Long term investment story

For those who want to know , how a rational long term investment approach works, here's a story on ET wealth.

"Over the past four decades, not only has he reaped the benefits of investing in equity, but also helped his clients. “I had subscribed to the rights issue of Gammon India and got shares at Rs 6 each. While I sold mine at Rs 120, I advised a client to hold on for a little longer. He sold when the price touched Rs 197.5 with an additional dividend of Rs 2.5 when sold,” he recalls. ...read on at ET"

Understand the contradiction in advices

After introduction and a bit of eulogizing of ET wealth, here's a general comment on the article titled 'Four reasons why not to buy IPOs' 

If IPO should not be bought why do papers like ET publish a buy/ no buy recommendation for IPOs. Is the recommendation not for the retail investor. Or is any FII or QIB is interested on a ET recommendation? ( I have taken this article just as an example and no offence intended to the author of the article. you will realize this by the end of the post)

The answer is simple. The world of investment advice is full of such contradictions and this article  is no exemption. Every advice is valid from one perspective and stupid from another perspective.

Equity market is not a casino!

Recently, I received a query from a person

The query ~ I have withdrawn rs 50,000 from my GPF (General provident fund- provident fund for government employees), How can i double it within one or two years .

This is the attitude that most of us carry towards equity markets. It's treated like a casino which can make you rich over night. Once  you loose your money and burn your fingers , the episode of bad mouthing that equity " investing " starts.

ET wealth

Economic times has come up with a new paper starting this week ( Every Monday as far as I remember).

I was going through the web edition of the paper. Nice articles and looks good. Let's hope to see it getting better over time.

The publication of a paper focusing on Individual wealth creation talks volumes about the growing need for personal finance education inn India.

As the disposable income is increasing at  a rapid phase, knowledge of managing the money in a right way to create long term wealth becomes absolutely essential for Individuals.

For those of you who haven't got the opportunity to read the paper yet, here's the link

http://economictimes.indiatimes.com/etwealth.cms

One small step - part 2

One small step  part -1

Was talking to one of my new colleague about personal finance, SIP , blog and specifically about the 'one small step' post....

This guy got damn excited and decided to start of with an SIP in equity fund to use his age to advantage and  to leverage the power of compounding. At last I was happy about it ( Please note: - I don't earn any commission by selling mutual funds. it's just a sense of happiness that some one is going to start investing in the right direction at the right age.)

Two blogs that I read everyday

Subramoney and Capital mind. These are the blogs I read almost everyday.

I think subramoney was introduced to me through a post in capital mind. From that time I am hanging on to it. The author's profound experience in personal finance and training is reflected very clearly on his posts.

The greatest attractions of this blog is regular posting, simplicity of posts ( I think even novices can understand and there are not too many jargons), real life examples  and variety of topics covered. the author has also been promoting his book on personal finance through the blog. I haven't got a chance to read the book yet. But a must read blog for all those who are interested in personal finance.

Capital mind is again a good read. The author of the blog also writes a column on yahoo. He is also versatile with his topics . Some topics with detailed technical analysis may only interest those who are used to that world.

Good to see such great content available on the web and that too for free :-). Who said that there is no free lunch?

Here are the urls:-

subramoney.com and capitalmind.in

It's discipline that fetches money

What it takes to earn big from equities. try to choose from the following :-

1. Extra -ordinary skills in stock market

2. Information updates from time to time on what's happening ( from say a paper, TV or a blog!)

3. Skills in technical and fundamental analysis

4. Ability to time the market ( when it will reach high and when it will reach a low)

5. Gift to spot multi bagger when they are small caps/ mid caps

None of the skills listed above are absolutely essential to make money form equities.

Health is wealth

We all have been hearing this from childhood. How many of us really understand the importance of health in India?. Very less as far as I see. We do not have time ( actually, bother to find :-)) even for any simple work out everyday.

A spate of small sickness, visit to the doctor and a big bill that followed made me look at my routine. I wasn't really doing any regular exercise or have any planned food habit. So, this sickness could have been probably avoided if I had been taking care of my health regularly.

In pursuit of wealth , one shouldn't ignore a regular and healthy routine. We definitely need to take time for ourselves and importantly maintain nutritious/ healthy food habits. Else we may be throwing away our hard earned money to doctors/ pharmacy cos unnecessarily.

It's definitely not only a question of money , there is nothing like being and feeling hale and healthy.When I say healthy its only not being free from diseases, but feeling good and enthusiastic about what we  do everyday.

Health is the greatest wealth , of course!

( Hopefully this gyan remains with me and I do some implementation of my advice!. Thought of sharing this as I felt there a lot of people who are like me   :-) )

IDFC infrastructure bonds - Not seen in your demat account?

I had applied for IDFC infrastructure bond in October 2010. My bank account got debited long back. I was waiting to see the bond credited in my demat account.

Finally got the information letter on allotment last  week but still the demat account wasn't reflecting IDFC  bonds credit.

The bonds are not seen in the 'holdings' section in my demat account ( India infoline). I figured it out in the transactions details.

Be aware where you invest your money

Fixed deposits are considered safe when compare to equity. But this may also turn out to be risky if you invest in corporate FD offering higher interest without considering the risk . ( There is a high possibility risk of repayment in certain sectors where there is poor corporate governance standards.)
Some real estate companies have been offering high interest rates on their FDs. I am not saying that all of them would go bust but make your careful evaluation before you invest in FD of any company.
PSBs are considered the safest. But even there don't try to put all your eggs in one basket. Be aware of deposit insurance rules and make your investment decision wisely.


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Chennai real estate to "sink"??

This article is for those who are vying for a seaside property in chennai. There is a report (Times of India) which talks about submersion of many areas in chennai in a couple of decades due to sea level change.

On a lighter note, choose the place you buy carefully or else your "real" asset may sink in sync with your end of 20 year EMI.

The article is here. One more here

Simple Living

I have very often contemplated that in the pursuit of money ,whether we loose our real happiness. Simple living is so often forgotten and stress full living is becoming

Tightening of real estate lending by RBI

A real welcome move by RBI.


http://valueresearchonline.com/story/h2_storyview.asp?str=15468

SBI Tier 2 Bonds 2010 - Oversubscribed as expected!!

After the over subscription to the bonds as expected , now the question that may be in minds of those who applied for the issue is - What will be the basis of allotment??

IPO application - ASBA

HDFC bank provides online facility to its customers to apply an IPO through ASBA mode.
All you need to have to avail this favcility is an HDFC bank account with

SBI Bonds issue opens today

SBI Series 1 and Series 2 Lower Tier II Bonds - Good investmentoption with a high interest rate and it's going to be listed too.

More details @

http://www.equitybulls.com/admin/news2006/news_det.asp?id=81678

Personal finance lessons for the kids

'How to teach the kids the value of money ? '. This is one question that parents have in mind.

There needs to be a balance between having them pampered and making them realize the value of money. this article might be a good read for those interested on this topic.

National Pension System ( NPS) - potential saving and investment tool

National Pension System tier- 2 account seems to be a good investment option. While the tier- 1 account is a rigid in terms of withdrawal ,etc, Tier -2 seems to be a good option.

EPF - Employee Provident Fund - A potential saving channel

EPF is one of the potential saving channel for those working in organized private sector. Employee provident fund consists of both the employee's and employer's contribution every month.

Everyone must keep track of their PF contributions regularly. Especially when there is a change in employment one must initiate the transfer of EPF from old account to the new one.

The return provided by EPF over the past few years has been 8.5%. For the year 2010-11, the EPF organization has decided an interest rate of 9.5%.

The over valuation continues

I have been a great critic of the Indian real estate scenario for a couple of years now. I stick to my view point even now.Buyers are still flocking to buy houses and say that Indian real estate prices have sustained even the worst of global recession.

One small step

"A journey of a thousand miles begins with a single step." -- Confucius

When I interact with a lot of people who are interested in personal finance, I do talk about the benefits of SIP investing in diversified equity funds.( Why this is a must for long term wealth creation...so on and so forth). People genuinely seem to understand and are raring to go.

But many do not take the " pain" of enrolling for an SIP.Some collect forms from fund houses then wait. Some have actually downloaded forms , filled them and really didn't have the time to kick start it by posting the completed form.

Life is....

This was one mail forward that I got that made me think. ! This is esp. for those who are caught in an eternal debt trap.

Reduce your debts! 'Live' within your means.

Apple surpasses Microsoft's market capitalization

Apple surpassed Microsoft's market cap last week. Microsoft 's revolutionary windows and its user friendly user tools took the world by storm and made computing reach the masses. Bill Gates and Microsoft were the innovation icons in the last decade of 20th century.

Apple which was literally bailed out by Microsoft in the last decade has bounced back because of it's innovation. iphone, itouch and ipad are to a great extent shaping the future of computing tomorrow.

Innovation and making the innovation reach the masses makes great companies. Innovative computing , wireless data connection and cloud computing are the mantras of today which have got companies like Apple and Google to the fore.

Most of these companies have a R&D centre in India and hope a few of the next generation innovations comes from India or from Indian companies themselves which are now more dominant in the IT services sector. Hope some day we will have a company from India doing the same feat that Google and Apple are doing today.

April - It's time to plan for your taxes

For the salaried class, this is the right time to start planning our taxes for financial year 2010-11

1. Plan your investments under 80c and for infrastructure bonds.

2. Decide on the declarations that you need to make to your employers and do that diligently.

3. Start making investments on a systematic basis and do not wait for Jan-Mar 2011 period.

http://ideasmoney.blogspot.com/2007/12/advantage-of-planning-for-tax.html

Highest NAV guarantee

Highest NAV guarantee is the new ad banner under which ULIP policies are being sold these days.

The following article is a must read before you decide to invest in such schemes.

http://new.valueresearchonline.com/story/h2_storyview.asp?str=101309

Make a sound investment decision based on your knowledge of the product and not based on advertisement alone.

Budget 2010 India - Changes that would benefit individual tax payers

Following are the changes that would benefit the salaried class/ individual tax payers.


Direct Taxes


Income tax slabs for individual taxpayers to be as follows
Income upto Rs 1.6 lakh Nil
Income above Rs 1.6 lakh and upto Rs. 5 lakh 10 per cent
Income above Rs.5 lakh and upto Rs. 8 lakh 20 per cent
Income above Rs. 8 lakh 30 per cent


Deduction of an additional amount of Rs. 20,000 allowed, over and above the existing limit of Rs.1 lakh on tax savings, for investment in long-term infrastructure bonds as notified by the Central Government


Besides contributions to health insurance schemes which is currently allowed as a deduction under the Income-tax Act, contributions to the Central Government Health Scheme also allowed as a deduction under the same provision

Spark Lines on NSE website

Just got a glimpse of sparklines in the NSE website.

http://nseindia.com/content/equities/niftysparks.htm

This page would help investors/traders to have a quick glimpse of the index stocks and this is available for most of the key NIFTY indices (like Junior Nifty, CNX IT, Bank Nifty, Nifty Midcap 50).

Crisp graphical representation of price movement, details of price changes and color coding of stocks nearing 52 week high /low & much more are presented in a crisp and adorable manner.

You can have a look at it when free.! I find this new page exciting!

ideasmoney featured on FEMINA india Feb 10 2010 issue

ideasmoney.blogspot.com has been featured in Feb 10 India edition of femina under " Money Resolutions 2010" -> Blog my money.

Investing ( trading) when you are in debt trap

Recently, got a mail from a person who is struggling to pay his EMIs. The person had withdrawn cash from a credit card when his variable pay got down and has a huge outstanding amount on his credit card.

When his company announced an increment this year, the person was keen to invest the incremental income in the stock market , to multiply the money quickly to pay off his credit card dues.

I was shocked on reading this mail. When you are in a deep debt trap, you should try to get out of it first. In fact credit card cash withdrawal should be the last mode you should look into.

When you are in a debt trap, one should try to use any excess or surplus cash to pay of the debt. Investing (Trading!) with borrowed money or when you are in deep debt trap would potentially lead you to more trouble.

One should always try to live within the means and borrow within the means too.!

Analysing 2009 IPOs

Here is an analysis of the IPOs of 2009 ( Source data: - NSE web site).

1. There were 21 IPOs in 2009. ( 20 issues after stability returned and only 1 during the time of uncertainity - Edserv softsystems in Feb) . IPOs are highly dependant on market sentiments driven and this fact proves that.

2. Edserv systems has given a good return and this after getting only a CARE rating of 1!!. So, solely depending on the rating and market sentiments may not help.

3. only 12 out of the 21 IPOS are trading in positive territory as of 21 Jan (Adani and Astec , just above the issue price)

4. All issues that were given a grading of 4 ( 6 issues) by rating agencies are trading in the positive zone.

Grade 3 's - 2 in positive zone out of 8.

Grade 2's - 3 in positive zone out of 4.

Grade 1 's - 1 in positive zone out of 2.

So, there has been no correlation between grading by the agencies and the returns except for the fact that all the issues graded four are in positive zone ( May be the sample is too small :-)).

5. Power and Real estate IPOS have not given any significant return in spite of the hype.(including PSU -NHPC).

We can infer that not all IPOs are money making engines for retail investors. All issues need to be analyzed carefully before you throw in your money. Just depending on a broker's recommendation or a tip or GMP ( grey market premium) or an article on a blog like this :-) wouldn't help. The basic rule is- if you don't understand about an issue or if you are not convinced what you want out of investing in an IPO, Please don't invest. Do your thorough research before you invest your hard earned money.

2010 - An interesting year ahead !!

Early 2009 , was an easy phase for seasoned investors as they could spot gold just walking on the road!!. Yes, most of the stocks were trading well below their real values. Anything you would have invested should have at least doubled by now. Having said that, it was only the people who were greedy when others were fearful and those who would have invested regularly ( say SIP) have benefited immensely out of the down turn.

2010 is showing a lot of promises (esp. media blowing a lot of good news like new jobs coming in, salary increments ,etc for Indian economy). But, the returns of 2009 would be unrealistic to expect from 2010.

At this stage there are a few who are sitting on decent profits from equity. So, the question is whether to stay invested or reap the rewards. If you are in need of money in next two, three years time frame , it may be prudent to book profits at least partially (depending on your need). However, if you are ok to hold your money for a long time, say 5 years then you may choose to hold on. The west is not completely out of the woods. So , FII flows, fluctuating exchange rates might lead to volatility of the markets.

It would be interesting to see how the markets turn about. There are a lot of predictions about markets touching new highs. We know how predictions work:-).

But as a retail investor, following a path of extra caution while making investing decisoins( in 2010) would definitely help protect your money .