PFRDA - Looks like a great start , Good option for all

PFRDA would be good scheme for everyone to enrol. The option to invest in equity is a win-win situation. It can potentially increase the equity penetration in India which is very low and the investor may benefit from the higher earning potential of equity. This is definitely a BIG first step. All of us must seriously consider this. With exemption for investment available under 80c and governtment planning to exempt the returns from tax ( like PPF,EPF and GPF), this seems an attractive option.
News - Source ET "The pension fund regulator, which is extending the new pension scheme (NPS) to everyone in the country on Friday, will review the 50% Monitor your financial healthAchieve fin goals with proper planning limit on investing people’s savings in equities a year from now.
The Pension Fund Regulatory Development Authority (PFRDA) has now stipulated that only half of an individual’s savings can go into equities even if he opts for a high-risk high-return investment. The auto (default) choice for persons who do not make an investment choice also caps the equity exposure at half of the savings.
A committee chaired by HDFC chairman Deepak Parekh that advised PFRDA in framing the investment norms had recommended that risk-hungry subscribers should have the freedom to invest all their savings in equities. It had also recommended a 65% equity exposure for auto choice. Investment in stocks is considered appropriate for long-term investments such as pension plans.
PFRDA chairman D Swarup told ET that the equity exposure limit was reduced based on the recommendations of the board of trustees of the NPS and the advice of the government. “This cap would be reviewed after a year. The Deepak Parekh panel had also recommended a review of the investment pattern after one year,” he said. Besides, the world over, pension plans do not allow 100% equity investments. In the US, equity exposure is allowed in the range of 50-70%."
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News of SIP taking a hit

"SIPs take a hard knock on market volatility
BS Reporter / Mumbai April 28, 2009, 0:41 IST
Once the most selling product in the mutual fund industry, systematic investment plans (SIPs) are now taking the hit as investors pull out, fearing that adverse market conditions are going to continue."
This news shows the lack of awareness of the investors regarding SIP investments. SIP in Equity funds is essentially to avoid timing the market. If someone is able to identify the market trends in advance accurately, he can afford to investment in the market by timing it. Unfortunately , there is no one person who knows the future graph of the indices.
When the market was moving up, everyone were happy to enroll in SIP as they could see their investment grow month on month. Continuing to SIP in a bull market is a tough proposition , but you will reap huge benefits , if you continue with your investment in a bear / volatile market.
SIP in Equity should be done with the following in mind
2. Only funds that are not required in the long run( at least 5 years ) is invested in equity.
If you are understand out 1 and 2 , you wouldn't be an investor who stops his/her SIP in a volatile market.
Know the power of SIP !! and use it to the fullest to make you rich.

RBI has changed the method by which banks calculate the 3.5 % interest rate they charge on savings bank deposits

This shall be applicable with effect from April 1, 2010.
This note comments on a point in the credit policy that has not got the attention it deserves. The RBI has changed the method by which banks calculate the 3.5 % interest rate they charge on savings bank deposits. This seemingly innocuous change has far reaching ramifications for bank bottom lines. Bank bottom lines will fall by as much as Rs 18000 crores because of this.
>From paying the interest on the lowest balance recorded from the 10th to the 30th of the month, banks will have to pay daily interest on the daily balances at 3.5%. This will result in a 25 to 50 basis point increase in the cost of savings bank funds according to the chairman of the Canara Bank.
Consider the simple example that follows:
I open an SB account with Rs 100 on January 1. Then I deposit Rs 100,000 on January 2 as I need to make (say) a mutual fund investment. The amount stays in my account till January 25, then leaves to go to the mutual fund. That leaves Rs 100 in my account on January 26. Previously I earned interest on this Rs 100 as that was the lowest amount in my bank account in the period from Jan 10 to Jan 31. Now the bank will have to pay me interest on Rs 100,000 for the period from Jan 2 to Jan 25. !!!
As mentioned, this will result in a 25 to 50 basis point increase in the cost of funds in savings banks, according to the chairman of the Canara Bank. Now there are 36 LAKH CRORES in savings accounts in India according to the RBI.
That means banks net interest margins (and consequently profits) will reduce by Rs 9000 crores EVEN if we take the impact at the lower 25 basis points. At 50 bps, the impact is 18000 crores.
Savers benefit by this amount and banks lose by this amount.

Sites offering tips for money

I see lot of advertisements offering trading tips in shares, future and options and commodities,etc. Many of them sell such tips for money and quote returns from the past like 100%,200%,etc .
If the sites that offer are confident about their recommendations, then they can very well make use of their own tips to multiply the money they have. There would not be any need for them to sell such tips for such meagre money.
Investors should always follow time tested methods and shouldn't fall to such cheap shortcuts to make money.
A realistic expectation, well understood investment and a patient approach would help any one make money over the long run through equity.

Future of IT?

With severe recession in the west affecting the earnings of most of Indian companies, they have started announcing pay cuts or lesser increments and variable pay.When the west starts stabilising,will the trend reverse is a big question?.
The next big problem would be exchange rate.The dollar may start weakening in a couple of years getting back to the trend it was a year ago.If this happens it will start having an impact on the revenues again.IT stock were multi-baggers in the late 90s and earlier part of this decade.
Unless these companies re-invent themselves and make a big innovative breakthrough in their business models, such stellar performance of the past is almost impossible to replicate in the future.

Back to Savings habit in US!!

Lof of articles on savings and investment ( sample ) have started popping up in yahoo finance, msn finance,etc. These articles are more in the US context .

Consumerism has just started in India and we still maintain a great savings culture. But a part of working class esp . young urbans who started of with great salary in the last couple of years , need to realise the value of living within the means. Value for money is not something that we should look for in a tough time. But it should be practiced all the time so that it becomes a shared nature. Buying any liabilities in the name of assets paying huge EMIs should also be avoided.

At least a part of the money earned should be made to work for future by investing appropriately.On the contrary consuming tomorrow's money for today need to be avoided.

The age old thoughts of being frugal, saving and investing would always help tide any economic or financial crisis.

SIP - to be discontinued now???

The author of the following article clear asserts out why it is important to continue your SIP in Equity funds. The author highlighted even though the 5 year SIPs are in red , it should be no reason to discontinue the SIPs.

It may take a couple of years for economies to come on track. Funds will start automatically flowing into markets then. So, if you wait for a perfect day to invest you might loose the bus.

So continue your SIP for long term investment goals and reap the benefit.

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