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.