imposing Prepayment or Preclosure penalty, normally 1 to 3%.

What I would suggest for middle income groups is to do a complete financial analysis before getting into a housing loan venture. Do a cash flow analysis for both outflow and inflow (i.e. for repayment of loan and your projected income) and do calculate Net Present Value of the entire cash flow, consider the stability of your income, and your future rental commitment if you choose not to buy a house, be realistic and do not be sentimental at all, since housing sector is commoditized and no more a worthwhile property. From my own experience am telling that we are very naive, when we buy.

The curse on middle class is 'we work to make others rich'

Government (when planning to revive the moribund housing sector) and IBA should come out with specific package to help small borrowers not the real estate giants, in order to completely waive Prepayment and preclosure penalty, since it affects the financial
planning of a common man. Banking institutions are NOT OBLIGATED under any law or contract (usually) to provide waivers of penalty fees to borrowers. It has to be amended, since lot more reasons are there to prepayment or preclosure of a loan to get rid
of a liability (Compassionate financial reasons - Natural disasters, personal economical problems, sale of ancestral property, accidents, etc.). The pathetic part is Under certain conditions the same penalty is charged to, where properties are sold at a loss (borrower's side) and the loan is transferred and taken up by another party with the same or larger amount.

It is advisable to borrow from a bank or housing finance company, wherever the prepayment clause or Loan Redemption charges is not harsh.
-Written by G. Kumaran

Advance tax info

Advance tax collections is one of the clues to predict the results of the companies in advance.As per the above info ( source: the hindu businessline), CBI, L&T, BOI, SBI &ACC have paid advance taxes more when compared to last year.
SBI stock is one of my favourite and a real long term bet. L & T should also be a sound long term investment. Small lots of these can be accumulated , if one is looking at a 3-5 year investment horizon.

Personal finance ratios

B- schools and finance books talk about ratios that are needed to judge and manage the finances of a company. But we seldom bother about how to manage our personal finaces using such tools.
Personal finance ratios cannot be a panacea to all our financial woes . But they can definitely be a starting point or a guiding point in managing our finances.
Found the following article in Money today very inetersting which talks about the EMI to salary ratio, Savings to Earnings ratio, Liquid money availability, etc. In these age where we dont even think twice before signing up for an EMI or swiping our credit card , having such ratios in mind can definitely bring some method to the madness.

Thinking aloud!!

If you rewind yourselves by an year, The Indian markets had "Decoupled" from the whole world and was surging ahead against all odds. Then the impact was felt slowly while the raising oil prices became the talk of the town. After that settled, India slowing down thought began to sink in amidst the mass exodus of the FIIs. Nobody's sure about the future and everybody is gloomy in predicting it too.
There are a lot of lessons to learn from this cycle and a lot of things to look forward too!. India has'nt seen as many job cuts as the US . So we have'nt really felta major impact. The economic growth for the last 4-5 years were primarily driven by the increasing spend by the salaried class. IT/ ITES jobs which triggered further more local jobs in India and ever increasing salaries led to a huge consumption boom. Many of us started living today with tomorrow's money. Many pledged their future income for 15-20 years to buy their dream homes and this inflated real estate prices. Stock market boom also created a great sense of confidence in all.
The retail consumption is going to be driven by the jobs that we have ( either internally generated or by MNCs). When the employment scenario looks bleak then the driver for consumption goes down.
If job cuts start happening in India too, it may lead to a mini-subprime within India. If Job losses are going to be minimal then we may push through and jump back faster.
IT/ ITES jobs have almost been the destination for most of the urban youth. These are the people who triggered big consumption. May be a decade from now , we may see these sectors loose sheen and become just another job ( like a Bank officer's job now which was looked at with awe a decade ago!). Such changes may bring in sanity to the society and lead us to inclusive development. If we look at the IT/ITES stock prices we don't see any encouraging signals in terms of the near future . A dent in the increase of salaries becomes a new item everyday and those who took home loans factoring higher salary growth might have to suffer.
Whatever it is, this too shall pass and these are the times we should remind ourselves of good old Indian ways of living i.e. " Living a debt free life ( living within the means)" and " Save for a rainy day". These mantras when sincerely applied to our lives will make us immune to financial crisis.

My experience with ATM

I happened to use my HDFC card at an ICICI ATM in early November' 08. I was trying to withdraw 18k . The transaction got declined .However, the cash was deducted from my HDFC account promptly. I raised a complaint with HDFC immediately and also raised a dispute along with the copy of the ( declined) transaction slip.
I got back the money after 35 days as assured but wanted to write this article to create an awareness. This 35 days may be harassing esp. when you are in real need of that money. You keep worrying while the bank keeps enjoying your money for no fault of yours.
What I have learnt
1) Avoid using the ATM card of one bank in another even if there are no extra charges involved.
2) Even if you decide to use your card in a different bank's ATM, do not try withdrawing a huge amount. If you need a huge amount , try withdrawing it in parts and not in full.
3)In case you get into such trouble as stated above , don't panic. Keep a copy of the transaction slip and raise a written dispute with your bank immediately.

Real estate crash in India??

Indian Stock market turmoil - What lies ahead??

It was not long ago that all of us were interested in equity and were proud of our equity/ mutual fund investments. When the fall started in Jan'08, most of us held on or added more to our portfolio thinking that this downturn was a short term phenomenon. Come October, We are left to face with reality .It's hard to believe that we are below 10k levels. Even SIP investors should be in deep red now and wondering what to do.
Equity is as such a risky investment and when we see a bull run lasting 3-4 years, we get over confident and start pumping more and more money into it. This happens always during the last phase of bull run. We tend to forget the bear phase when we invest during the peak periods. But at these times, we should also remember that we get bogged down too much about the negative news around the globe.
There should be light at the end of the tunnel and patience is the only virtue that can keep us going and bring us some good returns in the long run. With the US and India elections on the way, we cannot expect any great upward curves at least in 2009. But in a couple of years at least , the dust should settle down for more clarity. It would be difficult to say whether we will be back to 21k days any sooner or later. But we have to believe that things should get into better shape once the dust starts settling down.
Every body wants to make money out of equity but no one is ready to face uncertainty or downturns. ( It's like everybody wants to go to heaven but no one wants to die). Time and patience is key to solving any problems . So, lets wait patiently to see this crisis too going away!!.

Medical Reimb. limit too low

Last couple of weeks have been hectic at office. I was not able to post even though I wanted to blog badly for a long time. I was also down bit with cold & cough.
A couple of visits to the doctor (with medicines) cost me almost Rs. 1000/-. I was shocked as I visited a normal doctor and cold is after all a common occurrence!!. This may not be the exact figure that everyone spends for a couple of doctors visit. But I realise, visiting a doctor is getting a costly affair these days.
In these circumstances, a maximum limit of Rs 15000/ p.a prescribed for a salaried employee looks too low. If a family of four or more has only one working person, this limit will be blown of within a few months from the beginning of the financial year.
It is high time that these redundant rules get revisited and made more friendly to the salaried class.

Financial Meltdown in US ...... Impact on equity investors

With Bad news flowing in from US day in and day out, We are in a time of great uncertainty. So what should be the approach to equity / MF investment now???. This has become a common question.
Investment in equity especially through SIP in MFs is essentially avoid timing the market. Equity investments either made directly or through MFs should be made only with a long term time frame in mind. Not everything is assured with a long time frame but things evens out the over a longer time frame.
One who starts investing can start allocating to investment likes Debt, Post office investments initially and slowly move on to equity through balance funds. If such an approach is followed , even in time of crisis you need not liquidate your equity holdings in a hurry. Systematic investments during downturns may help you gain greater returns when the economy starts looking up ( remember we are just started going down may take substantial time to go up).
So...If we follow a systematic bottom up asset building ( Debt to Equity... Lower risk to Higher risk) and have made informed investment decisions , we need not panic. If we have been doing trading in the guise of investing, this may definitely be a rough time.

One more lighter stuff - a mail fwd

Here's a very interesting anecdote that describes how an 'asset bubble' builds up and what are its consequences. Read it even if it confuses you a bit...things will be clear as you reach the end.... ANCEDOTE - Once there was a little island country. The land of this country was the tiny island itself. The total money in circulation was 2 dollar as there were only two pieces of 1 dollar coins circulating around.
1) There were 3 citizens living on this island country. A owned the land. B and C each owned 1 dollar.2) B decided to purchase the land from A for 1 dollar. So, A and C now each own 1 dollar while B owned a piece of land that is worth 1 dollar.The net asset of the country = 3 dollar.3) C thought that since there is only one piece of land in the country and land is non produceable asset, its value must definitely go up. So, he borrowed 1 dollar from A and together with his own 1 dollar, he bought the land from B for 2 dollar. A has a loan to C of 1 dollar, so his net asset is 1 dollar. B sold his land and got 2 dollar, so his net asset is 2 dollar. C owned the piece of land worth 2 dollar but with his 1 dollar debt to A, his net asset is 1 dollar.The net asset of the country = 4 dollar.4) A saw that the land he once owned has risen in value. He regretted selling it. Luckily, he has a 1 dollar loan to C. He then borrowed 2 dollar from B and acquired the land back from C for 3 dollar. The payment is by 2 dollar cash (which he borrowed) and cancellation of the 1 dollar loan to C. As a result, A now owned a piece of land that is worth 3 dollar. But since he owed B 2 dollar, his net asset is 1 dollar. B loaned 2 dollar to A. So his net asset is 2 dollar. C now has the 2 coins. His net asset is also 2 dollar.The net asset of the country = 5 dollar. A bubble is building up.(5) B saw that the value of land kept rising. He also wanted to own the land. So he bought the land from A for 4 dollar. The payment is by borrowing 2 dollar from C and cancellation of his 2 dollar loan to A. As a result, A has got his debt cleared and he got the 2 coins. His net asset is 2 dollar. B owned a piece of land that is worth 4 dollar but since he has a debt of 2 dollar with C, his net Asset is 2 dollar. C loaned 2 dollar to B, so his net asset is 2 dollar.
The net asset of the country = 6 dollar. Even though, the country has only one piece of land and 2 Dollar in circulation.(6) Everybody has made money and everybody felt happy and prosperous.(7) One day an evil wind blowed. An evil thought came to C's mind. 'Hey, what if the land price stop going up, how could B repay my loan. There is only 2 dollar in circulation, I think after all the land that B owns is worth at most 1 dollar only.' A also thought the same.(8) Nobody wanted to buy land anymore. In the end, A owns the 2 dollar coins; his net asset is 2 dollar. B owed C 2 dollar and the land he owned which he thought worth 4 dollar is now 1 dollar. His net asset become -1 dollar. C has a loan of 2 dollar to B. But it is a bad debt. Although his net asset is still 2 dollar, his Heart is palpitating.The net asset of the country = 3 dollar again.Who has stolen the 3 dollar from the country?
Of course, before the bubble burst B thought his land worth 4 dollar. Actually, right before the collapse, the net asset of the country was 6 dollar in paper. his net asset is still 2 dollar, his heart is palpitating.The net asset of the country = 3 dollar again.(9) B had no choice but to declare bankruptcy. C as to relinquish his 2 dollar bad debt to B but in return he acquired the land which is worth 1 dollar now. A owns the 2 coins, his net asset is 2 dollar. B is bankrupt, his net asset is 0 dollar. ( B lost everything ) C got no choice but end up with a land worth only 1 dollar (C lost one dollar)
The net asset of the country = 3 dollar. ****************End of the story*************************** There is however a redistribution of wealth. A is the winner, B is the loser, C is lucky that he is spared. A few points worth noting –
(1) When a bubble is building up, the debt of individual in a country to one another is also building up.(2) This story of the island is a close system whereby there is no other country and hence no foreign debt. The worth of the asset can only be calculated using the island's own currency. Hence, there is no net loss.(3) An overdamped system is assumed when the bubble burst, meaning the land's value did not go down to below 1 dollar.(4) When the bubble burst, the fellow with cash is the winner. The fellows having the land or extending loan to others are the loser. The asset could shrink or in worst case, they go bankrupt.(5) If there is another citizen D either holding a dollar or another piece of land but refrain to take part in the game. At the end of the day, he will neither win nor lose. But he will see the value of his money or land go up and down like a see saw.(6) When the bubble was in the growing phase, everybody made money

(7) If you are smart and know that you are living in a growing bubble, it is worthwhile to borrow money (like A ) and take part in the game. But you must know when you should change everything back to cash.(8) Instead of land, the above applies to stocks as well.

(9) The actual worth of land or stocks depends largely on psychology.

A funny mail fwd - How stock market works

Interesting story to illustrate how the stock market functions.

It was autumn, and the Red Indians on the remote reservation asked their New Chief if the winter was going to be cold or mild.

Since he was a Red Indian chief in a modern society, he couldn't tell what the weather was going to be. Nevertheless, to be on the safe side,he replied to his Tribe that the winter was indeed going to be cold and that the members of the village should collect wood to be prepared. But also being a practical leader, after several days he got an idea. He went to the phone booth, called the National Weather Service and asked 'Is the coming winter going to be cold?' 'It looks like this winter is going to be quite cold indeed,' the meteorologist at the weather service responded.

So the Chief went back to his people and told them to collect even more Wood.
A week later, he called the National Weather Service again. 'Is it going to be a very cold winter?' 'Yes,' the man at National Weather Service again replied, 'It's definitely going to be a very cold winter. “The Chief again went back to his people and ordered them to collect every scrap of wood they could find.

Two weeks later, he called the National Weather Service again. 'Are you absolutely sure that the winter is going to be very cold?' 'Absolutely', the man replied. 'It's going to be one of the coldest winters ever.' 'How can you be so sure?' the Chief asked. The weatherman replied, 'The Red Indians are collecting wood like Crazy.'

This is how stock markets work!!!

IPO trend

Trend of IPOs over the years( data source NSE site- Past issues through NSE)

There was a rush of IPOs when market was doing good. Now we rarely hear of IPOs. Companies overprice their shares during bull phases and make hay.
When I was looking into the data of past issues on NSE site, it was clearly visible that companies were comfortable with IPOs only when markets are on the upward trend . This trend is visible in 2006,7 and early 2008. Now we see a steep decline in IPOs. It's sad that most of the companies and investors dont believe in business model or fair share price, but only on sentiments. This ought to change , if the IPO market has to mature. Stricter regulations on pricing and appropriate circuit filters on day of listing may be a solution. However, this alone cant solve the problem.

Shopping mantras

If you are trying to cut down your shopping bill , here are some tips
1) Always make a periodic budget (as to what you want to shop and set budgets for each category.)
2) Take a list of items that you are going to buy when you go to a mall and try sticking to it. Most malls gain only by impulsive buying.
3) When you want to buy a few items, do access your local shop as you will avoid visiting a big for parking, do some extra purchase,etc.
4)Check your bill very thoroughly ( price &quantity )before you pay for it. I have noticed that a bill is wrong more than 10% of the times. ( at times it may be in your favour too!!)
5)When buying packed food, check for the expiry date. I have seen expired/ almost expired items on the shelves of even premium stores . By this you ensure that you pay for a usable commodity and avoid a possible health hazard.
6)This is a powerful thing--- Carry cash to make your purchase by dropping your cards at home.When you pay cash , you may feel the pinch which is not visible when you pay thorough a card and there is a high possibility that you will stick to your budget.
7) Never buy something for the reason that there is an offer or discount on the product. Buy only if you are in genuine need of it.
If you feel these advises are primitive, then go ahead and shop till you drop. But never crib about your thin bank balance or thick card dues.

Why not buy a house ( esp. when EMI is a burden to you)

Well written article on buying a house@ Greenbuck blog. A must read if you are planning to buy a house.

Saving/ Investing early

Investment should be the first expense that we do every month. A sound investment made is going to multiply itself and work for us in the long run. So, the strategy of earn, invest and then spend should save us during the rainy days.
Financial independence can be easily achieved only if we start this habit early.On the contrary , if we get into the habit of taking loans for our lifestyle shift/wants early on and start living on EMIs , your finances may be strained in the long run.
In the article Power of postponing consumption this was illustrated with some example.

Last week I happened to bump into a person who had cultivated the habit of investing regularly during his early years. He had been investing in a fund through SIP and this was long back in 97-00 before he left to US. When he came back in 2007 ,he didn't bother even to check the money in that folio (leave aside the question of withdrawing!!). When he wanted to upgrade his car this month, he thought of checking his portfolio and decided to sell his MF units.

The market is down now and most equity fund NAVs have fallen by 30% since Jan'08. But when this guy decided to sell, he could finance his car fully by selling 70% of his units and the value of remaining units was almost 3 lakhs. He was surprised by considering the fact that he had invested only 1/10 th of the current value during the investment period.
This awesome performance of equity may or may not get repeated in future again.But it is definitely worth investing and reaping the benefits manifold rather than just thriving on EMIs.
This guy got a car ( worth almost 7 Lakhs) out of just 70,000 which he invested a decade ago and left with some good money too!!On the contrary lets look at a person who buys a car on EMI. he pays almost 15% as interest. By making money work for you tend to gain in the long run. But this rquires tremendous patience and a systematic approach.

Insurance with SIP

Recently found this post on one of the blogs.
Great job by the blogger on SIP+ Insurance. A thorough analysis of the latest available options wrt MF/SIP+ Insurance.

10 % on FDs

Raising interest rates are a pain for new loan seekers and those who are paying home loans ( variable interest schemes). But for those who are thriving on interest income, interest rate increase is a good news.
10% interest is offered by many banks on specified time periods.( 0.5% extra for senior citizens). Although the interest rate is lesser than the inflation rates, it atleast bridges the gap between inflation and returns.
With a very volatile stock market and immediate future of economy not auguring so positive, FDs would definitely come back into the portfolio of the middle class investors.
( TDS would be made if your interest earned per branch, per bank, per financial year exceeds Rs10,000 per annum. Appropriate forms need to be submitted at your branch to avoid TDS, if your overall income is below the taxable limit )

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Equity NFO watch

Scheme ( Category Open Date Close Date Offer Price (Rs) Min Investment (Rs)

Sahara Banking and Financial Services Fund (Equity - Sector Fund Jul 28, 08 Aug 26, 08 10 5,000 )

JM Multi Strategy Fund (Equity - Diversified Jul 31, 08 Aug 29, 08 10 5,000 )

JPMorgan India Alpha Fund (Equity - Diversified Jul 31, 08 Aug 29, 08 10 5,000 )

Some small step from IRDA

The Insurance Regulatory and Development Authority ( IRDA) wants insurance companies to go slow on ULIPs ( Unit Linked Insurance products), especially semi-urban and rural areas. The immediate trigger for IRDA' s action emanates from public complaints , which stated the distributors had been mis-selling these products.Many unsophisticated investors were lured with offers of 30 percent - plus returns.- Source BW.
IRDA , at last has come with some step against the ULIPs. Ulips are a products are definitely costly products and not the best of the breed investment tool as such. Many plans were sold as 'top performing ULIPs' by showing the returns generated during the bull run. Still equity inflows into markets through ULIPs are sizeable when compared to investment through SIP in equity MFs. This is primarily because of the lack of awareness among the investors about the costs involved with ULIPS. Hope IRDA tightens it act further and frees the innocent public from the clutches of mis-selling insurance agents.
If you are planning to invest in ULIPs , Please take your time to read these articles ~ ULIP


It has been some time since RTGS and NEFT facilities are available to retail bankers. If you are one looking for more information on this, you can use the following link which I found very useful and informative.

Financial services - a bright future ?

Due to multiple rate hikes by RBI during this year, most of the Indian financial stocks have got beaten . Even large cap bank stocks are trading almost 40% below their peaks. Does it mean a big doom for the financial services sector?.. It is definitely a bad patch . With more than 50% of the population being young and raring to go, there is a high probability that we have a lot of potential for this sector. When compared to developed economies , the market cap of financial services sector looks very small. These may be testing times but I feel that there is a huge potential for this in the long run.
This presentation ,on rediff is an ample proof for this is in one sense. Most of the companies in the list are from financials sector.

Investing in Oil

If you have been wondering as to how to invest/bet on oil and make your gains, there's going to be a way out.
Benchmark AMC has filed a draft with SEBI for OIL Bees ,an ETF similar to Gold ETF.
I think there should be a lot of takers for this fund at least as a hedge for equity investments. Good or Bad, I think we may be getting into a lot of ETF's like Silver and other stuff in the future.
If you have a demat account and willing to invest in oil , wait for the word go from SEBI for OIL Bees. Once you invest in this, soaring oil price may be a good news to you!!!

Magic lamp of luck

EC of Easycraftspassed on this MAGIC LAMP OF LUCK to me.

The mighty Genie King and the beautiful Genie Princess from the magical Land of Faraway are back! Upon escaping the clutches of their Evil Master after being held captive for 1000 years, the magical genies have been busy flying on their Magical Flying Carpet, granting wishes and spreading love throughout the blogosphere.And now, the genies are back with a special gift for everyone! Behold the sacred, Magic Lamp of Luck! With this magic lamp, your blog will enjoy much good luck and fortune, warding off all things evil lurking around in the blogosphere. We would like to share this magic lamp with you so please pass on the Magic Lamp of Luck to those in need of some good luck. Remember, do not be greedy or unkind, evil or vengeful and good luck & fortune will always be with you! Join us on another exciting magical adventure as we spread goodwill and good luck to one and all!

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Astrology, Economics and Stock Analysis

When there was a proposal a couple of years ago to include astrology as a mainstream course of study in universities, there were big hues and cries about it. Many questioned the rationality behind astrology and ridiculed that future prediction was just a cheating game.
But when top notch schools churn out economists and analyst ( thanks to RATIONALE study on macro economic, micro economics, technical and fundamental analysis!), we welcome them into the corporate world with a big heart.
They also start doing this prediction job, When oil moves up they predict it to go up and when it starts falling , they try to reason it out too. When sensex is at 21,000, they say that it will reach 27,000. But when it hits 13000, they start talking about 8500. They keep changing their stance each and every day and try to support their stance with a strong fundamental logic (????!!@#). Some of them may be doing this for their personal gain by operating in the futures market based on their stance. We never question these people or no one has ever tried to fix a accountability for them. But we keep hailing the schools that keep churning out these intellectual graduates and we cry for more of such institutes. Not that I am trying to support education on astrology in schools but trying to question our rationality 'on the stance of maintaining rationality' in education.
You may ask, why this article on a personal finance blog. The answer is quite simple. Don't follow these experts blindly but follow a simple and regular investment plan like SIP to make money in the long run.( Hope this works!!! :-) )

ICICI Prudential Banking and Financial Services Fund NFO


The new fund offer (NFO) opens July 9 and closes on August 7.

ICICI Prudential Banking and Financial Services Fund is an open-ended equity scheme.

The fund aims to maximise long-term capital appreciation by investing 70-100% in equity and equity-related securities of companies engaged in banking and financial services and 0-30% in debt instruments.


Those who are looking for an exposure to BFSI sector can apply a small amount.

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SIP + Insurance

Reliance and Birla Sunlife AMCs are offering SIP along with insurance depending on your SIP installments. This can be a good option for those who don't mind paying that extra bit towards insurance.
Many of us take find it difficult to take a term insurance policy as it fetches no "returns":-). So, lot of us end up with ULIPs which are very costly investment products.
For those who are yet to start their investments and insurance, these SIP+ Insurance plans may be a good start. As the plan may not provide adequate insurance for one's need, One needs to plan for this taking into account his overall insurance and investment needs.

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Decline in the markets ,India Vs US

Was going through this article .It talks about 42% decline in Indian markets Vs 15% slide in US markets .It also gives some figures on GDP to Market cap ratio.

India which has not faced a serious crisis like the US has suffered most. This is surprising considering the fact that the consumption pattern in India has not significantly slowed down.This sharp decline may be because, Sensex rose faster than US markets when the bull run was on.

But the main reason can be attributed to maturity in equity markets. We are still dependent on FII strength to boost our markets. Domestic savings should be encouraged to the healthy long term equity investment route. This will help our indices less dependent on FII action. We have a long way to go there, but I feel that the journey has already started , although slowly.

How to make your SIP direct -(Investing DIRECT in MF)

For those who are on a SIP made through a MF agent, you will be paying the entry load on your investment.
There are two ways to convert your investments into DIRECT investment.
1) Drop a letter to your AMC stating that you want to convert your broker code to DIRECT.
2) Stop the existing SIPs and start afresh investments directly.
When I read articles on difficulties in direct investment, they talk about difficulties in filling up forms, visiting AMC s, standing on queue ,etc.
If you have go through the instructions in the application form , there is little chance that you will make a mistake. If you find it difficult visiting the AMC, courier the form to your nearest AMC office. One time courier charge is better than the entry load. Always mention your email id along with the investments, so that queries can be sorted out on mails easily.
Don't forget to mention DIRECT in the broker code space on the application form.

Commodity Stocks Fund - NFO update

Mirae Asset Global Commodity Stocks Fund - Growth
Offer Open -Offer Close
Jun 24, 2008-Jul 23, 2008,Open Ended,Equity
Scheme Objective
The investment objective of the scheme is to generate long term capital appreciation through an actively managed portfolio investing in equity and equity related securities of companies that are engaged in commodity and commodities related sectors/sub sectors/industries, with at least 65% of the corpus invested overseas in Asia Pacific and Emerging Markets. There is no assurance or guarantee of returns

Minimum Investment-Rs. 5000
Incremental Investment-Rs. 1
SIP allowed- yes
NRI Investment -yes


Seems to be a novel idea. Since less than 65% invested in Indian equity, this would be treated as a debt fund for taxation purpose. Those who are extremely bullish on commodities can try out this fund. For new investors, wait and watch would be definitely better .

Time only will tell if CASH is king or COMMODITY is the king.!!

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Will the real estate prices get reasonable???

Real estate stocks are battered the most in this free fall of sensex. With hardening interest rates and slump in demand due to high prices, sales are expected to go down in this sector.
This may also lead to small corrections or a big fall in the real estate prices depending on the situation that unfolds. if oil prices keep going high or inflation continues to be in double digits, RBI may hike the interest rates further tightening the liquidity.
Moreover if there is an increase in EMI default because of the hardening interest rates, we may also see some panic selling in the market. If the real estate prices stands out this crisis for a couple of years... we may say the real estate prices are REAL or else they are certainly NOT. Lets see how things unfold.
real estate prices will fall?.. correction overdue in real estate impact of ineterst rates on real estate.real estate slow down

Free fall

Sensex and Nifty are having a free fall and there seems to be no end to it. There are a lot of questions in everybody' mind . What will be the direction of crude oil prices??...Will the oil prices ever fall... Are we in a recession??. How's the US slump or recession going to affect the emerging economies....
Experts who predicted the sensex to go to 25,000 by year end are revising targets to 12500.!!!
The P/E of NIFTy has almost fallen to 16. No doubt that this is a tough to digest phase for retail investor.
Time and patience cures everything . All the retail investor needs to do is continue to SIP in a proven diversified equity fund ...Sit back and relax. Money invested during these chaotic times may be yielding the highest returns. But there is a caveat...If you do not have a long time horizon for investment ( at least 5 years ) , debts may definitely be a safer option. Banks and NBFCs have significantly increased the deposit rates.
You may also park your funds in Debt funds and once you see a clear picture start an STP to an equity fund.
Time and patience cures everything. So, all the evils that the market see today should be cured someday or the other.

Dont stop your SIP

Mr . X started to invest through SIP in two proven equity diversified funds last June. He started of with a aim to keep investing for five years. ( a very good long term plan indeed). He was an happy man till Jan'08, as he was seeing his funds growing. Now after the downward run in the stock market, he is thinking whether he should discontinue his SIP. He is not happy because his portfolio has moved into negative territory.
Mr. X should actually be happy for the fall now because he is able to get more units at these lower prices. Instead of stopping- a better strategy would be increase the SIP , if possible. The amount you SIP in equity MF during bearish phases would yield more returns when the market turns around.
Don't stop your SIP , if you are baffled by the downturn!!!

P2P survival is dangerous.

The economy has been in the path of explosive growth in the last couple of years. Pay packets for all the levels have increased considerably in the past few years.( esp. in the private sector). Although there are a lot of uncertainties in the macro economic environment, there is a lot of room for growth in the long run. Prudent investors have managed to generate a lot of wealth in this period.
There are a some people , who are on a P2P survival mode even though their income/salaries have increased substantially during the years.
Pay check to paycheck survival ( P2P) is a really dangerous habit. Spending all you earn and taking loans that cause a huge burden are really bad financial habits. I know a couple of people who earn 6 digit figures per month, but can't manage even if they don't get their next month's salary. P2p survival (without even planning for contingencies )can be really dangerous.
Saving and investing at least for contingencies is the first step that one needs to take in the journey of financial independence. So, if you are on a P2P survival mode, TODAY is the best day to start saving (...and investing).

Comment on investing

Recently there were a lot of comments from other blogs. They all talked about how the investors (??) have lost money lost in the market in the recent past.
These were a sort of advertising comments having links to the respective blogs.The comments were not published not because of this reason, but all along they did talk about traders as investors.
If one does trading and calls it an investing, its like calling an engineer ..a doctor...!!. If someone is buying and selling stocks just for a price increase/ decrease that he expects in a short term ( period of one day to a couple of years), he is a trader.
The best way to create wealth is to stay invested in the market for a longer time horizon. Mutuals funds are the best way as most of us are not experts in picking up stocks.
1) Never get swayed by any articles/comments which calls trading as investing.
2) Believe in long term investing in equity through SIP route in proven diversified MF.

Lotus India Banking Fund -NFO

Fund category -Equity - Diversified
Scheme plan-Growth, Dividend
Scheme type-Open Ended
Launch date-May 19, 2008
Fund manager-Mr. Tridib Pathak
Initial Price-Rs 10
Min investment-Rs 5,000
Entry load-2.25 % Exit load-1
Objective-The investment objective of the Scheme is to generate long-term capital growth from a portfolio of equity and equity-related securities of companies engaged in the business of banking and financial services.
Investors can look into proven funds available around the same theme. Banking is a high risk return sector as there are a lot of uncertainties at this point of time.

Reliance Banking ETF (Exchange Traded Fund).

News:-The fund will track the CNX Bank Index, which has 12 liquid and large Indian banking stocks.The scheme's asset allocation will be 90 per cent in the equities of its Index and rest 10 per cent in other equities or debt instruments.

Scheme Details:Issue Opening Date : May 12, 2008Issue Closing Date : May 30, 2008Fund Category : Exchange Traded Fund Fund Type : Open-end, Exchange traded Benchmark : CNX Bank Index Cost : The fund has 2.25per cent entry load during NFO. Investors will incur brokerage on sale and purchase after listing of the ETF.Minimum Investment : Rs 5000(During the NFO)

Views :-

Sectoral fund. New investors can avoid. Existing investors who want to add banking flavour to their portfolio can considering investing a small portion of their portfolio. Comparable ETF's that exist are Benchmark BEES, PSU bank BEES and Kotak Bank ETF.

Being rich and looking rich

There are two kinds of people. The first type are ones-- who look rich i.e those who have a flaunting lifestyle. The other one's are rich but you cant gauge the richness from their lifestyle.
There are a lot of salaried middle class class people who belong to the first category. They flaunt a rich life style ( Thanks to the high salaries and EMI facilities !!).Nothing wrong in enjoying one's money. But one shouldn't end up eating out all his current income and future income. You should also save and invest for your future.

If you do not save even for contingencies, you may face a disaster when some unforeseen event happens. In this fast moving world, all things including permanency of employment, longevity of work life, etc have changed drastically. We should really work towards financial independence. i.e making money work for us , so that it can take care of all our future needs. So, being rich is more important than looking rich when you are working towards financial independence.

Returns that beat inflation and taxes

I was going through an interesting statistic in Times of India today- 6th may 2008. The article says

If you has invested Rs 10,000 a year ago in any of the following today it will be worth

1) Nifty -12595 ( ideasmoney comments--- this is roughly 26%. It manages to beat current inflation rate . effective return 26%-7.5%= 18.5%, no tax as long term capital gains rate for equity is 0%. , dividends that you would have got are a bonus!!)

2) Sensex -12502 ( ideasmoney comments--- this is roughly 25%. It manages to beat current inflation rate . effective return 25%-7.5%= 17.5%, no tax as long term capital gains rate for equity is 0%. , dividends that you would have got are a bonus!!)

3) Gold -12430 ( ideasmoney comments--- this is roughly 24%. It manages to beat current inflation rate . effective return 24%-7.5%= 16.5%, Applicable taxes would also shove off your returns and bring it down from 16.5%)

4) Silver -11802 ( ideasmoney comments--- this is roughly 12%. It manages to beat current inflation rate . effective return 12%-7.5%= 4.5%, Applicable taxes would also shove off your returns and bring it down from 4.5%)

4) Post office ( or other FD) -10850 ( erroneously given as 10625 in TOI???) ( ideasmoney comments--- this is roughly 8.5%. It manages to beat current inflation rate by a small margin. effective return 8.5%-7.5%= 1%, Applicable taxes would also shove off your returns and bring it down from 1%. If you are in highest income tax bracket your return would be effectively 0.7%!!)

So, when you plan to invest plan to beat inflation and taxes. For this reason, don't put all your eggs in one basket!!.

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Buying gold on Akshaya tritiya

Remember our article published last akshaya tritiya ?? -
if you had invested in gold ETF during last akshaya tritiya, you would have made a neat 25% (approx.) by this akshaya tritiya.
You would have got similar increase even if you had bought ornaments, but the cost of storage, resale value , etc brings down the ROI .
What are you waiting for??? Start your Gold ETF purchase this akshaya tritiya!!

See the splendour of Belur - Halebid

Details of Think Spice event

Penny wise , Pound foolish

One of my friend is a very alert guy when it comes to handling finances. He always goes for a bargain buy ( even for vegetables), plans his tax on time and so on. But when it comes to a buying a home, he was not that prudent . This is the mistake that most of middle class makes. he booked a flat almost to years ago with a reputed builder in Bangalore and still waiting for a day to get the possession. He keeps paying his EMI and has lost already lot of money in terms of the rent he is paying and pre-EMI interest for which he cannot claim tax benefit.
Although, the builder has been postponing the dates nobody has ever dared to sue the builder. This is a typical scene where one prudently saves everywhere and looses out in a big way in buying a liability ( yes!! your first residence is going to be a liability..If you don't agree , I am fine).
In this context found two great posts on some fellow bloggers post wrt buying homes. They are a must read , if you are planning to buy an house.
I sincerely acknowledge the great articles by these bloggers.

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NFO : ICICI Prudential Focused Equity Fund

NEWS -The latest offering from the ICICI Prudential is an open-ended diversified equity fund - the “ICICI Prudential Focused Equity Fund”.The fund’s investment strategy will be to invest in 20 large cap companies from the top 200 stocks listed on the NSE on the basis of market capitalisation. If the total assets in this fund crosses Rs.1000 crore then more than top 20 large companies would be added to the portfolio.
Scheme Details
Issue Opening Date : April 8, 2008
Issue Closing Date : May 7, 2008
Mutual Fund Family : ICICI Prudential Asset Mgmt.Co. Ltd
Fund Class : Equity Diversified
Fund Type : Open-Ended
Investment Plan : Growth
Fund Manager : Prashant Kothari
Entry Load : 2.25 %
Exit Load : 1.00 %
Benchmark : S&P CNX Nifty
Minimum Investment : Regular Plan - Rs. 5000, Institutional Plan - Rs. 10 crore.
The fund has a straight forward strategy to invest in the top 20 companies from the NSE index. The fund is likely to deliver returns and behave like a large-cap index like Sensex and Nifty. The fund might be a reasonable choice for its predictable strategy and relative safety of the mega-cap stocks. This fund could be a worthy consideration for NFO fans, seeking an opportunistic bet on the market turnaround which can especially benefit this fund.

Views - The fund theme looks similar to Sundaram select focus , JM core 11 and other such funds which focus on a smaller number of stocks for investment. Since, the focus is on only 20 stocks there is a high risk- return probability. The focus is going to be on large caps. So, the risk is reduced to some extent.

SIP in a focus fund would be a better strategy than a bulk investment in this volatile phase. If you are not too keen on ICICI, you can choose from a proven focus fund to invest. Prefer direct investment in MF, as this will avoid incurring entry load on your investment.

DASAVATHARAM - watch the splendour

Investment ideas and resources online

It has been quite a while since I switched over to investments books online. Here's a list sites that I frequently visit.

Dailies ~ - Dont miss the Sunday edition - Monday investor's guide is my favourite
livemint .com
Magazines ~

investment sites online, investment blog india, list of websites on personal finance , investment, tax planning, personal finance investment blog, wealth creation.

Advertisements (to loot you???)

The very purpose of advertisements is to build a larger than life image of the products that is being advertised.
Insurance advertisements are most funny in that sense...1) The daughter gets admission in a university abroad , father surprises her by showing her the education policy which has multiplied enough to finance her needs 2) Dreams like owning a book shop or a house in goa can be fulfilled by investing in insurance policies 3) Father planning his retirement and being independent by investing in insurance.
On the outset, everything seems logical . But ,why the hell should one invest in equity/debt through an Insurance ( ULIP) policy.??. Insurance is definitely essential to protect the family against unforeseen events. It is essentially to mitigate the risk ( of uncertainity to life or health). But shouldn't become a major investment avenue. I am waiting for a day to see where I see some real sense in Insurance ads. ( Ads which show Insurance taken purely to cover risk)
If you use ULIP as an investment tool, you are really not putting your money to perfect use. it's better you don't club insurance and investment. There are always better ways to invest in equity/ Debt...( Like SIP in MF , POMIS, FD, etc)


Thematic funds from Sundaram

News-Sundaram BNP Paribas MF launches Select Thematic Funds Entertainment Opportunities (On Apr 16 , 2008)
Sundaram Mutual Fund launches another open ended thematic equity fund, Sundaram BNP Paribas Select Select Thematic Funds Entertainment Opportunities. The investment objective of the scheme would be to achieve long term capital appreciation by investing primarily in the equity and equity related instruments of companies that focus on opportunities in the entertainment business. As a thematic fund, the portfolio will be more diversified than a sector fund and may not be as diversified as a typical equity fund. The fund will invest 65-100% in equity and equity related instruments in the targeted sector/theme. It will have a 0-35% investment in equity and equity-related instruments other than the targeted sector/theme. There will be 0-15% investment in fixed income and money market instruments. Equity investments may also include overseas securities, up to a maximum of 35% of net assets of the scheme. The NFO is open for subscription from 24 April, 2008 and closes on 20 May, 2008.

Sundaram BNP Paribus MF launches Select Thematic Funds Financial Services Opportunities (On Apr 16 , 2008)
Sundaram Mutual Fund launches an open ended sectoral equity fund, Sundaram BNP Paribas Select Thematic Funds Financial Services Opportunities. The investment objective of the scheme is to seek long-term capital appreciation by investing predominantly in equity and equity related securities of Indian companies engaged in the banking and financial services. The fund will invest 65-100% in equity and equity related instruments predominantly Indian companies relevant to the theme. It will have a 0-35% investment in equity and equity-related instruments outside of the theme. There will be 0-15% investment in fixed income and money market instruments. Equity investments may also include overseas securities, up to a maximum of 35% of net assets of the scheme. The new fund offer is open for subscription from 17 April 2008, and closes on 14 May 2008. source- MFI site

Views- Financial services and Entertainment are potential growth sectors in India . Those who have the adequate exposure to diversified equity portfolio can allocate a small portion to these funds. If you are a new investor, better to start with some proven diversified equity funds.


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These are just opinions/ ideas exchanged. No one can claim us responsible for any investment failures /losses based on the ideas expressed here.

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