Saturday, February 25, 2017

What are international funds?

Courtesy : Economic Times

Investors looking for geographical diversification in their portfolio can consider investing in international markets through mutual funds. Termed as international funds, they invest in equities of a region or country, or fixed income securities.

What are the various types of international funds?

Of the international funds available to investors in India, there are country-specific, region-specific and thematic funds. For example, there are funds that invest in the US, Brazil or Europe. Apart from this, there are theme based funds investing in sectors such as consumption, energy and real estate. As a resident Indian investor, you have to invest only in Indian rupees. Like any other mutual fund, you can select fund, write a cheque and submit the application form to a fund house. You may even invest online.

How do global funds invest?
Funds on offer to Indian investors invest in international markets either directly or have the option to invest in other funds in those markets.The latter way is called a feeder route and is in the form of a fund of funds.
What is the advantage of international funds?

There are many stocks or businesses which are not available in the listed space in India. For example, cola companies. You can be part of the growth stories of such companies through international funds that also help you diversify across geographies. For example, when the Indian economy isn't doing well, global markets may give you higher return.
Are there any risks of investing in these funds?

In addition to the normal risks of investing in stocks, international funds also come with currency risks. This could happen due to fluctuations in the value of other markets' currency against the Indian rupee. While you will invest in rupee, the fund house will have to take exposure to international stocks in various currencies. Therefore, investors have to be prepared for currency risks because any fluctuation will directly impact the Net Asset Value (NAV) of the fund. For example, if the rupee depreciates against the dollar, you will get more rupees for every dollar invested, and your NAV could be higher. On the other hand, if the rupee appreciates against the dollar, you get fewer rupees for every dollar invested.
What's the tax treatment of international funds?
From the taxation point of view, international funds are treated on a par with debt mutual funds.For a holding period of less than three years, an investor is required to pay short-term capital gains tax on the profits as per his tax slab. When it is held for more than three years, the investor will get indexation benefit as the profit is treated as long-term capital gains. Post indexation, the gain is taxed at 20 per cent.

Investors looking for geographical diversification in their portfolio can consider investing in international markets through mutual funds. Termed as international funds, they invest in equities of a region or country, or fixed income securities.

Investors looking for geographical diversification in their portfolio can consider investing in international markets through mutual funds. Termed as international funds, they invest in equities of a region or country, or fixed income securities.

Investors looking for geographical diversification in their portfolio can consider investing in international markets through mutual funds. Termed as international funds, they invest in equities of a region or country, or fixed income securities.

What are the various types of international funds?
Of the international funds available to investors in India, there are country-specific, region-specific and thematic funds. For example, there are funds that in ..

Saturday, February 18, 2017

8 secrets of making money from investing in stocks ...

Courtesy : Economic Times

The stock market is a great place to make money. According to Motilal Oswal’s Annual Wealth Creation Study, the top 100 wealth creators added Rs 28.4 lakh crore to shareholder’s wealth during 2011-16. What’s even more interesting is that this value creation happened when the markets were not exactly seeing fireworks. The Sensex grew at a tardy pace of 5% CAGR during 2011-16, but the Motilal Oswal study shows that the top 100 wealth creators grew shareholder wealth by a dizzying 18% CAGR. Ajanta Pharma, the fastest growing stock, multiplied investors’ wealth by 53 times in five years.
At the same time, some stocks also destroyed wealth. PSU giant BHEL alone has destroyed more than Rs 75,000 crore of wealth. Its market cap has fallen 70% from Rs 1,07,380 crore in February 2011 to Rs 31,598 crore now. Indian Overseas Bank is trading 84% below its 2011 price. Motilal Oswal estimates that almost Rs 15 lakh crore worth of wealth was destroyed during 2011-16, led largely by the downturn in metals, mining, PSU banks, capital goods, real estate and construction. So, while you can make heaps of money in the stock market, you can also lose your shirt.

What can ensure success in stocks? Our sixth anniversary issue looks at some basic attributes that can help make money in stocks. We reached out to experts and asked them to explain why a certain trait or skill is critical for success in stocks. The simplest way to make money is to buy a great company when the stock price is low. But this is easier said than done. When Infosys came out with its IPO in 1993, the issue was undersubscribed. Morgan Stanley bailed it out by picking up 13% of the equity at the offer price of Rs 95 per share. Very few small investors can be like Morgan Stanley and look into the future. But fundamental analysis, which assesses the prospects of a company, does exactly this.
To analyse a company’s prospects and assess its potential, one needs to be conversant with the financial terms used in research reports. According to tax and investment expert Balwant Jain, a successful investor should be able to read balance sheets and decipher the quarterly and annual numbers reported by the company.

But more than anything else, stock investors must demonstrate monumental patience if they want to make serious money from stocks. They should learn to withstand volatility and hold tight when the going gets rough. Legendary investor Warren Buffett says his favourite holding period is “forever”. But though small investors are enamoured of Buffett’s ability to create wealth, they are not willing to listen to his advice.The age data of stock ownership is not available, but mutual fund statistics give a fair idea of the average Indian’s investing horizon. According to AMFI data, small investors withdraw 27% of the investments in equity funds within a year. Almost 47% of the investments in equity funds are redeemed within two years. “Small investors just don’t have the patience or the long-term vision required to make money from equity investments,” says a senior fund manager.Experts say this is not a problem only in India. “Short-termism has become very pervasive in stock markets across the globe. In 1960, the average holding period of stocks by investors on the NYSE was 100 months. By 2015, this average holding period had fallen to eight months,” says Devendra Nevgi, CEO of Zyfin Funds.

Of course, the hold forever strategy comes with caveats. If there is a disruptive change in the external environment for a company, or an internal development alters its fundamentals, it is time to exit the stock. It is here that investors have to fight the behavioural biases that nudge them to act is a certain way. The confirmation bias is one such malady, where one seeks information that confirms one’s view. “Great investors do two things that most of us do not.They seek information or views that are different than their own and they update their beliefs when the evidence suggests they should. Neither task is easy,” says a report by Credit Suisse on the attributes of successful investors. “A seasoned investor has to be flexible because company managements, business strategies and the market conditions keep changing,” says Dinesh Thakker, Chairman and Managing Director, Angel Broking.
This is why successful investing is not just about buying at the right time or holding for a long term but also exiting when the tide turns against the company. “Erosion of cash flow visibility, sharp drop in demand for products and services or a tectonic change in the policy environment are some of the reasons to dump a stock,” says Kunj Bansal, Executive Director & CIO (Equities), of Centrum Wealth Management.
The 8 secrets
1. Fundamental analysis is critical for stock investing

2. Investors must learn to read companies' annual reports, understand financial terms

3. Think long term when investing in stocks

4. Keep updated with world news to take a holistic view when investing in stocks

5. Selling stocks at the right time is as important as buying good ones.

6. Use safeguards when trading in stocks, invest only what you can comfortably risk

7. Be tax-wise when investing in stocks to maximise gains.

8. Use the right parameters when researching stocks.

The stock market is a great place to make money. According to Motilal Oswal’s Annual Wealth Creation Study, the top 100 wealth creators added Rs 28.4 lakh crore to shareholder’s wealth during 2011-16. What’s even more interesting is that this value creation happened when the markets were not exactly seeing fireworks. The Sensex grew at a tardy pace of 5% CAGR during 2011-16, but the Motilal Oswal study shows that the top 100 wealth creators grew shareholder wealth by a dizzying 18% CAGR. Ajant ..

8 secrets of making money from investing in stocks

ET Bureau|
Dec 12, 2016, 06.30 AM IST

Friday, February 10, 2017


Dear Friends

For the past few days receiving lot of queries from my readers asking about spam SMS with the name   'VALUEPICK' .  In this subject , I would like to again clarify that I am NOT SENDING ANY SUCH  SMS , and in no way responsible for any loss arising out of such recommendations provided by the persons/entities using the name 'Valuepick' in their communication.

Saturday, January 21, 2017

Stock-Picking Strategies: Qualitative Analysis

Courtesy : Investopedia

Fundamental analysis has a very wide scope. Valuing a company involves not only crunching numbers and predicting cash flows but also looking at the general, more subjective qualities of a company. Here we will look at how the analysis of qualitative factors is used for picking a stock.

The backbone of any successful company is strong management. The people at the top ultimately make the strategic decisions and therefore serve as a crucial factor determining the fate of the company. To assess the strength of management, investors can simply ask the standard five Ws: who, where, what, when and why?

Do some research, and find out who is running the company. Among other things, you should know who its CEO, CFO, COO and CIO are. Then you can move onto the next question.

Where? You need to find out where these people come from, specifically, their educational and employment backgrounds. Ask yourself if these backgrounds make the people suitable for directing the company in its industry. A management team consisting of people who come from completely unrelated industries should raise questions. If the CEO of a newly-formed mining company previously worked in the industry, ask yourself whether he or she has the necessary qualities to lead a mining company to success.

What and When?
What is the management philosophy? In other words, in what style do these people intend to manage the company? Some managers are more personable, promoting an open, transparent and flexible way of running the business. Other management philosophies are more rigid and less adaptable, valuing policy and established logic above all in the decision-making process. You can discern the style of management by looking at its past actions or by reading the annual report's management, discussion & analysis (MD&A) section. Ask yourself if you agree with this philosophy, and if it works for the company, given its size and the nature of its business.

Once you know the style of the managers, find out when this team took over the company. Jack Welch, for example, was CEO of General Electric for over 20 years. His long tenure is a good indication that he was a successful and profitable manager; otherwise, the shareholders and the board of directors wouldn't have kept him around. If a company is doing poorly, one of the first actions taken is management restructuring, which is a nice way of saying "a change in management due to poor results". If you see a company continually changing managers, it may be a sign to invest elsewhere.

At the same time, although restructuring is often brought on by poor management, it doesn't automatically mean the company is doomed. For example, Chrysler Corp was on the brink of bankruptcy when Lee Iacocca, the new CEO, came in and installed a new management team that renewed Chrysler's status as a major player in the auto industry. So, management restructuring may be a positive sign, showing that a struggling company is making efforts to improve its outlook and is about to see a change for the better.

A final factor to investigate is why these people have become managers. Look at the manager's employment history, and try to see if these reasons are clear. Does this person have the qualities you believe are needed to make someone a good manager for this company? Has s/he been hired because of past successes and achievements, or has s/he acquired the position through questionable means, such as self-appointment after inheriting the company?

Know What a Company Does and How it Makes Money 

A second important factor to consider when analyzing a company's qualitative factors is its product(s) or service(s). How does this company make money? In fancy MBA parlance, the question would be "What is the company's business model?"

Knowing how a company's activities will be profitable is fundamental to determining the worth of an investment. Often, people will boast about how profitable they think their new stock will be, but when you ask them what the company does, it seems their vision for the future is a little blurry: "Well, they have this high-tech thingamabob that does something with fiber-optic cables… ." If you aren't sure how your company will make money, you can't really be sure that its stock will bring you a return.

One of the biggest lessons taught by the dotcom bust of the late '90s is that not understanding a business model can have dire consequences. Many people had no idea how the dotcom companies were making money, or why they were trading so high. In fact, these companies weren't making any money; it's just that their growth potential was thought to be enormous. This led to overzealous buying based on a herd mentality, which in turn led to a market crash. But not everyone lost money when the bubble burst: Warren Buffett didn't invest in high-tech primarily because he didn't understand it. Although he was ostracized for this during the bubble, it saved him billions of dollars in the ensuing dotcom fallout. You need a solid understanding of how a company actually generates revenue in order to evaluate whether management is making the right decisions. 

Aside from having a general understanding of what a company does, you should analyze the characteristics of its industry, such as its growth potential. A mediocre company in a great industry can provide a solid return, while a mediocre company in a poor industry will likely take a bite out of your portfolio. Of course, discerning a company's stage of growth will involve approximation, but common sense can go a long way: it's not hard to see that the growth prospects of a high-tech industry are greater than those of the railway industry. It's just a matter of asking yourself if the demand for the industry is growing.

Market share is another important factor. Look at how Microsoft thoroughly dominates the market for operating systems. Anyone trying to enter this market faces huge obstacles because Microsoft can take advantage of economies of scale. This does not mean that a company in a near monopoly situation is guaranteed to remain on top, but investing in a company that tries to take on the "500-pound gorilla" is a risky venture.

Barriers against entry into a market can also give a company a significant qualitative advantage. Compare, for instance, the restaurant industry to the automobile or pharmaceuticals industries. Anybody can open up a restaurant because the skill level and capital required are very low. The automobile and pharmaceuticals industries, on the other hand, have massive barriers to entry: large capital expenditures, exclusive distribution channels, government regulation, patents and so on. The harder it is for competition to enter an industry, the greater the advantage for existing firms.

Brand Name
A valuable brand reflects years of product development and marketing. Take for example the most popular brand name in the world: Coca-Cola. Many estimate that the intangible value of Coke's brand name is in the billions of dollars! Massive corporations such as Procter & Gamble rely on hundreds of popular brand names like Tide, Pampers and Head & Shoulders. Having a portfolio of brands diversifies risk because the good performance of one brand can compensate for the underperformers.

Keep in mind that some stock-pickers steer clear of any company that is branded around one individual. They do so because, if a company is tied too closely to one person, any bad news regarding that person may hinder the company's share performance even if the news has nothing to do with company operations. A perfect example of this is the troubles faced by Martha Stewart Omnimedia as a result of Stewart's legal problems in 2004.

Don't Overcomplicate
You don't need a PhD in finance to recognize a good company. In his book "One Up on Wall Street", Peter Lynch discusses a time when his wife drew his attention to a great product with phenomenal marketing. Hanes was test marketing a product called L'eggs: women's pantyhose packaged in colorful plastic egg shells. Instead of selling these in department or specialty stores, Hanes put the product next to the candy bars, soda and gum at the checkouts of supermarkets - a brilliant idea since research showed that women frequented the supermarket about 12 times more often than the traditional outlets for pantyhose. The product was a huge success and became the second highest-selling consumer product of the 1970s.

Most women at the time would have easily seen the popularity of this product, and Lynch's wife was one of them. Thanks to her advice, he researched the company a little deeper and turned his investment in Hanes into a solid earner for Fidelity, while most of the male managers on Wall Street missed out. The point is that it's not only Wall Street analysts who are privy to information about companies; average everyday people can see such wonders too. If you see a local company expanding and doing well, dig a little deeper, ask around. Who knows, it may be the next Hanes.

Assessing a company from a qualitative standpoint and determining whether you should invest in it are as important as looking at sales and earnings. This strategy may be one of the simplest, but it is also one of the most effective ways to evaluate a potential investment.

Saturday, January 7, 2017

5 things one must consider before making fresh Section 80C investment for FY 2016-17

Courtesy : Economic Times

The fag end of the financial year is when we scurry around and grapple with bewildering alphanumeric combinations like Section 80C and 80DD. If your tax-saving efforts are last minute the chances of locking funds in an unsuitable investment are quite high.

Tax-saving investment should never be made on an ad-hoc basis or for an ill-conceived goal. But with the accounts department of your organisation knocking on your door to submit proofs of actual investments, many people try to   make tax saving investments at the last minute.

Here is how you can do last-minute tax planning to not only reduce your tax liability, but also save towards the goals you have set at different life stages.

While choosing the right tax-saver, base your decision on these five important things, among others:
*How much deduction from gross total income can you avail
*The amount of fresh tax-saving investments you need to make
*Kind of tax-saving instrument you should invest in
*Tenure of the investment
*Taxability of income from the investment

Once you have got a fix on these, equally important is to choose a tax-saving instrument which can be linked to a specific goal .
How much deduction can you avail
Section 80C allows deduction from gross total income (before arriving at taxable income) of up to Rs 1.5 lakh per annum on one or more eligible investments and specified expenses. The eligible investments include life insurance, Equity Linked Savings Schemes (ELSS) mutual funds, Public Provident Fund (PPF), National Savings Certificate (NSC), etc., while expenses and outflows can include tuition fees, principal repayment of home loan, among others.
If you have exhausted your annual limit Sec 80C limit of Rs 1.5 lakh, you can also look at National Pension System (NPS) to save towards retirement and, in the process, save additional tax.

From 2015-16 onwards, an additional (additional to Section 80C) deduction of up to Rs 50,000 under Section 80CCD (1b) for investment in NPS is also possible. For someone in the highest 30 per cent income tax bracket, it's an additional annual saving of about Rs 15,000.

Further, the premium paid towards a health insurance plan for self and family members qualifies for tax benefit under Section 80D for Rs 25,000 and Rs 30,000 for those above 60. If one has a home loan, interest payments made towards its repayment can also be claimed under Section 24 of the Income Tax Act. The other deductions include donations under Section 80G, interest payments under Section 80E for education loan, etc.

Fresh investments you need to make
Before you start looking for the right tax saver, run this simple exercise to evaluate whether you actually need to make any fresh investments for this financial year (2016-17).

Non-Section 80C deductions: First, look at all non-Section 80C deductions like the interest paid on home loan, health plans, educational loan.
Section 80C outflows: Then consider Section 80C-related  expenses like children's tuition fees, principal repayment on home loan, pure term life insurance plans premiums.
Existing Section 80C commitments: Consider all the existing Section 80C commitments to invest/to pay premium such as in Employees' Provident Fund (EPF) and endowment life insurance, respectively

The exercise above gives you a total of existing commitments under Section 80C, 80D and other deductions. Now, from your gross total income, reduce the amount to arrive at the taxable income.

If your net income after doing the above calculation is still above the tax exemption limit of Rs 2.5 lakh then you need to look at further tax saving. To reduce taxable income further and provided the limit of section 80C isn't yet exhausted, look for the right Section 80C investments.
Kind of tax-saving instrument
Within the basket of Section 80C investments, there are two options to choose from: Investments offering "Fixed and assured returns" and those offering "market-linked returns".

The former primarily includes debt assets, including notified bank deposits with a minimum period of five years, endowment life insurance plans, PPF, NSC, Senior Citizens Savings Scheme (SCSC), etc. The returns are fixed for the entire duration and and generally in line with the rates prevalent in the economy and very close to inflation figure. They suit conservative investors whose aim is to preserve capital rather than create wealth.

The 'market-linked returns' category is primarily the equity-asset class. Here, one can choose from ELSS of mutual funds and Unit-Linked Insurance Plan (ULIP), pension plans and the NPS. The returns are not assured but linked to the performance of the underlying assets such as equity or debt.  They have the potential to generate higher inflation adjusted return in the long run to the extent they are based on the equity asset class.
All the above tax-saving instruments, by nature, are medium to long term products: From a three-year lock-in that comes with ELSS to a 15-year lock-in of PPF. Some like life insurance require annual payments to be made for a longer duration.

Taxability of income
Another important factor to consider is the post-tax return of the tax-saving investment. For instance, most fixed and assured returns products such as NSC provide you with Section 80C benefits, but the returns, currently 8 per cent (five-year) annually, are taxable. This makes the effective post-tax return equal to 5.52 per cent for the highest taxpayers. Considering the annual inflation of six per cent, the real return is almost zero!

Of all the tax-saving tools, only PPF, EPF, ELSS and insurance plans enjoy the EEE status, i.e., the growth is tax-exempt during the three stages of investing, growth and withdrawal.

Making the right choice
First, identify your medium and long term goals. A market-linked equity-backed tax-saving instrument is good for long term goals as equities need time to perform. And, before considering a taxable investment, see the tax rate that applies to you and consider the post-tax return. A low post-tax return after adjusting for inflation will not help you in achieving your goals in the long run. Inflation erodes the purchasing power of money, especially  
over long term.

Tax planning should ideally begin at the start of every financial year. Remember, the risks of planning tax-saving in a hurry later are manifold. There is, for instance, a high probability of picking up an unsuitable product. Also, there isn't any one instrument that can help you save tax and at the same time also provide safe, assured and highest return. Your final choice should ideally be based on a gamut of factors rather than solely being driven by returns from the financial product.

The fag end of the financial year is when we scurry around and grapple with bewildering alphanumeric combinations like Section 80C and 80DD. If your tax-saving efforts are last minute the chances of locking funds in an unsuitable investment are quite high.

Tax-saving investment should never be made on an ad-hoc basis or for an ill-conceived goal. But with the accounts department of your organisation knocking on your door to submit proofs of actual investments, many people try to  ..

The fag end of the financial year is when we scurry around and grapple with bewildering alphanumeric combinations like Section 80C and 80DD. If your tax-saving efforts are last minute the chances of locking funds in an unsuitable investment are quite high.

Tax-saving investment should never be made on an ad-hoc basis or for an ill-conceived goal. But with the accounts department of your organisation knocking on your door to submit proofs of actual investments, many people try to  ..

Saturday, December 10, 2016

The Top 17 Investing Quotes ....

1. "An investment in knowledge pays the best interest." - Benjamin Franklin
When it comes to investing, nothing will pay off more than educating yourself. Do the necessary research, study and analysis before making any investment decisions.

2. "Bottoms in the investment world don't end with four-year lows; they end with 10- or 15-year lows." - Jim Rogers
While 10-15 year lows are not common, they do happen. During these down times, don't be shy about going against the trend and investing; you could make a fortune by making a bold move - or lose your shirt. Remember quote #1 and invest in an industry you've researched thoroughly. Then, be prepared to see your investment sink lower before it turns around and starts to pay off.

3. "I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." - Warren Buffett
Be prepared to invest in a down market and to "get out" in a soaring market.

4. "The stock market is filled with individuals who know the price of everything, but the value of nothing." - Phillip Fisher
Another testament to the fact that investing without an education and research will ultimately lead to regrettable investment decisions. Research is much more than just listening to popular opinion.

5. "In investing, what is comfortable is rarely profitable." - Robert Arnott
At times, you will have to step out of your comfort zone to realize significant gains. Know the boundaries of your comfort zone and practice stepping out of it in small doses. As much as you need to know the market, you need to know yourself too. Can you handle staying in when everyone else is jumping ship? Or getting out during the biggest rally of the century? There's no room for pride in this kind of self-analysis. The best investment strategy can turn into the worst if you don't have the stomach to see it through.

6. "How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case." - Robert G. Allen
Though investing in a savings account is a sure bet, your gains will be minimal given the extremely low interest rates. But don't forgo one completely. A savings account is a reliable place for an emergency fund, whereas a market investment is not.

7. "Invest in yourself. Your career is the engine of your wealth." - Paul Clitheroe
We all want wealth, but how do we achieve it? It starts with a successful career which relies on your skills and talents. Invest in yourself through school, books, or a quality job where you can acquire a quality skill set. Identify your talents and find a way to turn them into an income-generating vehicle. In doing so, you can truly leverage your career into an "engine of your wealth."

8. "Every once in a while, the market does something so stupid it takes your breath away." - Jim Cramer
There are no sure bets in the world of investing; there is risk in everything. Be prepared for the ups and downs.

9. "The individual investor should act consistently as an investor and not as a speculator." - Ben Graham
You are an investor, not someone who can predict the future. Base your decisions on real facts and analysis rather than risky, speculative forecasts.

10. "It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for." - Robert Kiyosaki
If you're a millionaire by the time you're 30, but blow it all by age 40, you've gained nothing. Grow and protect your investment portfolio by carefully diversifying it, and you may find yourself funding many generations to come.

11. "Know what you own, and know why you own it." - Peter Lynch
Do your homework before making a decision. And once you've made a decision, make sure to re-evaluate your portfolio on a timely basis. A wise holding today may not be a wise holding in the future.

12. "Financial peace isn't the acquisition of stuff. It's learning to live on less than you make, so you can give money back and have money to invest. You can't win until you do this." - Dave Ramsey
By being modest in your spending, you can ensure you will have enough for retirement and can give back to the community as well.

13. "Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas." - Paul Samuelson
If you think investing is gambling, you're doing it wrong. The work involved requires planning and patience. However, the gains you see over time are indeed exciting!

14. "I would not pre-pay. I would invest instead and let the investments cover it." - Dave Ramsey
A perfect answer to the question: "Should I pay off my _____(fill in the blank) or invest for retirement?" That said, a credit card balance ringing up 30% can turn into a black hole if not paid off quickly. Basically, pay off debt at high interest rates and keep debt at low ones.

15. "The four most dangerous words in investing are: 'this time it's different.'" - Sir John Templeton
Follow market trends and history. Don't speculate that this particular time will be any different. For example, a major key to investing in a particular stock or bond fund is its performance over five years. Nothing shorter.

16. "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
In the beginning, diversification is relevant. Once you've gotten your feet wet and have confidence in your investments, you can adjust your portfolio accordingly and make bigger bets.

17. "You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets." - Peter Lynch
When hit with recessions or declines, you must stay the course. Economies are cyclical, and the markets have shown that they will recover. Make sure you are a part of those recoveries!

Wednesday, December 7, 2016

What are your options if the government puts a limit on gold holding?

 Courtesy : Econoomic Times

The market is rife with rumours that the government might take radical measures to unearth unaccounted wealth in the form of gold. This has made consumers uncomfortable about buying physical gold. A portion of the demand is expected to shift to Sovereign Gold Bonds issued by the RBI. These bonds offer 2.5% interest per annum (payable half-yearly) and their price is linked to the prevailing market price of gold. The bonds are listed on the exchange, facilitating early exit for investors. They mature in eight years, with an exit option at the end of five years from the date of issue. Sovereign Gold Bonds are a superior option to physical gold because while investors are assured of the market value of gold at the time of maturity, they also get periodical interest income. What’s more, the capital gains are fully tax exempt if the bonds are held till maturity and the investor can claim indexation benefits if he exits after one year.

The Sovereign Gold Bonds have evoked good response. Investors have bought bonds worth 14,071 kg of gold amounting to Rs 4,027 crore till now. The latest tranche, which was issued at a Rs 50 per gram discount on the prevailing market price of gold, saw investors buy bonds worth roughly Rs 915 crore. Anil Chopra, Group CEO and Director, Bajaj Capital, asserts gold bonds are a better alternative to physical gold. “Gold bonds not only provide better tax efficiency if held till maturity, they also do not have problems regarding safety and purity as is the case with physical gold.” Tanwir Alam, Managing Director of Fincart, reckons gold bonds will be a good alternative to fixed deposits as interest rates are likely to dip.

However, if the government cuts the interest rate on gold bonds, they will lose some of their charm. Since these bonds are linked to gold prices, a sustained disinflationary environment globally would also impact their returns, says Alam.

Investors may be deterred by some niggling issues as well. The latest issue concluded on 2 November but customers have not yet received the bonds. This could put off some investors, feels Manoj Nagpal, CEO, Outlook Asia Capital. “A better mechanism needs to be put in place by the RBI for the credit of these instruments in a defined timeframe.” There are other issues as well. While these gold bonds can be used as collateral for loans, several banks are refusing to sanction loans against them, says Vikram Dalal, Managing Director, Synergee Capital.

Meanwhile, the government’s Gold Monetisation Scheme has evoked lukewarm response, with a total of 5,730 kg of gold mobilised under the scheme as on 14 November. The scheme allows individuals to earn interest on idle, unused stock of physical gold in the form of jewellery, bars or coins. Depositors can get back the gold in physical form or in Indian rupees at prevailing market value at time of redemption. There is no capital gains tax on the appreciation in the value of gold deposited, or on the interest earned from it. Yet, investors have kept away from the scheme. “There are only limited number of branches for assaying the gold and investors have no control on the purification and no clarity on grammage of gold they will get in return for the gold they deposit,” says Amol Joshi, Founder, PlanRupee Investment Services. Most individuals hold physical gold in the form of jewellery, where the purity of the gold is often suspect and there is a high incidence of making charges. This deters people from submitting their gold lest it is valued far lesser than they expect. Also, the emotional attachment to jewellery and its snob value prevents most from parting with it. Even if a limit is put on gold holdings, people are likely to stay away from this scheme.

Saturday, November 19, 2016

Facing cash crunch after Rs 500, Rs 1,000 ban? Here's how to go cashless with digital payment options .

Courtesy : Economic Times
With the late-evening announcement made by PM Narendra Modi to scrap the existing Rs 500 and Rs 1000 currency notes from Wednesday, India's dream to go cashless has received a big push.

This big step taken by the Modi government will nudge people towards making digital transactions, with more people using virtual wallets and other digital modes of payment.

India, however, is an economy where cash is still the king. So this sudden shift may lead to some teething troubles. Here's help. We tell you how to manage your everyday transactions.

Unified Payments Interface (UPI):
UPI allows easier real-time transfer of money between bank account using smartphones. It is being touted as the biggest invention since ATMs. It has come to be a buzzword in the banking circles since its official unveiling on April 11. UPI allows a customer to pay directly to different merchants, both online and offline, without the hassle of typing card details, IFSC code or net banking or e-wallet passwords.

To use this app, the bank customer just needs to download the UPI-enabled app on his/her Android smartphone. To use this facility, the customer must have a bank account and a registered mobile number.

If you have these, you can create a virtual ID on the app or use your IFSC code and bank account number to complete the transaction.

A bank customer can use any bank's UPI app as per his/her choice.

E-wallet is an online prepaid account where one can store money, to be used when required. As it is a pre-loaded facility, consumers can buy an entire range of products from airline tickets to grocery without swiping a debit or credit card.

You can log on to sites ranging from telecom service providers, online grocery stores, recharge portals to even sites selling furniture that use e-wallet as an alternative payment option and get started on saving. The sites where e-wallet services are available generally have a few easy steps to get started.

What are the benefits
The sites where e-wallet services are available generally have the following easy steps to get started. They make for ease of use without having to enter your debit/credit card details for every online transaction.

For some sites there is no minimum amount. You can deposit an amount as low as Rs 10. You can pass on the benefits of your e-wallet to your friends and family as well. There is no chance of a decline of payment since e-wallet is a prepaid account.

Who offers e-Wallet
Some of the popular e-Wallets are: Paytm, Freecharge, Airtel, PayU Money, Oxygen, Wallet, Chillr, MobiQuick
Net Banking
Another option to transfer money from one account to other is through internet banking. There are three services available for such transfer: National Electronic Funds Transfer (NEFT), Real-time Gross Settlement (RTGS) and Immediate Payment Service (IMPS).
With IMPS one can transfer the money instantly and the service is available 24x7. The maximum amount one can transfer through IMPS is Rs 2 lakh. The transaction cost is usually around Rs 5 to Rs 15 depending on the value of the amount transfered.
In NEFT, the money gets transfered to another bank account during bank working hours in hourly batches. NEFT transactions cost between Rs 5 and Rs 25 depending on the value of the amount transfered. RTGS is for high value transactions-starting at Rs 2 lakh. And it costs Rs 30 to Rs 55 depending on the value of the amount transfered.
Plastic Money
There are three types of plastic cards available - Credit card, Debit card and Prepaid card. Debit cards are issued by the banks and they are linked to your bank account. Credit card are issued by banks and other entities. Prepaid card are alternative to cash and cheques and are issued by banks.

Prepaid card are very similar to prepaid mobile phone cards. All you have to do is buy a card and load it with the desired amount and the card is ready for use. One does not require any account to use these cards.


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