Systematic investments in a proper way always will help any one to build a decent portfolio.
Investing in too many stocks and too many mutual funds should be avoided, since it will become a burden to track. You have to followup the SIP route for any investments, since you are investing in ups and downs of a product you can easily mitigate the risks.
Before go for an any investment you have to setup a goal for the investment, Like Children Education, Children's marriage, Retirement Corpus kind of. Based upon these goals we need to form our investment portfolio with the help of a financial advisor
Once you get the suggested portfolio from the financial advisor you can start investing systematically and consistently. Over the long period your returns must be good, provided if you follow these things
Thursday, February 19, 2009
Wednesday, February 18, 2009
Economy Turmoil - What it means for you
From the earlier days, the human beings will always learn from the lessons and also they changed themselves to adapt with the environment. That’s how we are brought up our shapes differently from monkeys (whom consider our ancients…), the crisis times always change people mind set and their behavior.
The current financial turmoil also somehow reflects the same thing… Based upon the impact of the crisis the changes will happen. Now this economic crisis makes us get in to changes deeper in terms of savings and investments
In America people say this turmoil really changed the mindset of the whole generation about money, about savings and about financial risks. In India we haven’t suffer as much as that, but here also the current young generation (which means between 25 – 35) suffered a lot than their previous generation, means that ppl whom started earning after 1990s and before 1990s.
We don’t know when this will be over but I am sure the future is not the straight upward line as it was earlier. Instead it will have periodical ups and downs. I am sure that many of you may be already see that all around you or some of your friends…
So here are few tips what we suppose to do and what not suppose to do now…
Buying a Home
• Don’t rush in to buy home now, there are few golden principles are there for buying a home, if you met up them then please go ahead. If you need a home for living then there is no time for buy, Please ensure the below things before you buy that
o The EMI amount shouldn’t exceed 20% of your take home (Generally 40%, but by considering the risk of our profile 20% is good)
o Check out the property price and negotiate 50% reduction in the past peak rate
o If you want to buy for an investment better wait until Dec 2009 (In today’s news I have seen DLF has slashed 32% of rates in its existing ongoing projects…)
o Always consult an professional for a property buying
Investing in Share market
• Be sure that if you don’t have any requirement for the investment money by another 7 years.
• Please invest on any investment after you thoroughly knows about its goods and bad
• Invest systematically and phase wise, don’t put all your money in one turn
• Don’t put all your eggs in one basket
• You are not a TRADER but an investor, so please don’t have a trader aggressiveness in your self
• Investing in too many MF’s is risky and later it’s very difficult to follow up them, so invest systematically and choose a core funds and follow SIP route to invest
I have lot to say, but share my knowledge/lessons with you periodically
The current financial turmoil also somehow reflects the same thing… Based upon the impact of the crisis the changes will happen. Now this economic crisis makes us get in to changes deeper in terms of savings and investments
In America people say this turmoil really changed the mindset of the whole generation about money, about savings and about financial risks. In India we haven’t suffer as much as that, but here also the current young generation (which means between 25 – 35) suffered a lot than their previous generation, means that ppl whom started earning after 1990s and before 1990s.
We don’t know when this will be over but I am sure the future is not the straight upward line as it was earlier. Instead it will have periodical ups and downs. I am sure that many of you may be already see that all around you or some of your friends…
So here are few tips what we suppose to do and what not suppose to do now…
Buying a Home
• Don’t rush in to buy home now, there are few golden principles are there for buying a home, if you met up them then please go ahead. If you need a home for living then there is no time for buy, Please ensure the below things before you buy that
o The EMI amount shouldn’t exceed 20% of your take home (Generally 40%, but by considering the risk of our profile 20% is good)
o Check out the property price and negotiate 50% reduction in the past peak rate
o If you want to buy for an investment better wait until Dec 2009 (In today’s news I have seen DLF has slashed 32% of rates in its existing ongoing projects…)
o Always consult an professional for a property buying
Investing in Share market
• Be sure that if you don’t have any requirement for the investment money by another 7 years.
• Please invest on any investment after you thoroughly knows about its goods and bad
• Invest systematically and phase wise, don’t put all your money in one turn
• Don’t put all your eggs in one basket
• You are not a TRADER but an investor, so please don’t have a trader aggressiveness in your self
• Investing in too many MF’s is risky and later it’s very difficult to follow up them, so invest systematically and choose a core funds and follow SIP route to invest
I have lot to say, but share my knowledge/lessons with you periodically
Monday, February 16, 2009
Kindergarten Rules - Investment
Develop a Plan: For your short-term goals, make sure you're taking appropriate risks. Invest money that you'll need in the next two years to five years in cash and short-term bonds. If you've taken on too much risk for short-term objectives, pull back now. There's no telling where the bottom of this market is. It's better to cut your losses and preserve the money you already have for short-term goals. For your long-term financial goals, consider equities.
Keep It Simple: Buy a diversified equity fund or an index fund for equity exposure and a floating-rate bond fund for fixed income exposure. These are the basics of the investment world. Sure, you can buy many other types of funds (Petro, MNC, Gilt, Fixed Maturity, Serial Plans etc), but it's hard to go wrong with these two. To keep fund selection simple, stick with a diversified equity funds of well-established fund families. Equities prove to be the best performing long-term asset class. Stay away from exotic speciality and sector funds, unless you have a huge risk appetite and you can take in your stride a 25% loss in a quarter.
Ignore the hot stocks and funds: If you buy this year's top-performing fund or stock, be prepared to see it at the bottom next year. The fancy academic expression for this phenomenon is -- Reversion to the Mean. But the old saying explains it just as well -- what goes up must come down.
Invest Regularly: Investing a little bit of money each month is the surest way to reduce the risk of investing, because you lessen the possibility of buying at the market top. Also, no one is smart enough to anticipate all the moves, both up and down.
Buy and Hold: Short-term trading makes more brokers than investors rich. The income tax department likes the practice, too. If you meet anyone who claims to have made money through short-term trading, resist your temptation to listen any further and move on to a more productive conversation.
Start Early: It is not the "market timing" but time in the market that matters. Power of compounding will turn things in your favour.
Investing is a long-term proposition. Research your investments, remember your goals, re-examine your risk, and limit how much you listen to day-to-day market commentary. And don't let your emotions overpower your sense of reason.
Keep It Simple: Buy a diversified equity fund or an index fund for equity exposure and a floating-rate bond fund for fixed income exposure. These are the basics of the investment world. Sure, you can buy many other types of funds (Petro, MNC, Gilt, Fixed Maturity, Serial Plans etc), but it's hard to go wrong with these two. To keep fund selection simple, stick with a diversified equity funds of well-established fund families. Equities prove to be the best performing long-term asset class. Stay away from exotic speciality and sector funds, unless you have a huge risk appetite and you can take in your stride a 25% loss in a quarter.
Ignore the hot stocks and funds: If you buy this year's top-performing fund or stock, be prepared to see it at the bottom next year. The fancy academic expression for this phenomenon is -- Reversion to the Mean. But the old saying explains it just as well -- what goes up must come down.
Invest Regularly: Investing a little bit of money each month is the surest way to reduce the risk of investing, because you lessen the possibility of buying at the market top. Also, no one is smart enough to anticipate all the moves, both up and down.
Buy and Hold: Short-term trading makes more brokers than investors rich. The income tax department likes the practice, too. If you meet anyone who claims to have made money through short-term trading, resist your temptation to listen any further and move on to a more productive conversation.
Start Early: It is not the "market timing" but time in the market that matters. Power of compounding will turn things in your favour.
Investing is a long-term proposition. Research your investments, remember your goals, re-examine your risk, and limit how much you listen to day-to-day market commentary. And don't let your emotions overpower your sense of reason.
Saturday, February 14, 2009
Gold Glistening
Intro:
Gold will ensure liquidity and help diversify your portfolio. Invest in gold to get good returns in choppy markets and to hedge against inflation
What to DO?
* To build a corpus, buy a coin or bar of gold on your child’s birthday every year
* Buy from a reputed jeweller in your city
* Avoid buying from banks
* Buy gold ETF through a mutual fund broker. You can also use online trading portal
of brokers to buy ETF
* 2-5% of your porfolio must be in Gold
High returns. In the long term, gold earns high returns. The price of one gramme of gold has gone up from Rs 350 in 1999 to Rs 1,416 in 2009. It is also an excellent hedge against inflation. As inflation goes up, market sentiment and equity prices go down, but gold prices rise. Returns are attractive—from 1995 to 2008, gold has given a CAGR of 12.69 per cent. Gold is trading at very high rates at present— Rs 1,390.02 per gramme. But indications are that the prices would go up further. Analysts expect prices to touch Rs 1,760 per gramme this year. In fact, some even predict a high of Rs 2,200 per gramme. If you haven’t bought this year’s supply, then sooner might be better than later.
Exchange value. When it’s time to cash in on your gold, you can convert the coins into jewellery, or merely sell them at the prevailing rate. Gold coins and bars give you the full value. But, if you are converting gold jewellery into updated designs or other forms of gold, you will lose the making and design charges. Also, jewellery with stones will fetch a lower resale value.
Gold ETFs. Several fund houses sell gold ETF Benchmark Mutual Fund (MF), UTI MF, Kotak MF, Reliance MF and Quantum MF manage gold ETFs. The value of your units on the day you sell would be computed and handed over to you. This way, there is no threat of loss of value, and you don’t have to worry about safely storing your gold. In the future, some of these fund houses may even allow you to redeem units of your gold ETF into physical gold instead of cash. Another alternative is to invest in DSP Black Rock World Gold that invests in equities of global gold mining companies. Due to scarcity of precious metals globally, these companies have done well in the past few years. You can invest as little as Rs 5,000 in a gold ETF.
Tax treatment. You do have to pay capital gains tax when you sell gold in any form. If you sell within three years of buying, you are liable to pay short-term capital gains (STCG) tax. Your gains are added to your income. If you sell after holding gold for more than three years, you are liable to pay long-term capital gains (LTCG) tax. For this, you should calculate your indexed cost, which is your buying price multiplied by the cost inflation index. The difference between this and your selling price attracts 20 per cent LTCG tax.
You have to pay STCG tax on ETFs if you sell your units within a year. Here, too, your gains are added to your income. You are also liable to pay LTCG tax of 20 per cent after indexation if you sell your units after a year.
Gold will ensure liquidity and help diversify your portfolio. Invest in gold to get good returns in choppy markets and to hedge against inflation
What to DO?
* To build a corpus, buy a coin or bar of gold on your child’s birthday every year
* Buy from a reputed jeweller in your city
* Avoid buying from banks
* Buy gold ETF through a mutual fund broker. You can also use online trading portal
of brokers to buy ETF
* 2-5% of your porfolio must be in Gold
High returns. In the long term, gold earns high returns. The price of one gramme of gold has gone up from Rs 350 in 1999 to Rs 1,416 in 2009. It is also an excellent hedge against inflation. As inflation goes up, market sentiment and equity prices go down, but gold prices rise. Returns are attractive—from 1995 to 2008, gold has given a CAGR of 12.69 per cent. Gold is trading at very high rates at present— Rs 1,390.02 per gramme. But indications are that the prices would go up further. Analysts expect prices to touch Rs 1,760 per gramme this year. In fact, some even predict a high of Rs 2,200 per gramme. If you haven’t bought this year’s supply, then sooner might be better than later.
Exchange value. When it’s time to cash in on your gold, you can convert the coins into jewellery, or merely sell them at the prevailing rate. Gold coins and bars give you the full value. But, if you are converting gold jewellery into updated designs or other forms of gold, you will lose the making and design charges. Also, jewellery with stones will fetch a lower resale value.
Gold ETFs. Several fund houses sell gold ETF Benchmark Mutual Fund (MF), UTI MF, Kotak MF, Reliance MF and Quantum MF manage gold ETFs. The value of your units on the day you sell would be computed and handed over to you. This way, there is no threat of loss of value, and you don’t have to worry about safely storing your gold. In the future, some of these fund houses may even allow you to redeem units of your gold ETF into physical gold instead of cash. Another alternative is to invest in DSP Black Rock World Gold that invests in equities of global gold mining companies. Due to scarcity of precious metals globally, these companies have done well in the past few years. You can invest as little as Rs 5,000 in a gold ETF.
Tax treatment. You do have to pay capital gains tax when you sell gold in any form. If you sell within three years of buying, you are liable to pay short-term capital gains (STCG) tax. Your gains are added to your income. If you sell after holding gold for more than three years, you are liable to pay long-term capital gains (LTCG) tax. For this, you should calculate your indexed cost, which is your buying price multiplied by the cost inflation index. The difference between this and your selling price attracts 20 per cent LTCG tax.
You have to pay STCG tax on ETFs if you sell your units within a year. Here, too, your gains are added to your income. You are also liable to pay LTCG tax of 20 per cent after indexation if you sell your units after a year.
Friday, February 13, 2009
Recurring Deposit Vs Short Term Debt Fund
For an investment aimed at a short time span of one year, you should consider a bank recurring deposit. It is also preferable as you want your investment to be risk-free. One can expect similar returns from a recurring deposit and a short-term debt fund, but the former would give safety of capital along with guaranteed returns (interest) while the latter carries no such guarantee.
Think wisely - MF
Traditionally, one divides mutual funds into core funds and supporting funds. Core funds are those that should form the backbone of any equity-leaning mutual fund portfolio. There can be variations, but basically core funds should be conservatively run funds that invest most of their money in large-cap companies, but could invest in any sector or industry as the market conditions justify. Depending on the investor an equity-oriented balanced fund could also be a core fund.
Beyond core funds, there are the specialty funds. These are funds that have some twist in their tail. They have some limitation on where they can invest. These could be limitations of company size, as with small-cap or mid-cap funds or of industry something else. The basic idea is that the fund manager is not free to invest in any company that he or she wants to. There are some limitations imposed by the mandate that the fund has. It should be clear to any thinking investor that there is no great need for funds which come with strings attached.
Not surprisingly, such funds are given to swinging between extremes of performance. When the market was rising, they were rising more than vanilla funds. But when the collapse started, they fell more than them.
Traditionally, one divides mutual funds into core funds and supporting funds. Core funds are those that should form the backbone of any equity-leaning mutual fund portfolio. There can be variations, but basically core funds should be conservatively run funds that invest most of their money in large-cap companies, but could invest in any sector or industry as the market conditions justify. Depending on the investor an equity-oriented balanced fund could also be a core fund.
Beyond core funds, there are the specialty funds. These are funds that have some twist in their tail. They have some limitation on where they can invest. These could be limitations of company size, as with small-cap or mid-cap funds or of industry something else. The basic idea is that the fund manager is not free to invest in any company that he or she wants to. There are some limitations imposed by the mandate that the fund has. It should be clear to any thinking investor that there is no great need for funds which come with strings attached.
Not surprisingly, such funds are given to swinging between extremes of performance. When the market was rising, they were rising more than vanilla funds. But when the collapse started, they fell more than them.
It's a well-established cliché that we should learn from our failures.
So learn from the past failures of you and your friends and start a new begining in the world of investments
Beyond core funds, there are the specialty funds. These are funds that have some twist in their tail. They have some limitation on where they can invest. These could be limitations of company size, as with small-cap or mid-cap funds or of industry something else. The basic idea is that the fund manager is not free to invest in any company that he or she wants to. There are some limitations imposed by the mandate that the fund has. It should be clear to any thinking investor that there is no great need for funds which come with strings attached.
Not surprisingly, such funds are given to swinging between extremes of performance. When the market was rising, they were rising more than vanilla funds. But when the collapse started, they fell more than them.
Traditionally, one divides mutual funds into core funds and supporting funds. Core funds are those that should form the backbone of any equity-leaning mutual fund portfolio. There can be variations, but basically core funds should be conservatively run funds that invest most of their money in large-cap companies, but could invest in any sector or industry as the market conditions justify. Depending on the investor an equity-oriented balanced fund could also be a core fund.
Beyond core funds, there are the specialty funds. These are funds that have some twist in their tail. They have some limitation on where they can invest. These could be limitations of company size, as with small-cap or mid-cap funds or of industry something else. The basic idea is that the fund manager is not free to invest in any company that he or she wants to. There are some limitations imposed by the mandate that the fund has. It should be clear to any thinking investor that there is no great need for funds which come with strings attached.
Not surprisingly, such funds are given to swinging between extremes of performance. When the market was rising, they were rising more than vanilla funds. But when the collapse started, they fell more than them.
It's a well-established cliché that we should learn from our failures.
So learn from the past failures of you and your friends and start a new begining in the world of investments
Bank FD or Debt Funds?
Debt funds (long-term) offer higher tax efficiency and liquidity as compared to fixed deposits. The interest earned from a bank FD is added to one’s income for tax purposes which is taxed as per the applicable slab of the investor. On the other hand, returns earned from a debt fund held for the long term i.e. greater than one year are treated as long term capital gains (LTCG). One can avail the indexation benefit in case of LTCG of debt funds which reduces the tax liability. LTCG is then taxed at 11.33 per cent without indexation or 22.66 per cent with indexation.
However, debt funds are not risk-free like bank fixed deposits. They invest in bonds and hence, carry credit risk and liquidity risk related to the specific instruments held by them. They are also affected by interest rate risk. Hence, the choice of whether to invest in a bank fixed deposit or a debt fund would depend on one’s risk appetite.
SIP is a suitable method of investing in equity funds because equity, as an asset class, is more volatile. For debt, one-time investment is recommended. As for saving entry load, direct investments without an intermediary are not charged entry load. But at the same time, normally, debt funds do not charge an entry load.
However, debt funds are not risk-free like bank fixed deposits. They invest in bonds and hence, carry credit risk and liquidity risk related to the specific instruments held by them. They are also affected by interest rate risk. Hence, the choice of whether to invest in a bank fixed deposit or a debt fund would depend on one’s risk appetite.
SIP is a suitable method of investing in equity funds because equity, as an asset class, is more volatile. For debt, one-time investment is recommended. As for saving entry load, direct investments without an intermediary are not charged entry load. But at the same time, normally, debt funds do not charge an entry load.
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