- Funds : Affordability of price is critical here in this context and not just availability
- Financial awareness (Competence/Expertise) : Ability to understand or comprehend the dynamics of the investments
- Time for planning and implementation
Lord Krishna in Bhagvad Geeta Says "What to do & what not do is the confusion for even the wisest". Same is the story with wealth management in which, we are confused to conclude the best recourse. By this initiative, team Core-Wealth, endeavours to share it's learnings so as to catalyse decisions and channelise the savings in organized manner. The fundamental question that this blog will set it ideals to answer are the Why, Where, How and How Much of planned investing.
Wednesday, June 29, 2011
What are Mutual Funds and how are they useful to investors?
Saturday, June 25, 2011
Discipline and Regularity leads to a stable Growth of wealth
When you have a lump sum in your hand, you would most obviously like to invest it for further growth. However with the investment climate and market scenario turning its face towards uncertainty, it is a tough task to time the market (For buying low and selling high) and pick up suitable avenues for investing the lump sum. This would entail a huge risk even if it is debt instrument due to inflation eating up into your investment growth.
Friday, June 24, 2011
EGOM hikes prices of petroleum products.
The rise in the prices of the petroleum products only suggests an increase in the inflation levels in the coming months. The inflation level of 9% reported for the month of May is now likely to cross 9.5% thus challenging the economic growth. This in our view is likely to have an adverse impact on the overall performance of corporate India as well.
A rising inflation level also signals that apart from the muted performance of the corporates, this would also impact the common man in a big way. The prices of essential commodities is likely to rise accordingly thus leaving a low disposable income in the hands of the common man. Based on the above we feel the Indian stock markets will continue to remain under pressure and the over hang of high inflation levels could continue to over weigh the sentiments of the investors. Having said this we might see a temporary upside in the markets, primarily due to the positive global cues i.e. the positive development on the Greek debt crisis. This may continue for some time in the near future and investors may use this as an opportunity to exit and then re-enter at around 16000-16500 levels on the sensex in the next few months.
Sunday, June 19, 2011
RBI Review Meet - an Update
The recent 25 bps hike in the rates by the RBI was very much expected by the markets and the impact of the same was fully built in the price of various asset classes. However the RBI has left open a door to take another hike rate in its next review meeting.
Till than the cloud of uncertainty would hover over the markets be it equity or debt. This leads me to review the performance of the arbitrage funds and multicap funds. In our scanner the Birla Arbitrage fund seems to be a good avenue to invest in as the return profile suggests a consistent performance by the scheme. Along with this some other offerings from the Birla stable like the Birla Sunlife Dividend Yield plus and the Birla Sunlife Monthly Income Plan too have registered decent returns over a period of time and should be looked upon while taking an investment decision.
Hence we think that current situation warrants a focus on mutual funds with a specific theme / objective. in our view we think that the above mutual funds could be considered as options for investing.
Wednesday, June 15, 2011
Understanding Basic Investment Classifications: Debt and Equity
Point of Comparison | Debt | Equity |
Risk | Low | High |
Return Volatility | Stable | Highly Volatile |
Form of Income | Interest | Dividend |
Investor’s Position | Lender to the firm | Owner of share of the firm |
Tuesday, June 14, 2011
After failing to meet guidance in fiscal 2011, real estate companies have lined up extensive asset sale programmes, aggressive launches to tide over the huge interest burden and debt repayment they are staring at. Realty major DLF was quick to revise its asset - sale target to Rs 10,000 crore after missing its debt reduction and sales guidance for FY 11.
the above is a news item appearing on money control, which is to a certain extent my opinion as well. based on this I think we should think twice before investing in any instrument related to real estate.
Expect RBI to increase interest rates by around 25 bps
The move is expected on the back of rising inflation levels in the country. The Inflation levels reported are at an high of 9%, which is above market expectations of 8.5%.
The increase in the interest rates is primarily to arrest the rising inflation levels. Having said this, any rise in the interest rates higher than 25 bps could be considered as aggressive move by the RBI and also seems unlikely.
In the light of the above, the movement in the bond markets, specifically the 10 yr. G-sec paper could be worth tracking. However, we feel that if that if that if the rate hike happens to the tune of 25 bps than the bond prices should not be affected either ways substantially. In case if the rate hike is above the expectations, than we might see some movements in the bond prices and hence the yields.
Tuesday, June 7, 2011
Can you Multiply the number of apples you can afford over the years?
Well, if you are thinking what has an apple to do with financial planning, what is important is not “apples” but “to afford to buy more” apples as the time passes. This test would hold good not just with apples but also with anything ranging from a needle to a House property that has a monetary value. How does this work is what I propose to deal with in this article. As you go through, you will realise how important is Inflation to an investor and why is it important to consider inflation before picking up avenues of investment for parking your precious and hard earned wealth!
More than a decade back when I was just appearing for my 10th grade in Schooling, I was very keen to know about the details of the investment advertisements of various kinds in leading newspapers. I use to chase my mother with the details such as “9.5 % returns” “Standard Chartered Bank deposits”, in the hope to persuade her to make accept some of my financial advice although it was more of an impulsive thought rather than an analysed one. As a very conservative family, She said : "Son, do you know that these are very risky instrument, and we cannot afford to lose any money at the end. The prices of Vegetables and other household items are rising and we have to be careful while making investment. What is the use if we cannot keep up with the shooting prices of vegetables and other utilities!" Same is the case with many of us who come across these advertisements. Probably there are many who have insufficient exposure to the way these investments grow. If you are one among them, do not stop till you have finished reading this entire article because this will throw some light on the meaning of “growth” of investments.
First and foremost, What is money? Money is not Wealth. Yes you heard it right!! Money is something that is used as a representation of wealth. This is because a term like wealth is more comprehensive which would cover financial as well as non financial aspects such as Food, Clothing and shelter, Medical and Educational needs. Can anyone eat money? Can anyone sit on money and go for a long drive – and the answer most obviously is no. Money can be used to buy these things which are necessary. So what is more important is to be able to afford these tangible things that support a human life. Now, Once you are clear with this concept of Money as a representation of wealth – most of the purpose of this communication seems to have been achieved.
The purpose of investment is to grow your wealth (Affordability of above mentioned tangible things). Now let me give an illustration to explain the investment: Let’s say you invested Rs. 100 at present for an year and make 10 % growth at the end of year. Does this mean your affordability has increased? Not necessarily. This decision cannot be taken in isolation from the element of inflation. For the affordability to increase there is a precondition here that the inflation rate be less than your investment return. If the apple that costed Rs. 10 is now costing Rs. 15, then this is how the picture would look like : The initial amount (Principal) of Rs. 100 that you invested would empower a purchasing power of 10 apples on you. At present the “apparently” grown investment worth (Amount) Rs 110 would give you a purchasing power of only 110/15=7.33, i.e. less than 8 apples. So you can see that actually your investment value has declined. If an year down the line, still you would have been able to buy same number of apples with the Amount, you have neither gained nor lost anything with respect to your investments. Work out the future affordability of money before you invest and make sure you afford more than today and that is precisely what growth would mean to me.