Some relief for the salaried class at last!

Budget 2008~ the things that strike me first

The tax slabs have been liberally changed in favour of the salaried class. The savings can be from Rs 4000 to around 50000 per annum depending upon your salary range and structure.

The other welcome change in this budget is - You can claim tax benefit on up to Rs 15,000 (20k in case of sr. citizens)which is used to pay medical insurance premium for parents ( apart from 1 lakh under 80c and 15000 Rs medical premium for yourself).

Short Term Capital gains up to 15%- Not good for traders . But doesn't make a difference for true investors.

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DSP Merrill Lynch Natural Resources and New Energy Fund

News~
DSP Merrill Lynch Fund Managers has announced the launch of its open ended equity growth scheme, DSP Merrill Lynch Natural Resources and New Energy Fund. The scheme aims to invest a minimum of 65 per cent in the domestic companies which belong to the natural resources, energy and new energy sectors and up to 35 per cent of its funds will be invested in two international funds i.e. New Energy Fund and World Energy Fund. The natural resource sector will include base metals, other minerals and commodities, water and agriculture, and energy including oil, gas and coal. The new energy sector includes renewable energy and alternative fuels. The new fund offer will open for subscription on 3rd March, 2008 and close on 27th March, 2008. The scheme has two plans i.e. Regular and Institutional Plan. Under the regular plan the minimum investment amount is Rs. 5,000 and in multiple of Re 1 thereafter, and under the institutional plan the minimum investment amount is Rs. 5 crores and in multiple of Re. 1 thereafter. The scheme has both the options, growth and dividend with dividend payout and dividend reinvest sub-options. The scheme will charge an entry load of 2.25% if the investment amount is less than 5 crores, and an exit loads of 1% will be charged if the holding period is less than 6 months and 0.50 per cent if the holding period is less than 1 year.

Views~

Those who are looking to diversify into Energy and Natural Resource theme canapply. 35% of funds can be invested in world energy fund. Investors will get a diversification by this without loosing tax advantage on equity ( as 65% is planned to be invested in Indian equity)

Trading and Investing

Recently I happened to meet with two of my friends who have been investing in the stock market for a long time. The first person is not a long term investor. He is a trader although not a day trader. He quoted a particular stock and said he had bought and sold the same stock at least five times in the last 10 years. He definitely gained 20% on each of the transaction.

Another friend has been holding the same stock from last 10 years. He had invested a few thousands. Now the stock after multiple splits and bonuses stands at a couple of lakhs. He has got back more as dividends alone.

Although trading seems to be tempting, Trading alone is not capable of creating wealth in long run. People should understand "Investing " in true sense. Once they pick the right stock, they should be patient for long to reap the benefits. So, it is important to invest money (that you dont need atleast for a couple of years ) in stocks.

Be a PATIENT investor to create WEALTH.

Greed and Fear

A reasonably priced IPO is taking a long time to get subscribed fully in the retail segment now. But when the market euphoria was on over priced IPOs got subscribed in lightening speed.

Most of the investors( I should call them traders rather) follow a group behaviour. They either are too greedy or too fearful. Both are not great attributes for a seasoned investor. As a famous quote goes " We should be fearful when everyone is greedy and be greedy when everyone is fearful"

Time matters the most

In this period of high volatility ,many have started thuinking about the risk in stock market. This will be the right ocassion to recollect a slide from the article" Power of Equity *" . The following slide clearly depicts, the longer a person stays in the market - the probability of losses keep coming down.

( As per the slide which has compiled past data from Indian Indices)

If your investment horizon is 15 years , % times positive return is 100% and Minimum and maximum returns are 13% and 27%.

Even if you take the minimum return of 13% ( Equity income which is tax free now as cap gains and dividends), This is far more than a tax free PPF return of 8%. So, its worthwhile to invest in equity for a longer time frame.

As always SIP in an Equity MF would be the best way to go for a novice retail investor.

NFO

Scheme Category Open Date Close Date Offer Price (Rs) Min Investment (Rs)
Mirae Asset India Opportunities Fund
Equity - Diversified
Feb 11, 08
Mar 10, 08
10
5,000
Morgan Stanley A.C.E. Fund
Equity - Diversified
Feb 11, 08
Mar 10, 08
10
5,000

Birla Sun Life Pure Value Fund
Equity - Diversified
Jan 17, 08
Mar 01, 08
10
5,000

What a change!!

It was not long ago that we were all in a euphoria thinking that the sensex is never going to slip. Many new investors rushed to invest their money in big IPOs and new demat accounts opened. Experts opined that this was the best time to invest in Indian economy.

FIIs started moving out and the golden IPOs have to come to earth. Now there is a downward journey of sensex.

What a Change in span of 15 days. Experts predict more downside !!!

The best way to reap the benefits (from Equity) would be to do long term investing (>5 years). Passive investing through SIPs would help us overcome all these blues.

Open Equity and ELSS NFOs

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


HSBC Small Cap Fund
Equity - Diversified
Jan 19, 08
Mar 03, 08
10
10,000

HSBC Emerging Markets Fund
Equity - Diversified
Jan 28, 08
Feb 25, 08
10
10,000

Lotus India AGILE Tax Fund
Equity - ELSS
Nov 15, 07
Feb 15, 08
10
500

SBI Tax Advantage Fund - Series 1
Equity - ELSS
Dec 03, 07
Mar 03, 08
10
500

Reliance Equity Linked Saving Fund - Series 1
Equity - Diversified
Dec 18, 07
Mar 17, 08
10
500

UTI Long Term Advantage Fund - Series II
Equity - ELSS
Dec 19, 07
Mar 19, 08
10
500

JM Tax Gain Fund
Equity - ELSS
Dec 24, 07
Mar 25, 08
10
500


Lotus India Mid N Small Cap Fund
Equity - Diversified
Jan 07, 08
Feb 19, 08
10
5,000


HDFC Infrastructure Fund
Equity - Diversified
Jan 08, 08
Feb 21, 08
10
5,000

LIC MF Infrastructure Fund
Equity - Diversified
Feb 04, 08
Mar 04, 08
10
5,000


ICICI Prudential Fusion Fund Series III
Equity - Diversified
Jan 08, 08
Feb 21, 08
10
5,000

Standard Chartered Small and Midcap Equity Fund
Equity - Diversified
Jan 09, 08
Feb 15, 08
10
5,000

Struggling IPOs

The secondary market correction has got in sanity to the IPOs too.. Two big brand names are struggling to get subsribed even a single time extending their subscription dates and cutting down their price range.

If there were'nt a correction many of us would have applied for these IPOs. The element of greed has come down and sanity has returned back.

Lets hope this prudence continues.

Guide to investing- Learn from "NATURE"

* from a old pamplet of canbank mutual fund


Invest Early - To get a headstart in life

The zebra foal gets a headstart in life as it stands up within an hour of birth.

Invest Regularly - To create wealth over a period of time

Ants regularly store more food than they consume.

Ensure Safety - By investing in schemes that provide adequate safety

The baby kangaroo is well protected and safe in its mother's pouch even when she leaps

Diversify Investments - To minimize risks and maximize returns

The Squirrel hides its nuts in different places in the woods.

Be Patient- Stay invested to reap rewards

The Crane stands absolutely still in water for hours together for its catch.

Ensure Liquidity - To get your money back when you need it most

The Giraffee feasts on the food stored in one of its four chambers, when it is hungry.

Happy Investing

Another good news from SEBI

The Securities and Exchange Board of India (SEBI) on Wednesday prohibited mutual funds from charging and amortising initial issue expenses on closed-ended schemes.

Before the SEBI move, the mutual fund houses were allowed to amortise issue expenses of up to 6 per cent of the amount collected when a new scheme was launched.

So if a scheme raised Rs 1,000 crore it was allowed to recover up to Rs 60 crore as initial issue expenses from the investors investing in the scheme.

Initial issue expenses include expenses such as sales, marketing and advertising, printing and mailing, broker/agent’s commission, bank charges etc, that need to be incurred in order to get an investor to invest in a new scheme.

With this leeway of 6 per cent, some recent closed-ended fund launches, even paid commissions of as high as 5.5-5.75 per cent of the amount invested to the distributors.

The distributors, in turn, passed on part of this commission as kickback to the big investors.

A set back for distributors and investors who used to get kick-backs. But ultimatley this will help small investors by reducing cost of investing to a great extent.

Earlier AMCs came up with lot of close-ended NFOs to use this loop -hole. Now SEBI has acted wisely although a bit late.

Never do HYPE investing

We purchase some shares or mutual funds just because of the HYPE associated with the names. This can be dangerous at times. It is very normal for everyone to get carried away by hypes. But investing without any due research can be dangerous. There are companies which are trading in extremely high P/E ratios. There may be huge growth possibilities but risks associated with the growth factor has also to be understood before one makes an investment decision. if we invest only based on HYPE ...We should never blame anyone if the investment money diminishes drastically!!

Why the market correction is good?

This market correction has been good because it has brought down the issue price of a couple of IPOs down.




Companies using the frenzy in secondary markets have tried to over price the issues and tried to make a killing out of public money. Pricing based on market sentiments rather than on intrinsic value and growth prospects can kill the stock market system.




SEBI should come up with some stern measures to determine the price of IPOs. Investors should also be careful while investing in IPOs and never get carried away by grey market premiums.