Financial Literacy Drive Treasure Post May 2, 2007
Posted by Ranjan in Asset Allocation, Budgeting, ETF, Index Funds, Insurance, Investing, Mutual Funds, Personal Finance, Planning.22 comments
This post links to a treasure trove of information on personal finance. Actually, April was National Financial Literacy Month in the US and JDR (GetRichSlowly) has the ultimate collection of posts covering everything on Personal Finance.
Other than the 20 posts linking to the literacy drive, he also links to his popular articles and the websites which provide such information. Maybe it’s all dry information, but you can do well to bookmark that post and keep coming back to it. It’s dry, but important for you. Why? Look at the following questions and then decide.
How much do you know about money? Have you learned about the power of compounding? Do you know how the stock market works? What is a bond? Can you tell the difference between an Income Statement, a Balance Sheet, and a Cash Flow Statement? Do you even know why you would want to?
Do you know how to keep a budget? Do you understand how your taxes are used and why we pay them? Do you know what it takes to purchase a house? How much insurance do you need?
Head on to this treasure trove. Even though some posts are US specific, the concepts are useful and important to learn.
You need to be Lucky and brave! May 1, 2007
Posted by Ranjan in Investing, Personal Finance, Stocks.add a comment
As an asset class, Equity stocks offer the best returns. But so many of us have burnt our fingers in the process?
How is it that very few investors can make real profits, grow their networth and consistently beat the market? That’s because it often takes one or more of the following rare traits…
The vision to identify breakthrough products, leaders, and brands
The knowledge to spot an undervalued gem in a sea of glass
The courage to buy and hold when others are running scared
Occasionally, you’ll come across an investor with one of these valuable characteristics. And it’s likely that person does quite well. But I can’t imagine a person who can offer all three.
That would take two very different and even contradictory approaches…
Sounds scary? But fortune favors the brave only!!
Picking up stocks: Real Estate/ Construction April 30, 2007
Posted by Ranjan in Investing, Stocks.1 comment so far
One of the questions to my earler post was how to pick stocks? It is allright to say that, ” You can start with identifying a list of 10-15 companies out of 3-5 sectors which you know or which interests you. You can keep a tab on their management team, financials and future outlook and over a period of time, you will be able to take a call on them.”
But I guess, it’s good in theory. How about doing an analysis of a sector and then take a look at some stocks of that sector. Let’s take a look at the Real Estate/Infrastructure sector which is so much in the news.
So when we do an industry analysis, what are the things we look at? Companies producing similar products are subset of an Industry/Sector. For example, National Hydroelectric Power Company (NHPC) Ltd., National Thermal Power Company (NTPC) Ltd., Tata Power Company (TPC) Ltd. etc. belong to the Power Sector/Industry of India. It is very important to see how the industry to which the company belongs is faring. Specifics like effect of Government policy, future demand of its products etc. need to be checked. At times prospects of an industry may change drastically by any alterations in business environment. For instance, devaluation of rupee may brighten prospects of all export oriented companies. Investment analysts call this as Industry Analysis.
To start with, let’s look at some macro facts and observations about the industry.
The Tenth Five Year Plan has estimated a shortfall of 22.4 million dwelling units in the country. According to one estimate, over the next 10 to 15 years 80 to 90 million housing units will have to be constructed.
The investment required for constructing these dwelling units and for providing related infrastructure during this period will be of the order of $666 billion to $ 888 billion at roughly $33 billion to $44 billion per year ($ 1 billion = Rs 4,400 crore).
There is a steady growth in Housing Finance sector of approx.30 % over last four years.
The rate of interest for housing finance has become reasonable and affordable which has resulted into more credit offtake and subsequent maturing of the housing industry. Even though there is an increase, the rates are still reasonable to my mind after factoring in the tax benefits.
Fiscal benefits provided by the Government of India have encouraged the end users and investors alike.
Income of the urban buyer has grown substantially.
There is tremendous scope and growth in the Infrastructure Development.
Foreign investment by way of FDI has been approved.
Emergence of professional builders in the market with proper accounting standards.Emergence of rating systems for building projects.
The high growth of the real estate sector has led a lager financial institution to launch a dedicated real estate fund. These funds are simultaneously enticing large institutional investors as well as High Net worth Individual (HNIs) to expand their portfolio.
The award of ultra mega power projects and privatisation of airports demonstrates a committment at the highest level. So the momentum to build up roads, ports and urban infrastructure is building up for sure.
The JawaharLal Nehru Mational Urban Renewal Mission (JNNURM) initiative in 63 cities and urban transport projects will also drive up Investments in Infrastructure. Water Supply projects and sewerage projects would be part of the JNNURM.
So what do you think about the future of Infrastructure stocks in India? Ready to take a call?
There are three major stocks in the Infrastructure sector which is worth talking about. 1. Nagarjuna Construction (NJCC) 2. IVRCL and 3. HCC
Remember, do not go by the order book size alone, which is what many people do without understanding the intricacies. We need to understand the execution period of the order book, and the kind of margins that the company would make, given the kind of raw material prices at which it has booked these orders.
Even though it may look daunting, a lil bit of research helps you in understanding the stocks as well as improving your general knowledge.
Derivative for Dummies: By a Dummy April 29, 2007
Posted by Ranjan in Personal Finance, Stocks.add a comment
Yes, it’s for Dummies and by a dummy on Derivatives. So here’s what lil’ bit of Derivatives I understand(or pretend to..). Read on….
Derivative is a product whose value is derived from the value of one or more basic variables, called underlying. The underlying asset can be equity, index, foreign exchange (forex), commodity or any other asset. Derivative products initially emerged as hedging devices against fluctuations in commodity prices.
In India, BSE created history on June 9, 2000 by launching the first Exchange traded Index Derivative Contract i.e. futures on the capital market benchmark index – the BSE Sensex. The exchange commenced trading in Index Options on Sensex on June 1, 2001. Stock options were introduced on 31 stocks on July 9, 2001 and single stock futures were launched on November 9, 2002. September 13, 2004 marked another milestone in the history of Indian Capital Markets, the day on which the Bombay Stock Exchange launched Weekly Options.
Types of Derivatives:
Forwards: A forward contract is a customized contract between two entities, where settlement takes place on a specific date in the future at today’s pre-agreed price.
Futures: A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Futures contracts are special types of forward contracts in the sense that the former are standardized exchange-traded contracts, such as futures of the Nifty index.
Options: An Option is a contract which gives the right, but not an obligation, to buy or sell the underlying at a stated date and at a stated price.
Facts: The daily trade of commodities futures market is expected to rise by another Rs 5000 crores from the Rs 15000 crores being traded currently.
With increasing interest from investors, the basket of 120 commodities currently being traded is likely to touch 250 by 2007-08.
Options offer three significant benefits: Versatility; High Leverage and Risk Management. (I bet I didn’t understand this, but I’ll pretend I did)
Last Word: Warren Buffet sees derivatives as “time bombs” and a weapon of mass destruction!!
Being Covered is not sexy or cool but Smart! April 27, 2007
Posted by Ranjan in Insurance.add a comment
Hey, I’m not into fashion designing. But could not resist a tantalising title to talk about Insurance!! If you haven’t started a family, an Insurance cover is the least of your priorities. But even though it’s not that cool to be insured, it sure is smart when there are people who depend on you.
Life insurance is a potent tool that not only offers the ability to plan for unforseen events that can affect the family’s financial situation adversely, but is also looked up to as an important tax saving cum investment tool.
One needs to do a certain amount of spade work before purchasing a policy, to ensure the best possible coverage at the right price. Here are some helpful tips to get you started:
Explore As premiums vary widely from company to company and cover to cover, it’s important to look around. One can try internet sites to get instant quotes.
Plot your value The key to purchasing the right amount of life insurance is to have just enough coverage to meet your needs. If you have more life insurance than you need, you’ll be paying unnecessarily for higher premiums. On the other hand, it’s important not to have too little coverage, resulting in you being underinsured.
Health matters the most Healthy people get better rates on life insurance. Higher premiums are quoted for anything that poses a risk for longer life expectancy (smoking, on regular medication, etc). Sooner the better As premium rise with increasing age, the younger you are when you purchase life insurance, the lower premiums you will be required to pay.
Review your cover periodically Any life change indicates the need for an overall review of the financial plans. Make sure you have enough cover for all important events of life.
Focus on annual installments You may not realize it, but you may be paying more for your life insurance if you pay your premium in monthly installments. Many insurance companies charge extra fees if you make monthly premium payments instead of paying the annual premium.
Never conceal facts Though, age and negative health related conditions attract higher premium, don’t think about lying on the insurance application. If your insurance company gets the knowledge of concealed facts they can terminate the cover.
