FW: Glaring Example of a Phishing mail

Enclosed is a mail that I received, which looks like an authentic mail from ICICI Bank, but is a typical phishing mail. 

 

The mail id, logo, the color combination, the link shown in the mail, the person who has signed the mail – all look authentic.

 

Take the cursor to the link in the mail (https://infinity.icicibank.co.in/BANKAWAY?Action.RetUser.Init.001=Y&AppSignonBankId=ICI&AppType=retail&abrdPrf=N), you will notice that it points to a site called www.praisefm.ky.  All the information that you key-in (account number, Password,PIN etc.) are captured and misused.

 

Please remember that NO BANKS ask for sensitive details like the card number, password etc. through a mail.

 

Its better to be cautious now than regret later.

 

Best wishes….KRC 

 

--- On Tue, 5/27/08, ICICI BANK <msg.id1.secure.icici.email.manager@sec.icici.mail.messenger.co> wrote: From: ICICI BANK <msg.id1.secure.icici.email.manager@sec.icici.mail.messenger.co> Subject: Please Restore Your Account Access Otherwise It Will Get Blocked To: kaushikrc2001@yahoo.com  Date: Tuesday, May 27, 2008, 6:17 PM Online Banking Alert Due to concerns, for the safety and integrity of your online banking account we have issued this warning message. It has come to our attention that your ICICI account information needs to be updated as part of our continuing commitment to protect your account in this year 2008 and to reduce the instance of fraud on our website. If you could please take 5-10 minutes out of your online experience and update your personal records you will not run into any future problems with the online service. Once you have updated your account records your ICICI account service will not be interrupted and will continue as normal. To update your records click on the following link(s) and fill in the necessary requirements : Personal Account Holders - https://infinity.icicibank.co.in/BANKAWAY?Action.RetUser.Init.001=Y&AppSignonBankId=ICI&AppType=retail&abrdPrf=N Business Account Holders - https://cib.icicibank.co.incorp/BANKAWAY?Action.CorpUser.Init.001=Y&AppSignonBankId=ICI&AppType=corporate Please sign in to Online Banking after you have verified your account to ensure your account security. It is all about your security. Chetan Bhagat Security Department ICICI Bank

 

 

How to select a financial planner

we regularly meet clients (both existing and prospective) for their financial planning needs. Many of the prospective clients are unsatisfied with the advice/service rendered by their existing financial planners. These clients often turn out to be victims of mis-selling/poor advice. By the time they realise this, the damage is already done. We think it would help investors if they had a ready checklist of parameters that they can refer to before employing the services of a financial planner.

Why you need a financial planner?
Before we venture into how to select a financial planner, let us first understand, why you need a financial planner in the first place.

The financial planner is someone who can help you invest across investment avenues based on your risk profile and investment objectives. Post-investment, he monitors your investments and ensures that you are on course to achieve your investment objectives. If necessary, he suggests changes to your financial plan so that you are able to achieve your investment objectives as planned.

Given the critical inputs provided by the financial planner in helping you achieve your financial goals, it is important that you select the right financial planner. We outline a simple 6-step strategy that you need to consider before employing the services of a financial planner.

1. Certification
More than anything else, this is a pre-requisite from the compliance point of view. Your financial planner should be certified and registered as a mutual fund agent with AMFI (The Association of Mutual Funds in India). Ensure your financial planner and his team members are certified.

2. Competence
Gone are the days when financial planning simply required delivering application forms. The traditional "one-size fits all" approach is passe and the sooner financial planners recognise this fact, the better it is for all concerned, especially their clients. With the increasing list of investment avenues on offer, selecting the one that suits you the best is becoming a challenge. To that end, competence and skill set are the basic criteria that investors should look for in an investment planner. Financial planners should be competent enough to provide you with a solution that can help you in achieving various objectives such as retirement and child’s marriage/education. Furthermore, the recommendations offered by your financial planner should be backed by solid research.

3. Value-add services
In addition to financial planning, your financial planner must provide related, value-add services that can assist you in the investment process. On-line tools and calculators are some of the more popular value-add services. These tools can help you keep track of your investments. These value-add services must form an integral part of the financial planner's offering.

4. One-stop shop
Every individual has different needs and the same undergo a change over a period of time. The financial planner should be capable enough to understand these needs and offer suitable products to fulfill them. Also, he should provide you with the entire range of investment products from mutual funds, bonds, fixed deposits to small savings schemes. In other words, he should offer a "one-stop" solution for all your investment needs.

5. Objective advice
The financial planner needs to have thorough knowledge of all the products offered by the various companies so as to provide unbiased and meaningful recommendations regardless of how much he stands to gain by way of commissions. Albeit evaluating the investment planner on this parameter may not be possible initially, you should be able to do so over a period of time (alternatively, references can prove useful in evaluating financial planers on this parameter). Providing objective and unbiased advice, which is in your interest (i.e. client’s interest), should be the planner's number one priority.

6. Accessibility
One of the common complaints from investors is that their financial planner is unavailable/inaccessible and therefore unable to provide adequate/prompt service. This is particularly common in a one-man setup where the financial planner’s services begin and end with him, with little or no backup. If the financial planner is preoccupied with some important clients or if he re-locates, it leaves you in a soup because your financial plan is in limbo. It is best to go with a financial planning initiative that is run by teams (as opposed to one-man setups) to ensure continuity of your financial plan.

 

Lesson worth learning

One rainy Sunday afternoon, a little boy was bored and his father was sleepy. The father decided to create an activity to keep the kid busy. So, he found in the morning newspaper a large map of the world. He took scissors and cut it into a good many irregular shapes like a jigsaw puzzle. Then he said to his son, 'See if you can put this puzzle together. And don't disturb me until you're finished.' He turned over on the couch, thinking this would occupy the boy for at least an hour. To his amazement, the boy was tapping his shoulder ten minutes later telling him that the job was done. The father saw that every piece of the map had been fitted together perfectly. 'How did you do that?' he asked. 'It was easy, Dad. There was a picture of a man on the other side. When I got him together right, the world was right.'

A person's world can never be right until the person is right

 

5 steps to select an insurance advisor

The presence of a life insurance policy is essential in every individual's financial portfolio. But at the same time, it is also important that the right insurance products be bought and that too for the right reasons. With so many insurance products vying for a place in the individual's portfolio, conducting a proper evaluation can become quite a task. Taking the help of an insurance advisor/agent can help solve this problem.

An insurance advisor/agent can play the part of the direct link between the insurance company and the insurance seeker i.e. you. He is the one who can help you select the right policy i.e. one which can help you fulfill your insurance needs. But for this, it is important that you connect with an expert and qualified insurance advisor/agent.

We present a 5-step strategy that will help you identify and select the right insurance advisor.

1. Is your insurance advisor certified?

Before selecting an insurance advisor, you should ensure that he has the necessary IRDA (Insurance Regulatory and Development Authority) certification. IRDA has laid down certain guidelines, which need to be followed by every individual who intends to qualify as an insurance advisor. Only on the completion of these requirements, an individual is allowed to sell insurance policy. Therefore, before selecting an agent, you must ensure that he has acquired the necessary qualifications and that he holds a valid license to sell insurance.

2. Does he offer investment solutions?

You should understand that the job of an insurance advisor is not limited only to selling insurance i.e. providing the insurance form, getting the same filled and submitted. Instead, with the changing scenario, more emphasis is now given to financial planning as a broader exercise. Now your insurance advisor is required to have a comprehensive understanding of your requirements and accordingly he should be equipped to offer you the policy that best suits you. Thus, his job has been extended to advising clients rather than simply selling insurance.

Since an insurance advisor is now required to play such a vital role, it is pertinent that you steer clear of advisors who normally sell policies, which earn them high commission even if those policies do not match your needs.

3. Does he have detailed product knowledge?

The insurance advisor should have an in-depth knowledge of all the products that his insurance company offers. It has been observed many a times that the advisor does not possess complete and accurate information about the products that he is selling. In our view, an advisor should not only have detailed information about all the products that his company offers, but also he should be well versed about the products from other life insurance companies, in order to answer the queries on that count effectively.

4. Does he provide timely after sales service?

The job of an insurance advisor does not end once the policy has been bought. He should provide you with regular updates on the policy status in terms of premium payments, declaration of bonus and any other important inputs that you need/would like to know. Not only this, your insurance advisor should also keep you updated about the new policies that can help you to reach for your financial goals.

5. Is he aware of all the formalities to be fulfilled towards claim?

An advisor assumes an important role at the time when a claim arises, as he is the sole contact point between the policyholder and insurer. He should have clear understanding of all the formalities that need to be fulfilled at the time of claim.

An insurance advisor should be more than a sales-man who pushes products that help minimise your tax liability. Insurance is a long-term commitment and could be needed at different points in time in one's life. Therefore, the advisor should be competent enough to service all your requirements by providing comprehensive insurance-based solutions.

5 principles of financial planning

Do you want to achieve financial freedom as early as possible? You want to but don't know how to do it? Do you know the principles that make up for successful financial planning?

Do you save a decent part of your salary and want to invest it in good mutual funds? How much saving is enough for you to begin investing in mutual funds for the long term? What are the returns that you can expect?

You have bought more than half a dozen mutual funds and want to pare your exposure so that you can focus only on a few? Which are the best mutual funds to invest in for the long term?

In a chat with Get Ahead readers on December 5, financial planning expert Vetapalem Sridhar answered these and several other queries related to financial planning and freedom for you and your family.

For those of you who missed the chat, here is the transcript.

Part II: 'Financial freedom is all about discipline'




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Suresh asked, GoodAfternoon Sridhar.I have Rs.10000 every month after all my monthy expenditures are done.Could you tell me what principles should i keep in mind while financial planning? Could you provide a basic plan also?

Vetapalem Sridhar answers, Hi Suresh, There r simple rules that u should keep in mind regarding Financial Planning.

1. Have clear defined objectives in life.

2. Never mix Insurance and Investments.

3. Ur risk profile does not depend only on ur feeling of fear. It primarily depends on the horizon of investing. The longer the horizon, the more is the risk taking ability.

4. A suitable Asset Allocation Plan (Debt/Equity/Real Estate) is the key to long term success of a Financial Plan.

5. Be aware of wat is happening to ur money, even if u r taking external help. Unless u put persomal effort the money will not grow to the best of its potential.




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NBH asked, Hello Sir, I can save around Rs 3000 each month after all my expenses. I have to pay premium of around 12000 on my LIC [Get Quote] I want to invest in ULIP which would be best for me to invest?

Vetapalem Sridhar answers, As u have already invested in a LIC, I suggest that if investment is wat u r looking for, then u should look at a diversified Mutual Fund with a 5-7 yr horizon. It would enable u to make more returns than a ULIP over the long run.




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Jeba asked, Hi Sridhar I earn Rs. 13000 per month out of which Rs. 5000/- is the monthly expenses invested in LIC annually Rs. 22,000/- Invested in Money Plus Rs. 10,000/- annually Started investing in PPF. planning to invest in MF Kindly Suggest what should be my strategy in future to secure a flat?

Vetapalem Sridhar answers, If u plan to buy a flat in 2-3 yrs time then, MF is not the place that u should invest. U should look at collecting the money reqd for downpayment in a bank FD. Also instead of putting money in a PPF a/c (which is for 15yrs), this money should be directed towards Mutual Funds.




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JKV asked, Sir, If have to choose 2 of the following MF for a period of 10-12 years on SIP basis, then what will these two: hdfc growth kotak opportunity sundram select focus magnum contra dsp ml tiger I am already investing in the following: sbi tax gain reliance tax gain franklin india prima plus reliance vision reliance power sector tata infrastructure.

Vetapalem Sridhar answers, Considering ur existing portfolio I would suggest HDFC [Get Quote] Growth and Magnum Contra. Do not increase any more ELSS funds. Sectors funds r not such a gud idea unless u have really done ur research on the sector. Ideally u should have between 4-6 funds to build a gud portfolio.




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cinki asked, 4 months back I have started 4k per month SIP for following funds FIDELITY EQUITY FUND GROWTH HDFC PRUDENCE FUND GROWTH OPT. DSP ML TIGER FUND GROWTH OPTION HDFC TOP 200 FUND - GROWTH OPT. SBI [Get Quote] MAGNUM GLOBAL FUND - GROWTH ICICI [Get Quote] SERVICES INDUSTRIES GROWTH RELIANCE [Get Quote] GROWTH FUND - GROWTH PLAN PRU. ICICI EMERGING STAR FUND - GROWTH FRANKLIN INDIA OPPORTUNITIES FUND - GROWTH IS this a right choice? I also hv FDs worth 5 lacs, debt free residential property worth 60lacs and debt free commercial property worth 15lacs (market value). My take home after all taxes and expenses is approx 1.3lacs per month. How much do u think i need to save and where to invest to accumulate enough which will give me 1 lac monthly income 15 years down the line after considering inflation..Is it a far fetched dream?

Vetapalem Sridhar answers, U have not mentioned ur age. But assuming that u r 40 yrs old. If u invest around 60K p.m. from now on for the next 15 yrs in diversified equity MFs, then u can withdraw equivalent to 1L (close to 2.9L pm then) in today's terms for the next 50 yrs. U have too many funds. U can look at reducing the number.




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Sukhi asked, Can you let me know some good investmemt options within the range of 10000-15000 per month which provide excellent results after 4-5 years?

Vetapalem Sridhar answers, U should look at doing an SIP into 2-3 funds to begin with. U can pick one of the ELSS funds. For the other u can look at HDFC Growth Fund, Sundaram Select Focus, Reliance Vision and ICICI Pru Dynamic Fund.




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kk asked, can you suggest me some mutual fund investment plans for children below five?

Vetapalem Sridhar answers, It is better to invest into regular diversified Mutual Funds in ur own name for the sake of children. Put them as the second holder with ur spouse as the gaurdian. This makes operational activities easy. Also read thro the following link to know about investing for children. It is a slide show so click NEXT to read thro. http://specials.rediff.com/getahead/2007/aug/07sli1.htm.




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neeta asked, Hello Sir, i earn 18k pm and have a expenditure of 10-12k pm, can u suggest for me the financial plannings? I am 37yrs with one 8 yeras old daughter.

Vetapalem Sridhar answers, Hi Neeta, U and ur Husband need to take up a TERM Insurance. Of the 6K tht u r able to save, divert that portion which u will not need for atleast 5 yrs towards an SIP into a diversified Mutual Fund. This should help u build funds that would take care of ur daughter's future needs.




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Madhu asked, Hi Sridhar.. Good afternoon.. I am working in an IT firm.. I am getting around 17k at hand.. being an employee , i am not too sure to achieve financial freedom in a couple of years.. What are my options for earning? What do you suggest of network marketing? I have seen people who were commmitted part time, for 3 years peoriod of time, achieve financial freedom. Want your suggestions regarding it. Thanks in advance.

Vetapalem Sridhar answers, I personally do not believe in the Network Mktg concepts that r floating around. It would be much wiser to spend the same time to learn about investing and managing ur money better. Over the long run by investing wisely, u can build much greater wealth thro investing ur savings wisely.




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Padma asked, Good Afternoon Sridhar....Including my husband's and mine, the take-home salary comes to Rs.60k.We don't have any dependents and children.Our goal is to get a car worth 5lakhs in next year (may be through loan) and start saving for children from next year (as we have planned for a child next year).We have our own house with the outgoing EMI of Rs.26k.Also personal loan EMI of Rs.8k which will get over by this september.We are looking for a good monthly income after retirement and good education for our children, ofcourse some funds for their marriage too. On top of this, as a salaried professional, we are investing Rs.1lakh each in MFs and ULIP. Can you please suggest a good financial planning for us? Are we supposed to trim anything in our current outgoings?

Vetapalem Sridhar answers, Dear Padma, It is gud to see that u have clearly identified ur future needs/objectives. The first thing to ensure is that u have adequate TERM INSURNACE cover. If ur loan guys have bundled a Life Cover, plz check up whether this cover lasts for the entire term of the loan. A lot of such covers last only for 5 yrs, which only protects that loan providers. Do not take any more Personal Loans in future. Continue investing into Mutual Funds. Also do not add any more ULIPs. Continue the existing ULIP till the end of its tenure and not only for 3 yrs. At a basic level these r the things that u MUST do.




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prithvi asked, Hello Sridhar! I earn Rs 8000 p.m. I want ot start sip of Rs 500 each in 2 good mutual funds. My investment period is of at least 3-5 years. Are SBI mutual funds good? If yes pls suggest 2 good MFs from SBI.

Vetapalem Sridhar answers, I would suggest u to pick SBI Contra and HDFC Growth. It is better to put money into different Mutual Fund companies.




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Juhi asked, Hello Mr. Sridhar I understand from your earlier advices and articles that SIP is the best way to invest in MFs to reduce risk to certain extent. However, my monthly income is not fixed as I am a small time self-employed person. But in some months, I do get a decent surplus income to invest. Not knowing much about MFs, I have been playing safe for the last 1 year by taking short term FDs. But I know that it is not entirely correct. Please advise for example what should I do if have a surplus amount of Rs. 10000.00 today and not requiring that amount for the next 3 -5 years. Just to mention, I don't have much financial backing to play in the 'high risk zone'. Would you still advise to go for SIP by breaking the above 10K into 5 or 10 parts and spread it over several months? Thanks.

Vetapalem Sridhar answers, Plz understand that there is no problem in investing in lumpsum amt into MFs. If u have intermittent income flow, then by all means u can invest when u have surplus money. SIP is more suitable for those persons who have a fixed salary and who r not disciplined in their saving and investing. Creation of wealth (returns) is more dependent on the amount of time that u remain invested into MFs rather than the method of investing into Mutual Funds. U need to have a 5 yr horizon in the current mkt scenario to invest into MFs. If mkts correct by atleast 15-20% then a 3 yrs horizon maybe suitable.




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Rajesh asked, Good Afternoon Mr. Sridhar I am 35 and single. Owing to financial crunch, I have only about 5 lacs invested in LIC and FDs and PPF put together. I have been doing good since last one year and I would like to have a plan for investment for my later years. I request you to kindly give a quick opinion about my current investment plan as below: a) 50% in secured returns like LIC, PPF, NSC, FDs etc [Obj: Retirement planning] b) 25% in Moderate Risk MFs- Balanced, ELSS MF schemes [Obj: Expenses for big events like marriage, education, travel, health issues etc] and c) Balance 25% in aggressive -- High Risk MFs -- Equity � Growth schemes [Obj: Capital growth]. Also, if you could please advise few good MFs for the above purpose where I can invest in? Thank you.

Vetapalem Sridhar answers, Following an Asset Allocation Plan is a gud strategy to meet ur future objectives. Probably u should look at increasing the ratio of money going to equities as u still have a lot of yrs of working left. For the core part of ur portf u can look at picking 3 funds from Reliance Vision, HDFC Growth, Sundaram Select Focus and ICICI Pru Dynamic, SBI Contra. U can look at adding a ELSS Scheme. For aggressive funds u can look at 2 funds from JM Emerging Leaders Fund, SBI Magnum Midcap, Franklin Opportunities Fund, Reliance Regular Savings Fund.




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ravinderpal asked, Pls.suggest best mf & tax savers also as i want to invest rs.15000 per month through SIP.Already invested rs.350000.00, last year in Jeevan Plus of lic, is it a good one? regds.

Vetapalem Sridhar answers, Sundaram Taxsaver HDFC Taxsaver Principal Tax Savings Fund These r the ELSS funds in my watchlist. As an investment option Jeevan Plus may not be the best one. Mutual Funds should be a better option.




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5 mutual funds that can make you RICH

Can mutual funds help you create wealth in the long-term? If yes, then how should you plan your mutual fund investment strategy?

What are some of the best funds if you were a long-term investor? Is investing in systematic investment plans, SIPs, better than going for an equity linked saving scheme, ELSS?

Is 2-3 years a good investment horizon for mutual funds?

In a chat with readers on July 4, Get Ahead mutual fund expert T Srikanth Bhagavat answered these and many more queries related to the art of building good mutual fund portfolios.

For those of you who missed the chat, here is the transcript.

gaurav asked, Is this the right time make investments, as market is at new high of 14,800 points?

Srikanth Bhagavat answers, At current valuations, the market is not undervalued or overvalued. But it is discounting current year's earnings entirely. Entry now will have better chance of pay off only if you have a 3-year timeframe. Markets have to create new highs as time passes - it is a reflection of a healthy economy.

MKay asked, I cannot take up much shock from the market changes. So I am planning to go for SIP. Which mutual fund gives good return? I am interested in long term investment through SIP. Can you suggest which fund is good performer and gives better value for my money?

Srikanth Bhagavat answers, The long term peformers are HDFC [Get Quote] Equity Fund, Templeton Prima Plus, Reliance Growth Fund and DSPML equity Fund.

rawat asked, I am looking for MF of high returns. I am an aggressive investor and looking for a timeframe of 3 to 5 years. Suggest five goods MFs for me.

Srikanth Bhagavat answers, Pru Dynamic, Reliance Diversified Power Sector Fund, Pru Services Sector Fund/ Infrastructure Fund, Templeton Prima or Reliance Growth Fund.

Amba asked, For long term suggest good equity funds. Should I pay extra payment to my bank for closing home loans early? Suggest MF for investing Rs 20K.

Srikanth Bhagavat answers, If the high EMI's now are putting pressure on your income, go ahead and prepay some of the loan. Else, your long-term returns from equity are likely to be more than the interest you are paying to the bank.

dsharmas asked, When should one redeem mutual fund units? As in should one also keep on booking some profits when markets are high and just churn the principal amount or inviting exit loads will amount to strategy backfire?

Srikanth Bhagavat answers, If you can make out that there is evidently a bubble situation, then you could exit. Otherwise, churning is expensive. Re-entry in the market is very difficult at low points. In falling markets, one is very often overcome with pessimism and hence miss out on the correct entry points. Leave long-term money invested as long as your fund is performing.

ss123 asked, Hi Srikanth, I have two questions. 1. While investing in debt funds (monthly income plans) is it wise to go for SIP?

2. For the long-term (10 - 15 years) investment how much does the SIP performance differ from one time deposit for diversified equity funds?

Srikanth Bhagavat answers, Debt funds do not have much volatility -- hence a one-time investment is ok. For long term equity investing, the one time investment may be beneficial as compared to an SIP -- but you must have the stomach to sit through the volatility. If you are a first time investor, start with an SIP. If you have already experienced the volatility, go for one time long term!

Samir asked, What are the prospects of infrastructure mutual funds for a long-term investments? Which are the good infrastructure funds?

Srikanth Bhagavat answers, Given the lack of infrastructure in India, and the Governments willingness to spend on it, It is regarded as a profitable sector. You could have upto 10 per cent of your equity in such funds (Pru Infrastructure /Tata Infrastructure).

mumtaz asked, Dear Shrikant, good afternoon. I am an NRI and I am investing Rs 10,000 per month in HDFC SIP plan. I have planned to invest for 3 years. Please let me know seeing present market situation what kind of returns can I expect after 5 years. Also please suggest me what are other options where I can invest another Rs 5,000 per month.

Srikanth Bhagavat answers, Given the country's GDP growth of at least 8 per cent, one can expect a 15 per cent to 18 per cent per annum returns. Another good fund is the ICICI [Get Quote] Pru Dynamic for NRIs.

sundar asked, Hi Sri! For the short-term suggest a few best schemes?

Srikanth Bhagavat answers, Low risk, short-term funds are liquid plus schemes such as ING Liquid Plus and Deutsche Money Plus. With a 6-month horizon, SBI [Get Quote] Arbitrage Fund looks good.

ajit_rai asked, Hi Srikanth,for my tax saving as I have to invest Rs 1 lakh, I have Rs 28k in insurance, Rs 36k in ELSS. Still I need to invest Rs 36k to complete Rs 1 lakh. Where should I invest Rs 36k now? Pls advice.

Srikanth Bhagavat answers, Since any tax saver has a 3 year lock-in, go for another ELSS. HDFC Tax Saver/SBI Tax Saver/ Pru Tax Saver.

sadashiv_salunkhe@rediffmail.com asked, Please give details of monthly income plan. Can I get Rs 1,000 confirmed per month after investing Rs 75,000 in a mutual fund?

Srikanth Bhagavat answers, Doubtful. Unless you do not mind depleting the principal amount!

Sajal asked, Mr. Bhagavat, could you please answer my question? I have taken 3 SIP's for 36 months. HDFC Equity Fund, FT Prima Plus and Reliance Diversified Power Sector Fund (Growth) putting in Rs 4,000 per month for the next 3 years. Do you think it's a wise decision? Please do reply.

Srikanth Bhagavat answers, Seems fine. All are good performers.

Nidhi asked, Hey Srikant, I'm again posting my question to you. Having a running SIP of Rs 5,000 each in 3 funds ie. HDFC Equity fund (Dividend), Reliance vision Fund (Dividend) and Magnum Contra (Dividend). How long will it take for me to become a crorepati?

Srikanth Bhagavat answers, About 16 years, assuming a return of 15 per cent per annum and that you continue with these SIPs.

BINU asked, I have investment in following funds. Can you tell me how are these funds. My investment duration is for 5-6 years. HDFC Equity, HDFC Multicap, HDFC Core and Satellite, HDFC Long Term Advantage Fund, HSBC Equity, Reliance Growth, Reliance Vision, Tata Infrastructure, Sundaram Midcap, Birla Sunlife Equity, Franklin Templeton Blue Chip, Franklin Templeton Flexi Cap and HDFC Top 200. My investment in these entire funds stands today @ Rs 7 lakhs and I am continuing with SIPs in the following funds 1. Reliance Growth and Vision 2. Birla Sunlife Equity 3. SBI Contra. Please advise about the strength and weakness of my investment strategy.

Srikanth Bhagavat answers, 1. There is too much diversification. Reduce your portfolio to about 4 funds. 2. HDFC Multicap and Core and Satellite funds are not performing too well. 3. Birla Sun Life Equity is a recent performer.

sandip asked, Hi, I have taken SIPs in HDFC Equity Fund, RIL [Get Quote] Growth Fund and PRU ICICI Power of RS 2,000 each for two years as suggested by my advisor. Is it ok?

Srikanth Bhagavat answers, 1. You can stop the SIP anytime you wish without penalties. 2. Have a longer time frame to invest and remain invested in equity. 3 years plus is a good time frame.

5 Forex Day Trading Tips

Forex day trading is a popular way to try and take a piece of the 3 trillion dollar a day Forex market. To tell you the truth, I prefer longer duration trades better than day trading, but in this article I'll share some tips on how to make the most of this trading strategy.

5 Forex Day Trading Tips

1. Set Stop Loss and Take Profit prices for each trade - You need to be a machine when it comes to day trading, and the best way to do this is to set a Stop Loss and Take Profit price for each trade. This will save you a lot of time.

2. Get a commission discount - If you're going to go day trading, you might as well get a commission discount from your broker. You have every right to ask for a discount because as a day trader you will be making a lot of transactions which is just the sort of trader brokers love to keep for themselves. This will save you a lot of money.

3. Trade without emotions - Forex day trading is an emotional process, but you need to fight against that because with trading, emotions mean mistakes. Costly ones. You need to trade with your head and not your heart.

4. Trade currency pairs you know well - There are many currency pairs to trade, but a good Forex day trading strategy for you would be to stick to pairs you know very well and are familiar with their countries.

5. Trade with a software by your side - Trading blind is always a mistake. Doing it when you're day trading can be financially destructive. Always trade with a software to help you make the best decisions. Even a single trade a day can mean hundreds of dollars of extra revenue each week.

4 reasons for buying insurance products

Ask individuals wanting to buy life insurance, about how they do their tax planning and the first reply will be - insurance policy. Such is the nature of life insurance. It is bought by almost everyone right from the bigwigs of the business world to small retail investors. And most buy it for one core reason – to save tax. But should this be the only reason to buy a life insurance policy? We don’t think so. Here, we present some guiding principles for individuals who are contemplating taking life insurance.

1. Passing away early
One is never sure about life. We often come across people claiming that nothing is going to happen to them; that they are too young to pass away. But do they really know what the future holds for them? We can assure you they don’t, because the question ‘What if?’ has probably never crossed their minds. We only have to read newspaper headlines about the recent Tsunami, the earthquake that took place not so long ago and such other natural calamities to understand how the future can be unpredictable.

Individuals need to insure themselves to secure the future of those who are dependant on them; especially so if they happen to be the sole breadwinners. You wouldn’t want them to go through hardships or rely on others/relatives, etc. This, in fact, is the prime reason why one should buy an insurance policy.

2. Living too long
Advances in the field of medicine have grown by leaps and bounds over the past few decades. Due to this, life expectancies have gone up. This poses another problem for individuals. It is generally observed that individuals who tend to live way beyond their earning years like say, till the age of 85 or 90, usually face a problem coming to terms with increasing costs of living. And that is not taking into account the manifold increase in medical expenses of course. This takes place largely due to imprudent financial planning by individuals during their earning years. Insurance, if bought at the right time for the right amount, acts as a saviour in such times. Individuals could opt for a pension plan offered by insurance companies, which suits their profile in terms of income, proposed retirement age and proposed expenses post-retirement. Such plans provide an annuity, which means that individuals keep getting a fixed sum every month/year after they have retired.

3. Painful existence
Maybe an individual has planned well during his earning years to secure himself financially. He has also designed his financial portfolio in such a way that he is drawing a comfortable monthly income to support his family expenditure. But what if an individual were to have a health problem afflicting him or his spouse? What if the remedy to this ailment were to cost him a sum beyond his financial capacity? Here again, life insurance can act as the saving grace in two ways. One, by way of a medical rider like the accidental death benefit rider, permanent disability benefit rider, critical illness benefit rider. These riders are taken along with the life insurance plan and help cover the medical expenses.

And secondly by allowing the individual to surrender the insurance policy. Of course this should be done only in case of an urgent need like a serious health problem and even then, after all other sources have been exhausted. Surrendering the policy will help in the generation of a lumpsum amount that can be used for covering the high cost of medical expenses.

4. Tax benefits
Do we need to elaborate on this any further? Traditionally, life insurance has always been bought more for tax benefits than for what it is actually purported to do; i.e. insure human life. But the role of life insurance in an individual’s tax planning cannot, in any way, be undermined. Under the new regime, individuals can now invest upto Rs 100,000 in insurance premia to avail of a deduction from taxable income. The tax sops provided on insurance help ‘increase’ the individual’s disposable income and make him consider taking a life insurance plan which he otherwise may not have done.

We cannot change yesterday; that is clear. Nor can we begin tomorrow until it is here. But what we can and should do is to make today count to ensure ourselves of a financially secure and stable tomorrow.

3 ways to stay on top of stock market

With stock markets oscillating wildly, the bigger concern for investors is to protect their investments over the downturn, rather than clock aggressive growth during the upturn.

Protecting your investments in a falling market is easier said than done. It involves taking on that precise quantum of risk that can spur your investments in a rising market and cut losses in a falling market.

While this sounds very difficult (and it is, even the best fund managers often struggle in striking this sweet balance between risk and return), we have not one, but three ways for you to stay on top of stock market volatility.

1. Good old balanced funds

Balanced funds, if you still remember them, are asset allocation investments. They invest across equity and debt markets (minimum 65% of assets in equities), which leaves them well placed to serve three objectives:

Shift across asset classes based on the best available investment opportunities.

Use the debt component intelligently to de-risk the equity portfolio during volatility in equity markets.

Book profits in equities regularly which again de-risks the equity portfolio by capping the level.

Like balanced funds, monthly income plans (MIPs), offer a similar investment proposition, although to a lesser extent. Since MIPs usually invest 15%-25% of assets in equities they are suited for investors with low-to-medium risk appetite.

In a falling market, when being fully invested in equities can prove perilous, a balanced fund with a 35% debt component might just be what the doctored ordered.

2. Investing through SIPs

Unlike balanced funds, which are usually ignored, SIPs have been widely adopted by investors. The reasons are not far to seek. Investing Rs 500-1,000 every month is a lot easier on the wallet than investing (a minimum of) Rs 5,000 lump sum.

By investing smaller amounts at regular intervals, you can reduce the average cost of your mutual fund investments over a market cycle. This is possible because when markets are volatile, SIPs activated during that period lower the overall average cost of purchase.

So investors who have opted for the SIP route welcome the volatility in stock markets and look forward to more of it going forward.

3. Always stay diversified

When markets are on the rise and everything appears hunky dory, that's when investors are most prone to make mistakes. That is the time when various high risk investments like thematic/sector funds are spawned.

Since a rising tide lifts all boats, most fund houses are quick to respond to a rally by launching high risk investments like thematic funds which they otherwise would not have launched.

Taking on higher risk pays rich dividends in a rising market, which explains why investors are prepared to risk their monies in a thematic fund that they would otherwise not have done.

Don't believe us? Compare the number of investors who invested in technology/software funds in 1999-2000 (before the tech crash) with those who invested in them in 2000-2002 (after the crash). Once the tech crash had set in, technology funds were the most reviled investments.

On the other hand, investors who were invested in well-diversified equity funds were relatively better off in the face of market volatility.

We see a similar situation emerging at present. Investors are going all out to invest in infrastructure funds ignoring the higher risk and the fact that they are in the midst of a stock market rally which enables such funds to generate above-average returns.

If the markets were to correct sharply, themes like infrastructure could be the hardest hit making investors in thematic funds wish that they had invested in diversified equity funds instead.

3 Simple Stock Tips

So, you want to invest in the stock market. Doing so half-heartedly and without the proper due diligence can destroy you. I've been in the stock market for many years and I've made huge trades and trades that were huge mistakes.

How can you avoid getting slaughtered in the stock market? I've come up with three simple stock picking tips that will help point you in the right direction.

Stock Tip One: No Easy Way

Sorry, there's no easy way to pick winners. Buy into all those "systems" if you want, but in the end you'll be left high and dry. Picking winning stocks is a process—an on-going process.

Stock Tip Two: Don't hold a stock for decades

There's an ancient thought out there that says you should buy a stock and hold it for 10-20 years to make money. I don't know about you, but this doesn't sound like a good time.

If you were to look at everyone who makes a lot or has made a lot in the stock market, you'll find that they trade either very often or somewhat often. Rarely will they have a stock in that sits in their portfolio for years. They may own it off and on in that span, but that's the key.

Stock Tip Three: Do your homework

Don't just buy a stock because a friend of a friend said it's going up or because some service is touting it. Learn how to analyze stocks and companies for yourself.

Ask yourself, why is this stock going up? If you can't answer it, specifically, it's not a good move.

Are You Stock Trading Ready?

Stock trading is not for everyone. In order to be a good stock trader you must first understand market fundamentals and then build upon that knowledge to make good stock picks.

You must know how the markets move. You must know the various indexes and how they perform. You must know how different types of stock classes i.e. blue chips, small caps, equities, etc respond to real world events.

You must understand how interest rates impact the various stock classes.

You must be able to recognize buy and sell signs. And this list is just for starters.

In other words, stock trading is not for the naive and inexperienced. Before you go and plunk down money in the stock market you must know your stock trading ABC's or have your lunch ate.

There are several ways to gain the education you need to become a good stock trader. You can take a stock trading course at your local community college or courses given by local business groups. You can load up on stock trading books at Amazon.com or from your local library and study them religiously. You can attend stock investment seminars given in your local area. And of course you can search the Internet where there is tons of valuable information on the subject of stock trading.

But your best bet when it comes to stock trading maybe to turn it all over to a professional. Good stock brokers are worth their weight in gold. With a good stock broker you can avoid the stock trading learning curve which is fraught with pitfalls. Indeed, hiring a broker might be the best course of action because stock trading is a serious business that takes no prisoners.

3 reasons why SIPs put off investors

This article written by Personalfn for Business India, and was carried in its April 25, 2005 issue with the same title Right now in the mutual fund industry, if there is one 3-letter word that can give the other one – IPO, a run for its money, its SIP (Systematic Investment Plan). The benefits of SIP investing and the convenience to retail investors have been much touted. However, at Personalfn we came across some investors who felt short-changed after having started their SIP investments. There can be little debate that SIPs promote two traits that are invaluable to financial planning – §  Regular investing that makes market timing redundant §  Rupee cost-averaging that beats investing lumpsum Despite the pros, investors would be well-advised to note some demerits associated with SIPs. Although its not like the negatives bring down the entire edifice on which the argument for SIPs is based, they are nonetheless pertinent. 1) Exit isn’t as cheap as you thought Most SIP investors probably aren’t aware that there is an exit load slapped on premature redemption since the entry load is waived off on SIPs. In a lot of cases 12 months is the minimum time period for which investors have to be invested to escape without an entry load. So investors assume that they can redeem the entire amount in the 13th month after investment. While this assumption is flawed, it is not necessarily the investor who is to be blamed. Often, investment agents in their ‘enthusiasm’ to promote SIPs forget to mention exactly how the redemption schedule for SIPs work. Know your redemption schedule Cheque date SIP Number Earliest redemption 1-Jan-04 SIP 1 1-Jan-05 1-Feb-04 SIP 2 1-Feb-05 1-Mar-04 SIP 3 1-Mar-05 1-Apr-04 SIP 4 1-Apr-05 1-May-04 SIP 5 1-May-05 1-Jun-04 SIP 6 1-Jun-05 The earliest redemption of SIP1 can be made only in the 13th month since the cheque date. Likewise in the 14th month, the investor can redeem SIP2. Notice each SIP has a minimum investment time frame of 12 months, not just SIP1. So you can redeem SIP6 only in June 2005. If you want to redeem the entire SIP amount in one go without incurring a sales load, you will be able to do it only in June 2005. 2) Rupee-cost averaging does not always work How many times have we heard elaborate presentations and seen fancy tables and graphs that show how rupee-cost averaging is one very important reason to take the SIP route to mutual fund investing. However, rupee cost-averaging does not always work. It certainly does not work in a rising market. This is because a market that shows a consistently rising trend, will ensure that every subsequent SIP in an equity fund is at a higher NAV than the previous SIP When rupee-cost averaging fails Cheque Date NAV (Rs) SIP amount (Rs) No. of units 1-Aug-04 11.72 1,000 85.3 1-Sep-04 12.53 1,000 79.8 1-Oct-04 14.03 1,000 71.3 1-Nov-04 14.12 1,000 70.8 1-Dec-04 15.84 1,000 63.1 1-Jan-05 18.68 1,000 53.5 Average NAV        14.48 (This is a real example of an existing diversified equity fund.) It is obvious from the above illustration that the SIP mode of investing wasn’t such a great idea. Rupee-cost averaging did not work its charm for the investor who had the option to enter the equity fund through a one-time, lumpsum investment on at least four occasions from August 1, 2004 till November 1, 2004 to beat the average NAV of Rs 14.48, but yet chose the SIP way. If he had taken the opportunity to enter lumpsum on anyone of these occasions he would have been better off than opting for the SIP route. Of course, that is not to say that rupee-cost averaging is a failure, but it works particularly well if you have taken an SIP over a longish time horizon of 12-18 months to benefit from a falling market. 3) The exit load could really pinch you Some investors opt for SIPs thinking that despite the drawbacks it is nonetheless a smart way to invest as opposed to one-time lumpsum investments. This is right, but SIPs work best only if you last the entire tenure and don’t redeem units prematurely. Some investment consultants advise their clients to go in for SIPs because the entry load is waived off. Their argument is that since the entry load is waived off, then even if the client withdraws prematurely, the 2.00% exit load (approximately) is not really damaging as its just a charge for not paying the entry load. This argument is flawed because the entry and exit loads are charged on different amounts. For example, from the above real life illustration its easy to understand how the exit load can be particularly high on premature redemptions from an SIP. Take the first SIP at an NAV of Rs 11.72 (in the table above); if the investor had entered one-time at that level at 2.00% entry load it would have cost him Rs 0.23 (2% of Rs 11.72). But since he has opted for the SIP route let us understand how a premature redemption works for him. Say, the investor wants to redeem his units by January 1, 2005 because the NAV has climbed significantly and he wants to capitalise on the opportunity. He will be slapped with a 2.00% exit load since the entry load was waived off on the SIP. However, the 2.00% exit load will be calculated on Rs 18.68, which amounts to Rs 0.37. Compare this with the Rs 0.23 he would have had to pay if he had entered lumpsum in August 2004. Of course, our illustrations are on hindsight and the investor has no way to know this in advance. That is understandable and as we have outlined we are not out to debunk SIPs. However, SIPs need to be promoted by the investment agent/distributor community after explaining all the merits and demerits to the investor so as to enable him to take an informed decision.

 

 

3 Key Advantages Of A Large Stock Investment Fund

There are vast differences between large investment companies and the smaller ones in terms of fund size, return performance and the management team. How stock investors could benefit from investing through a large stock mutual fund? Just to name 3 key advantages here for investors' reference.

1. Lower Expenses for Diversification

The more obvious advantage of an investment fund rests on the mere fact that it has much more capital than any but a few individuals own. It can diversify into a reasonable number of stocks with reduced percentage of expenses over your total investment sum.

An investor wanting to reduce the gamble in owning common stock must hold stock in a good many companies. Momentarily ignoring the existence of investment companies, suppose a man decides that for adequate diversification he should own stock in fifty companies, and for the companies he selects the average price per share is $30. Conceivably he could buy ten shares in each company at a total cost of $15,000, plus at least $3,000 expenses.

In return for his money, the first things he gets back are fifty stock certificates, which he must keep safe. When he sells a certificate at any time in the future Uncle Sam requires that he know when he bought it and the cost. Also, in the course of a year he will receive some 200 dividend checks, for a total of perhaps $60. The whole thing sounds silly, doesn't it?

This example suggests three negative points about an investor's obtaining diversification without using an investment company:

(A) He must pay out at least a few thousand dollars, and not many investors start with that amount of money.

(B) The expenses incurred in making small, direct purchases of stock may be higher than on the same total amount bought through an investment company, especially if a buyer figures in the fees for later sale of the stock.

(C) Even if an investor has capital enough to buy many times 10 shares in each of fifty or more companies, he still takes on a lot of work in selecting and keeping track of so many companies, and in handling his certificates and dividends.

2. Professional Investment Manager

Another advantage of having considerable capital in one pool under an investment fund is that a large fund can afford to pay the salaries of a competent portfolio manager and research deputies. Aside from the sales charge, most of the expense incurred in a typical investment company is the fee paid to the group responsible for keeping the fund invested. Usually this fee is fixed at a rate equivalent to 0.5 to 1 per cent of the fund's assets each year. Suppose a fund's capital is a mere $500 million; 0.5 per cent of this is $2.5 million, which the fund can pay for its investment managers, assistants, and operations expenses. A fund far smaller than this may be able to hire a skilled manager, because he expects a rapid growth of the fund's assets, and consequently of his management fee. Or the same management organization may be in charge of more than one fund, with some of the assets of each fund invested in stock of the same companies, thus reducing the work for each fund.

It appears that in 2005 the investment companies with the best performance records are apt to have total assets of at least $300 Billion either in one fund or in a group of funds under the same management.

3. Fund Maturity and Track Records

Large size also implies maturity. It is practically impossible for a fresh investment company to accumulate $3 billion of assets, let alone 100 times that much, until either the fund has been in existence for a good many years, or else its management group has an established reputation strong enough to draw capital rapidly into a new fund. In 2005 most of the funds, or groups of funds, with $300 million assets or more, are at least twenty-five years old. So a fund with a good performance record is apt to have age as well as size. The giant of the industry Fidelity Investments was founded around 1930 by Edward Johnson II.

These comments on size may cause a reader to wonder: "How does a new investment company get started?" One answer is that many investors are so careless that a salesman with colorful prospectus can sell them shares in a fund with neither size, age, nor reputation. Or a buyer inclined to gamble may want to "get in on the ground floor," whatever that means.

Of course, a fund can be large and still have poor or mediocre management. Large size merely gives a fund its perceived stability and the opportunity for a fine performance.

3 Easy Stock Market Tips

Everyone wants the chance to strike it big, but few actually know how. The stock market has always been where many hopefuls go to try to bring their dreams to reality. This is not always easy but with some tips it can make starting your journey into the stock market a lot easier.

1. Check with your company and see if you are part of a stock option- Many people may be involved in this and not even know it. This is when employees are rewarded for helping the business grow with complementary company stocks. This is a great way for many people to start off. With stock options you can either invest in the company, hoping that it will grow, or you can bet that the company is going to lose money and do poorly. Either way their is risk but if you pick right there may be great reward.

2. Try investing in penny stocks- Penny stocks are companies that have either just started out, or they have fallen from a much higher price. The risk may be high if you put a lot of money into the stock, but the reward will be enormous if the price goes up, even a couple cents. Don't believe the people that claim a certain penny stock is going to increase by thousands of percent and you should buy now. Most of those are lies, you should do your own research, and buy stocks that you are comfortable with.

3. Get a bonds guide- Bonds guides give you a look inside the world of bonds and tell you when you should get involved. Bonds are more of a long term investment for people looking for future financial stability. These bonds can pay off really well for you.

3 Best Ways To Invest Your Money - Getting Outstanding Returns

The point of investment is to get a return on your capital within a given time frame. The shorter the time frame, the bigger the return, the bigger your compounding result will be each year. Investors focus on getting the biggest possible compounder each year with the least possible risk.

This factor risk defines the quality of an investment. A quality investment is of course an investment where you actually get back your seed capital as well as a percentage margin on top of that capital. So the best ways to invest money are ones where your risk is very low or nill.

There is no such thing as a nill risk investment, there is always some risk. Even the investment of putting your money in a bank has at least some small element of risk involved. This is considered by most investors as the safest investment of all because a bank is a certain kind of business that is actually backed and guaranteed by the government.

So a bank deposit is the best way to invest your money, if you have several million dollars. The single digit return makes it impractical as a source of passive income for investors with less than at least a million dollars because the returns are too small to live on. But for large capital accounts it is still the safest place to park money.

The next safest investment is real estate because unlike the stock market or mutual funds, your money leaves your hands but you receive something of tangible worth in exchange. This is a very significant thing, because if you compare it to the stock market, you receive nothing more than a receipt for an investment in shares. This receipt is an acknowledgment but it has no intrinsic value in and of itself. The actual paper document you receive has no value.

What this means is that the risk is out of your hands to control. You have passed on the money to someone else and the capacity to control risk is completely absent. Control and risk are very closely connected, so when that control is relinquished, then so the risk factor increases significantly.

The final best way to invest money is a variation on real estate, however it can be used even with small capital accounts. The entry costs of real estate are large, you need a deposit, you have legal costs and other associated expenses. However, you may also invest into investment objects that match your current level of seed capital. For example, you could quite easily buy common goods that are mis priced and sell them at a profit. This sort of transaction can happen as quickly as a week and the return can be quite high. This capacity to rapidly turn over an investment has powerful ramifications on a port folio. If you can buy something for $100 and sell it for $140 that is a 40% mark up, if you can do that in a week, you have quite an investment model if you can maintain those levels of compounding. $100 turns into a million dollars in only 28 such transaction.

"There are 2 places to invest your money - The Indian stock markets and gold

Having said that, let me explain why.

Buying the basket of stocks that make up the BSE-30 Index in 1980 would have given you a return of 136 times your investment. If you were to average out this return over the 27 year period, that works out to 20% per year every year for these past 27 years.

There will be continued economic growth in India over the next decade. This means that Indian companies will continue to grow sales and profits and - because share prices are a function of these growing profits - an investment in shares of Indian companies should generally be a pretty profitable investment.
That is why I like the Indian stock markets - even at a 20,000 Index level.
There will be bad years and scary quarters but a disciplined investor can hope to earn reasonable returns in the long term.

And you can make this return in a variety of ways, each of which is based on disciplined thinking and sharing our frank views with you:

1)	do your own stock selection: be a subscriber to www.equitymaster.com
2)	ask our financial consultant to help build a portfolio of mutual funds for you: be a client of www.personalfn.com
3)	invest in the Quantum Long Term Equity Fund, a vehicle for you to continue ploughing your savings into - regularly: reach out to us at www.QuantumAMC.com

But there is another great investment opportunity staring us right in the face: gold.
That's right. Buy a lot of gold. Gold is now at around USD 900 per ounce. It was trading at USD 37 in 1971. Gold then shot up to USD 850 in 1980, collapsed all the way to USD 260 in 1999, and has only now crossed the previous peak of USD 850 that it established 27 years ago.

I own gold. Now, I am ready to buy some more gold. In the Quantum Gold Fund (an open ended ETF). Just as you should.
Why?
Because many of the central banks of the world have lost sight of what they are supposed to do.

As a student of economics, we were taught that the role of a central bank was to ensure that it maintained the value of the paper currency issued. It did this by ensuring that every time it printed paper, it had a fixed ratio of gold lying in its vaults. But, over the past few decades - and increasingly over the past few years - the central banks have been printing more paper and not worrying about the gold they have as a reserve for their paper currencies. And paper currencies are, in the end, paper. History has shown us that governments have fallen and paper currencies have died with them. Gold has been a currency - a medium of exchange - for centuries. No paper currency has existed for that long. Not the US Dollar. Not the Sterling Pound. Not the Indian Rupee. As governments have printed larger amounts of paper currencies, these currencies have lost value against real assets like property. Or even a samosa.

Of Samosas and Gold...
In 1980, it probably cost you Rs 1 to buy one samosa. Today, it costs you Rs 10. Has the samosa become 10 times larger over the past 27 years? Not at all. The fact is that Indian rupee has lost value over the past 27 years so the samosa wallah wants more of your rupee to sell you the same samosa. He wants 10 times the rupees for that same samosa. Or look at the price of your house. In 1980, it cost Rs 200 to buy one square foot of property in Cuffe Parade, Bombay. Today, it costs Rs. 40,000 per square foot. That is an increase of 200 times! Money, obviously, buys less these days. Paper money has lost value. That is what is called "inflation".

Now look at gold. It was USD 850 briefly in 1980 - when samosa was available at Rs. 1 and land in Bombay at Rs 200. Today it is at USD 900. Interesting, isn't it? The one currency that governments cannot print at will and which has, across civilisations, been a "store of value" - a hedge against inflation in the language of economics - has not really seen any increase in price over the past 27 years.

If the price of gold was to move in line with the price of samosas, gold should be trading at USD 9,000 per ounce or over Rs 1 lakh for every 10 grammes. But gold can be bought for around Rs. 11,000 for every 10 grammes today. If gold was to have moved along with the price of Bombay property, gold should be trading at Rs. 20 lakhs for every 10 grammes.

That may sound absurd. But sometimes the most attractive investment opportunities are those that sound absurd. Like Infosys at its IPO in 1992 or Zee at its IPO in 1993. You could have multiplied your money by over 1,000 times in each of them.

Don't get me wrong - not every absurd idea is a good investment.
And not every investment will increase in value by 10 times let alone by 1,000 times. But, sometimes, simple logic and harsh facts should allow us to make simple investment decisions. Do I expect the price of a samosa to fall to Rs. 1 - because that price for a samosa, justifies the fact that the price of gold has not moved in 27 years? Do I expect the price of Bombay property to fall to Rs. 200 per square foot? Or do I expect gold to start climbing and get closer to the equivalent price of a samosa and the price of Bombay property?

Inflation and uncertainty require insurance. Gold is an insurance against absurd government policies - worldwide. I own gold. And I am buying more of it at the NFO of the Quantum Gold Fund. To diversify my portfolio. To spread my risks. You should consider investing in the Quantum Gold Fund (an open-ended ETF). Unless you believe that your next samosa will cost you Rs. 1.

 

5 stocks worth investing in

The Indian markets had fallen by almost 30 per cent between January and March, 2008. Since then, they have recovered half the lost ground. The impact of the fall was so hard that many stocks were beaten down to levels disproportionate with their fundamentals and growth prospects.

Interestingly, even as the markets have risen, many stocks are still quoting well below their worth and provide investment opportunities.

The ways of identifying value stocks are many, including looking at ratios like price-to-earnings and price-to-book-value besides, factors like replacement cost and dividend yields. But if factors like company management and track record, healthy growth prospects and sound business model, are also considered, it only increases the margin of safety.

To put it differently, a low PE or low P/BV does not necessarily mean cheap but, it only helps in keeping a lid on the price one pays vis-�-vis a company's past earnings or book-value. Thus, it makes sense to look for stocks that offer a good combination of value and growth.

In a bid to identify such stocks, the Smart Investor looked at companies by considering factors like market capitalisation (over Rs 250 crore), PE (under 15), financials, return ratios and cash flows (should be positive).

While companies with a dividend track record were preferred, their growth prospects were given utmost importance.

Many of these companies are from sectors that have underperformed in the past (even before the markets crashed) due to different reasons, including change in macro environment and cost pressures, which typically, are not permanent in nature.

This also means that the worst is already reflecting in their stock valuations. And, since the long-term growth prospects of most of these companies look healthy, there is potential for their stocks to deliver decent returns.

Apart from the companies mentioned below, there are many public sector banks that are quoting at a good discount to their true values.

Additionally, stocks like Aurobindo Pharmaceuticals, LIC Housing Finance [Get Quote], Wanbury and Lok Housing, which are quality buys, continue to look good and merit attention.

Alok Industries [Get Quote]

In the last four years, Alok Industries has taken advantage of the textile upgradation fund (TUF) to backward integrate (from yarn to home textiles and apparels) as well as expanded capacities in a big way.

The fruits are visible in its numbers including the healthy operating profit margins (22-25 per cent in the last eight quarters).

The last phase of the expansion will get commissioned over by March 2009, and should help sustain revenue and profit growth in excess of 20-25 per cent in the next two years. The company's focus on value-added products and thrust on retailing should also help maintain profit margins.

In the retail space, Alok is consolidating all its activities under Alok Homes & Apparels, where it is targeting to operate 400 stores (20 now) over the next two years. 

Alok is also looking at real estate as agrowth driver, wherein it has signed up for a few projects (a township in Vapi, a million sq ft commercial project in Bhandup (Mumbai) and two projects in Central Mumbai).

In a bid to mitigate risks, it has chosen the joint venture route and aims to be selective with focus on large projects. 

Among key risk factors is the high leverage (but, largely low-cost loans under TUF), which should gradually come down as the last phase of expansion starts contributing, post the conversion of two crore warrants into shares (at Rs 102 per share) over next 15 months and a planned private equity placement (in 1-2 months).

To sum up, Alok should report robust growth rates over the next two years, while additional triggers will come from the progress in real estate and retail businesses. At Rs 68, the stock trades at 6 times its estimated FY09 earnings.

Amtek India [Get Quote]

Amtek India manufactures castings and machined auto components for companies. Like others, Amtek too, has been facing input costs pressures.

For quarter ended March 2008, operating profits grew at a slower pace as compared to revenue growth. Analysts though say that the company has cost escalation clause with its customers and is already negotiating for price hikes.

Over the years, Amtek India has done backward integration to emerge as a fully integrated castings player. It is now expanding its foundry capacity by 60 per cent, which will go on stream by 2008-09.

Besides, Amtek is shifting capacity (45,000 tonnes) of its subsidiary Sigmacast, UK to its Indian facilities this year, which will lead to better utilisation of the assets and expand operating margins due to lower costs in India.

These moves should help sustain volume and earnings growth of over 15 per cent for the next two years.

Funding its expansion and inorganic growth plans is not an issue, given the low leverage, cash and bank balance of Rs 265 crore, and the sale of its stake in a group company in April 2008 for about Rs 300 crore. The stock quotes at just one time its book-value and at a PE of 8 times it's estimated FY09 earnings.

Grasim [Get Quote]

Including its subsidiary, Ultratech, cement accounts for 70 per cent of Grasim Industries' consolidated revenues followed by viscose staple fibre, sponge iron and textiles.

Currently, higher input prices across its businesses has seen its operating profit grow at a slower pace than revenue growth in Q4 FY08. Not surprisingly, the stock has underperformed the Sensex by a huge margin; valuations are now close to historical lows.

While the near-term outlook is not exciting, Grasim's expanded cement capacities (6.6 million tonnes per annum commissioned recently and another 2.7 MTPA expected by December 2008) will result in strong volume growth over the next 18 months, whereas cost rationalisation measures should help report a reasonable growth in profits. Capacity expansion in other businesses too, has been taken up and should contribute to the kitty.

Notably, Grasim is among few cement companies that will have the advantage of early commissioning of capacities, given that an over supply situation is expected by end-2009. Some analysts though expect that project delays by players may postpone any possible glut situation to 2010.

All these indicate that Grasim is well placed to shore up volumes across its businesses, while its earnings should grow by 12-15 per cent annually over the next two years (estimated EPS of Rs 320, PE of 7.5 for FY09). And, if there is any realignment (reduction) in excise duty rates, it will only provide a boost to the industry's volumes.

As per analysts' estimates, the stock is quoting below the combined replacement cost of its businesses. Based on its growth prospects too, the stock is being valued between Rs 2,950-3,100. In short, Grasim has the potential to deliver good returns, as it rises to its true value.

HPCL [Get Quote]

Quite an exception to the other four stocks, going purely by numbers, this one needs little brains to call it a value play; HPCL's stock quotes below its book value and its dividend yield is 7.3 per cent.

The reasons for the same, too, are well known. While the situation is unlikely to change any time soon or may not change at all, this stock is for those with an extraordinary high level of patience and an appetite for risk.

The dividend yield may also not hold this year as it is based on last year's dividend (2006-07). But, even if turns out to be lower considering that Hindustan Petroleum Corporation has reported a 26 per cent decline in net profit at Rs 750.37 crore (annualised EPS of Rs 29.5) for nine months ended December 2007, it would still be decent. The other risk relates to the assumption that the subsidy burden does not increase in future.

Regards its business, among long-term drivers is the company's investment (10-20 per cent stake) in 21 exploration & production blocks in consortium with other companies besides, some with ONGC [Get Quote].

The company also owns a 16.95 per cent stake (29.72 crore shares) in MRPL worth Rs 2902 crore or Rs 85 per share of HPCL. Adjusting for this, the stock quotes at a PE of 5.4 times its estimated FY09 earnings.

Royal Orchid Hotels [Get Quote]

Most of hotel stocks have underperformed the broader markets in the last one year and, Royal Orchid Hotels is not exception. In fact, its stock performance has been relatively worse, thanks to subdued growth in revenues and marginal dip (by 5 per cent) in profits in the nine months ended December 2007. This may be attributed to its presence, primarily in Bangalore (80 per cent of revenues)�four out of its 10 hotels are in the city, including a 200-room 5-star business hotel and a 200-room 4-star business hotel. Bangalore has seen room rents remain stable to weak in the recent past.

However, the new international airport, increasing international events, development of new convention centres and corporate conferences (like held by Microsoft and IBM) could provide some triggers to drive demand in the future.

Overall, the company has 10 hotels with an inventory of about 830 rooms in Bangalore, Mysore, Pune and Jaipur. Positively, by 2009, it will also have presence in Hyderabad, Shimla, Delhi, Noida and Mumbai (includes foray into budget hotels category), which in turn should mitigate the concentration risk.

Last month, the company acquired a 50 per cent stake for Rs 17 crore in a company that owns a 65-room beach resort in Goa.

The company plans to spend Rs 10 crore towards renovating the property, which is expected to be completed by October 2008 thus, indicating that the time-lag to its revenue contribution will be minimal.

At a one-year forward PE of 7 and a reasonably high dividend yield of 5.8 per cent, and considering its growth prospects, the stock can deliver good returns in a year's time.