Invest Junction

Rupee Symbol

2010-07-20T13:38:00.003+05:30

Ok, the rupee symbol is now out there for everyone to see. Now, you can also download it and use it in your Word documents. Fordian Technologies shows how you can do it. Check this link: http://blog.foradian.com/

It's quite simple. Just download the font and then click install on it. Then, in MS Word, select Rupee Foradian. Click the tilde sign "`" and voila, you have the symbol of the Indian rupee!

Let me know if you face any problems.

ICICI raises Quarterly Average Balance (QAB). What is QAB?

2010-07-08T13:04:00.007+05:30

Ok, so writers are not the best paid guys around. That fact was brought to my notice recently when I got a letter from ICICI saying that from July 1 onwards I need to maintain a Quarterly Average Balance of Rs. 10,000. And if I didn't, there were penalties in store and they wouldn't mind losing me as a customer.

Do they mean what they say? If I go by past experiences, then I'm quite convinced that they mean what they say. So either I pay up or I close my account and the demat and the trading etc. associated with it. So much for "Kahayal Apka" - as their advertisement baseline goes.

Any way. That's my problem and I'll have to make a decision on it.

The interesting question was what QAB meant? The letter assumed that I knew what it was. There was no explanation of how it worked or why the amount was Rs. 10,000. (I mean, why not Rs. 7,000 or Rs. 8,000. What was the mathematical explanation for it?) But more importantly, it didn't tell me how this thing got calculated!

I know what most people would do in such a situation: Just keep Rs. 10,000 in the savings account and let ICICI keep it as a fixed deposit (even though you earn only saving rate interest on it!) But is that possible for everyone? What if you had to scrape the bottom and not leave much in the account? How will the QAB get caclulated in that case. So probably this is a good time to understand what QAB is.

Let's take the example of a statement for the last quarter: April-May-June
(Assume you had Rs. 5000 already in your account)
Date: 1st April, Deposited Rs. 5000, Total Balance: Rs. 10,000
Date: 15th April, Withdrew Rs. 5000, Total Balance: Rs. 5,000
Date: 1st May, Deposited Rs. 10,000, Total Balance: Rs. 15,000
Date: 25th May, Deposited Rs. 2,000, Total Balance: Rs. 17,000
Date: 1st June, Deposited Rs. 3,000, Total Balane: Rs. 20,000
Date: 20th June, Withdrew Rs. 18,000, Total Balance: Rs. 2,000

In the above example, QAB will be calculated as
From April 1 - April 14 = 10,000 x 14 = Rs. 1,40,000
From April 15 - April 30 = 5,000 x 16 = Rs. 80,000
From May 1 - May 24 = 15,000 x 24 = Rs. 3,60,000
From May 25 - May 31 = 17,000 x 7 = Rs. 1,19,000
From June 1 - June 19 = 20,000 x 19 = Rs. 3,80,00
From June 20 - June 30 = 2,000 x 11 = Rs. 22,000

Total Amount = Rs. 11,01,000
Then divide it by the number of days, which is 90.
To get the QAB, which is 12,233

So your QAB is above the Rs. 10,000 limit and you are safe from penalties.
I got curious about this whole QAB business and checked out how other banks went about it. I also have accounts in a couple of other banks, so I thought it would be a worthwhile exercise. This is what I found:

1. Citibank = Rs. 25,000
2. HSBC Bank = Rs. 25,000
3. ICICI = Rs. 10,000
4. HDFC = Rs. 10,000
5. Axis Bank = Rs. 5,000
6. Kotak Mahindra Bank = Rs. 10,000

All Public Sector Banks have QABs between Rs. 500 and Rs. 1,000
Their penalties range from Rs. 50 to 200 in comparison to private banks who charge around Rs. 750 on a quarterly basis.

Banks maintain that they need to have such a minimum amount so as to be able to offer the kind of service they offer. So more service from private sector banks and hence more you're expected to pay. What are you paying for? Anything and everything from ATMs to cheque books to online help, etc.

So you decide if you feel whether you're willing to block this amount of money for the service they offer or if you'd rather switch to the lower service offerings of a PSU and maintain a lower QAB. The choice is yours.

Now I'll have to make mine.

PS: This is something that all of you should know.
The RBI, as part of its financial inclusion initiatives have made it mandatory for banks to offer low-frills and low balance accounts. Most banks have it; but it's often not disclosed to customers. For example, a no-cheque book account in SBI will have a QAB of Rs. 500 instead of Rs. 1,000. Plus, the QAB changes with location. You pay a higher amount in metros and larger cities and lower QAB in smaller towns and villages.

A surge in Financial Awareness efforts

2010-06-25T18:08:00.004+05:30

Of late, I'm noticing a distinct increase in the number of articles, workshops, interviews etc. that aim to educate the common investor. This is primarily by institutions and people related to the field. Personally, I feel too much is happening which is a bit confusing. But then, as they say, if you throw so much, something's gonna stick. So probably more is better in this case.

A quick list of what I can remember from everything that's happening around:
1. Moneylife Foundation Workshops held every week in Mumbai. This is by Moneylife magazine.
2. Financial Literacy Awareness programs by SEBI. This looks like a serious effort. There are dedicated teams and support infrastructure being put in place.
3. TV programs specially dedicated to personal finance on the business news networks. Haven't been able to check the specific programs on each channel, but ever so often, when I switch to a business news channel, I happen to catch a glimpse of such a program. (Personally I feel this is a very effective medium if someone can make it work like the saas-bahu serials)
4. Dedicated pages to personal finance in Mint
5. Lots of articles in mainstream newspapers about Ulips vs Mutual Funds. A lot of them are clearly spelling out the issues with Ulips.
6. Lot of blogs and websites that are trying to focus on educating the retain investor.
7. CFPs creating their websites and trying to educate their clients about money matters.

The economy is heating up too. Inflation is rising. RBI may increase rates. So money matters are really up there for everyone to notice.

A-Z of Investing: Bulls and the Bears

2010-04-23T13:21:00.004+05:30

These are two terms that you cannot avoid hearing if you are discussing the stock market. For those who are not sure what they mean, it can get a bit difficult following the discussion. So what exactly do these terms mean?

Consider the Bull. It's an animal that's a symbol of vigour and energy. It charges at its opponent with its horn pointed up in the air. The Bear on the other hand comes across as laid-back and lazy in its approach. Now, if we co-relate these images to stock market movements we can say that any upward, positive movement is "bullish" while any movement that is slow, lethargic can be considered "bearish".

A person who is upbeat about the stock market is therefore also called a "bull" while those who are pessimistic about the market is called a "bear".

But remember that a bull or a bear market is not a short term event. Nor can it be attributed to a particular stock. Usually, the stock market is said to be going through a "bull phase" if it picks up by at least 20% across most sectors. Similarly, the markets are said to be going through a "bear phase" when the markets are down by 20% or more.

During a Bull Market - most people are planning to buy stocks and there is a general air of positivity around the whole economy. As you'd have guessed by now, during a Bear market, the opposite happens. People are mostly trying to sell of their shares, the overall economy slows down.

So that's more or less what anyone means by Bulls and Bears.

A-Z of Investing: Inflation

2010-04-13T12:37:00.015+05:30

I'm planning to write a series of short articles on some of the commonly used terms in investing. These terms may seem obvious to most, but in reality they are not clearly understood by many. Usually, it is these terms which confuses the ordinary investor. If these terms are well understood, I'm sure the investors will be in a much better position to make sense of investing.

I'll start this series with probably the most loosely used term in today's times: Inflation!

What is inflation? I'm sure that most people will be able to answer that in a sentence. "Inflation is a rise in the overall price levels of goods over a period of time." So for example, if a kilo of sugar was Rs. 25 a few months back and it's now Rs. 30 - that's an example of inflation in daily life.

Ok, so that much is almost common, accepted wisdom.

What needs to be understood is the cause for these price rise. Who is responsible for the increase in prices? Is it a co-ordinated effort by all producers? Is it an impact of global conditions? What is the RBI's role in it? And where does the media pull up the these fluctuating inflation rates?

Inflation is mostly caused by an increase in demand or a decrease in supply or a combination of both. Such situations lead to more money chasing fewer goods in the economy. For example when the monsoon fails, there is a shortage of food grains and other crops which are essential parts of our daily life. This sudden decrease in supply causes prices to rise. This has happened in the past and it will happen in the future.

But look at the current scenario. India is going through a period of high economic growth (more money with people than before) and at the same time, there was major crop failures in many parts of India. That's a combination of great demand and lesser than usual supply - definitely a recipe for a serious price rise. No wonder we saw high inflation rates during the last one year.

If inflation is a rise in prices, inflation rate is a way to capture this increase in terms of a number. In India, inflation is calculated on the basis of the Wholesale Price Index. This index is based on the wholesale price of 435 essential items. The rate of inflation is the increase/decrease in the price levels of these 435 items during a period of time. For example, if the price of these 435 items was Rs. 100 on August 1, 2008 and the same set of 435 items cost Rs. 108 on August 1, 2009, then we say the rate of inflation for August is 8%. Note that not all 435 items are given the same importance. Each item has a particular weight based on its importance. So something like sugar - which is an essential part of our diet has more weight than something like shoes. So a rise in sugar prices will cause the inflation rate to move higher than a similar rise in footwear.

Overall, the WPI consists of three types of items:
1) Manufactured goods which has a weight of 63.75%
2) Primary items like foodgrains and edile oil - 22.02%
3) Fuel, light and lubricants which add up to 14.23%

Is this the best way to calculate inflation? Is it accurate enough?

There is lot of debate on whether WPI is the best way to go. We use WPI method because we have ready data for it. The other option is Consumer Price Index (CPI) which is more accurate from a consumer's point of view, but unfortunately, we don't get the data early enough to compute it as easily we can with WPI. The following are some shortcomings of the WPI method of calculating inflation:

1) It is calculated on 435 items. But as consumers it's not just the price of items that matter to us. We also pay for services which constitute a major part of our expenses. By not considering the cost of services, the inflation rate gives an incomplete picture.
2) Most countries (around 160) calculate inflation on Consumer Price Index - the price that the consumer is paying to the market. In India, it is calculated at the wholesale price -which is not the price that we end up paying (we pay quite a higher amount when the products reach us).

But demand and supply is not the only cause for inflation. The amount of money in the economy also has an effect on inflation. That's where the government and the RBI come in. The RBI regulates the amount of money that is available by controlling the interest rates and the amount of money that banks can lend. When interest rates are high, people will borrow less, spend less and invest more. This ensures that less money is chasing goods - so price of goods could come down. This basically affects the demand-supply by causing demand to lessen - thus making supply equal or greater than the demand. So prices of those items will drop down automatically. Similarly, by asking banks to lend only a certain part of the money they have, they reduce the money that is available for loans, etc. For example, if banks cannot extend loans to people, the demand for houses will drop - thereby reducing the price of houses. Which will in turn reduce the price for cement and steel, etc. So overall, consumption drops.

That was a short and quick explanation of inflation and how it works. This understanding should give a fair idea of what's happening when inflation rate increases or decreases. The interested investor can explore deeper into the subject if required. Any feedback on this post will be welcome.

Daily Interest Calculation on Savings Account

2010-04-12T12:59:00.006+05:30

Something really "interesting" happened for all those who have a savings account. Here's a summary of it in case you missed it earlier.

Starting April 1, 2010, the RBI has asked all commercial banks (excludes co-operative banks) to pay 3.5% interest interest on a daily basis to saving account holders. Prior to this, banks used to pay interest on the lowest balance in your savings account between the 10th and last day of the month.

For example, if you had Rs. 50,000 in your savings account between the 1st to the 29th - and you took out Rs. 49,000 on the last day, you'd be paid interest on the Rs. 1,000 that was left in your account!

Now, that will not be the case. If you take the above example, you'd earn interest on the Rs. 50,000 from the 1st day to the 29th day and only the interest for the 30th day will be calculated on the Rs. 1,000.

The calculation for daily interest works like this:
(Amount in your account x 3.5/100) / No. of days in year

So, for the first 29 days, you'd earn = (50,000 x 0.035 )/ 365 x 29 = Rs. 139
For the last day, you'd earn = (1000 x 0.035) / 365 = Rs. 0.10.

So that makes it Rs. 139.10 paise for the month.
By the earlier method, you'd have recevied = (1,000 x 0.035) / 365 x 30 = Rs. 2.87

So the difference in calculation does make a difference.

Why wasn't this done earlier?
Well, the RBI had recommended this method of calculation way back. But because banks didn't have the facilities (read computerization) to calculate interest on a daily basis, they decided to pay interest on the lowest amount in your account between the 10th and last day of the month.

Now, the RBI feels all commercial banks are equipped to carry out the computation that's required. So the rule was passed. But as you'd expect, banks are not happy about the increased payouts they'll have to make. There's a feeling that savings interest which is 3.5% would be reduced to accomodate the increase in payouts by the banks. This probably won't be the last you heared on this!

Budget 2010: What's in for the investor

2010-02-27T16:00:00.002+05:30

By now everyone knows that the two important features of this year's budget for the investor is a) the change in the tax structure and b) the additional Rs. 20,000 tax benefit you get if you invest in long term Infrastructure Bonds.

Regarding the first change, it will benefit only those who are earning more than Rs. 3 lakh per year. From Rs. 3 lakh onwards, you have a better saving rate than the previous year. For those who are interested in seeing it in figures, check this blog by Manish in JagoInvestor.

As for Infrastructure Bonds, I had a feeling it would make a comeback sooner than later and had thus included it in my book. It's not an exciting investment option per se, but combined with the tax benefit it can be a safe and attractive option.

Apart from that, there was a huge silence on most fronts. That there was nothing for Senior Citizens was a huge dissapointment. The rise in food prices and general inflation hits them really hard and they must have been looking for some relief. Which should all make us think. We all are going to retire someday and it is important that we are prepared to take care of our finances by investing when we have the time.

The other slight good news is the announcement about the government's contribution to the New Pension Scheme (NPS). The government is going to contribute around Rs. 100 crore for certain segments for a certain minimum investment. Hopefully that should create some noise and support for NPS. I was planning to include NPS in my book but it's a bit late - maybe I'll add it in the next version.

Will add more about the budget in the next blog. Till then.

Following Budget 2010. Updating my book.

2010-02-26T11:34:00.003+05:30

Task for today is to go through Budget 2010 and make the required changes in my book for the next edition to be published in March 2010.

Hopefully the Finance Minister includes positive and important changes for all investors. (I do not mind rewriting sections of the book for that.)

Keeping my fingers crossed.

The biggest reason to be financially literate...

2010-02-20T20:10:00.003+05:30

The biggest reason each one of us should be financially literate is to ensure that we only buy investments that are right for us. Honestly - there's nothing more disheartening than finding out that the hard-earned money we invested only ended up benefitting the investment companies and their agents.

The situation is really bad. And its getting worse. What is making it worse is the relentless and aggressive marketing and advertising campaings carried out by these companies.

The one entity that could make a difference here is the government. Sadly, they are not doing much. Financial literacy is something that we hear lot about but hardly any one has any serious plans for it.

This article by Manish at JagoInvestor is an eyeopener for those who still think being financially literate is an option they can afford....

When was the last time you reviewed your investments?

2010-02-15T17:26:00.002+05:30

I think the only time people seriously look at their investments is when they are filing returns for the year. And that too - they'd be looking at the investments for the year. Very few of us actually take a day off - even once a year - to sit and review our investments. To understand which of our investments make sense and which do not. One day - just to review our finances shouldn't be asking for too much. But I'm sure the majority of us don't do it.

Why?

The answer to this also answers the question why most people feel awkward talking or discussing investments.

There simply needs to be more awareness. Forget sex education - the government should focus on finacial education in schools and offices. Is anyone going to raise this issue anywhere?

Investment Ads: Emotional Atyachar

2010-02-09T23:30:00.003+05:30

Every time I come across an investment ad, I get the feeling they are inflicting nothing short of Emotional Atyachar on the target audience.

Consider the state of the retired guy who is watching TV with his wife and he comes across the ad where this old guy in the ad whips out two tickets and says "Tumhe Singapore Dikhane Ke Liye" to his wife. What are the chances that the retired guy in real life feels like a loser?

Or consider the ad where the daughter is shown buying a car for her dad. There are many other ads that go on similar lines.

I know what goes on behind the scene; I used to belong to the advertising field. But something about these ads make me feel uneasy. Do these products that they advertise really deliver in such a manner? Is it OK to take such creative liberties in the case of selling an investment product that could make or break lives? Is the Target Audience of these ads financially literate to evaluate the investment options when they go to actually buy them? After all, we are not selling a soap or a toothpaste or a television - these decisions have a deeper impact on people's lives....

I don't know. Of late, I feel ads are just laying it thick. They are pushing the envelope on creating aspirational ads. After a point, it becomes simply too manipulative.

And of the lot, the investment ads take the cake. I just hope people do the required due diligence before they hand over the money.

Becoming Financially Literate - 2

2010-02-05T11:57:00.005+05:30

Why is financial literacy so important when our parents could manage without it?
There are many reasons for it, but for me the most critical reason is to prevent an unnecessary and expensive investment option being sold to an investor. To avoid the feeling that you get when you realize that your hard-earned money has been invested in a scheme that is making money for someone else, and not for you. That's the biggest reason why we need to have more awareness about investments. And the way advertising works, the way commissions are offered, the way investments are designed - it's just too easy for the uninformed investor to invest in the wrong scheme. There simply has to be better awareness all around! Period.

Slowly but surely, decision-makers are realizing that financial education should start early - right at the school level. Leaving it for adults to pick it up later doesn't work. But if we include financial education as a subject in school, care should be taken that it is practical, simple, and understandable. That it doesn't become another subject that children study to get marks and then forget about it. There seems to be some noise building on this and I won't be surprised if the government introduces it in some form sooner than later. Keeping my fingers crossed on this one.

Coming back to the subject of financial literacy for adults, I am still not closer to finding the answer to my question: what is the best way to go about imparting finacial education at a mass scale without compromising on its efficacy? I'm listing down the options I can think of with their respective strengths (+) and weaknesses (-):

1. Newspaper articles: Unstructured(-), Needs basics to be clear to understand news items (-)
2. Websites on investments: Unstructured (-), difficult to find, reach is limited (-), Free (+)
3. Magazines: Structured(+), expensive (-), needs basics to be clear (-)
4. Books on the subject: Structured (+), affordable (+), difficult to find the right book (-), needs high degree of motivation to find it and read it (-)
5. Classes: Structured (+), difficult to find (-), needs high degree of motivation (-), could be expensive (-)
6. TV Shows: Structured (-), free (+), possibility to create great content (+), need motivation to track it (-)
7. SMS: Structured (+), affordable (+), limited content (-), easy to digest (+)
8. Learning through CDs: Structured (+), Affordable (+), Great content (+), difficult to find (-), needs high level of motivation (-)

Right now, financial education or content related to it are available across these mediums. Of the lot, financial magazines, financial newspapers, and tv shows are reaching out to the most people I think. Although there are a few good websites on the subject, and they deserve a special mention for their evangelical zeal, most of them are unstructured and tackle the subject in a random fashion to actually rely on them as a source of educating oneself. While there are books on the subject, their availability across cities and towns, in the language you need is limited. Financial education through SMS seems like an exciting idea to me (I'm thinking of starting something of my own) but the content planning needs to be done carefully.

The best bet seems Learning through CDS - but again, it involves technology so its spread seems limited. TV would be the ideal medium because of its reach, but it's expensive to deliver. There are some shows that are already there - I recollect one where Monika Halan appears on it - but it's delivered in too quick a style to be considered a learning program. The other problem about TV is that it's not interactive. So you have to live with your doubts and questions.

The ideal solutions should have the following features:
1. Wide availability (geographically) - in as many languagues as possible
2. Easy to deliver - through a medium that is available with the majority
3. Interactive - have doubts, get them cleared
4. Affordable - free if possible!
5. Easy to understand content - it should be designed well

Any one has any suggestions?

Becoming Financially Literate - 1

2010-02-04T10:08:00.003+05:30

How does one go about learning about managing ones investments? That's the big question that I've been thinking of for some time now.

I look around at the people I know; my family, relatives, friends, colleagues - and I see the struggle they go through to manage their investments better. But there's hardly any good source for them to acquire the knowledge or the skills to be a better investor.

That doesn't mean there aren't choices.

The daily newspaper that they read has a financial section. But is it for the new investor? Most magazines have some bits about finance - mostly "Top 5 Investment Ideas for Singles" or something like that which is too simplistic to consider as educational. But it's still better than nothing. There are financial magazines - Outlook Money and the like - but that's a cost and it requires a dedicated mindset which most people don't have. There're dedicated newspapers like Mint - it's cheaper at Rs. 2 a copy and pretty easy to read; but again, I don't think it's for the novice investor.

I have come across comics published by the RBI to educate children about investing - which can be useful for adults too. But then they are just a couple. The RBI needs to publish at least 50 of these to make it really work - and then to make sure they reach the audience. Right now I don't know how they get distributed; I happened to come across them during an exhibition. I have not seen them in a book stall or on the streets.

Many people are recommending that managing money and investments should be taught at the school level. Right. But or those who have completed their schooling - what about them. What do they read....

Does any of you have any suggestions? Have you come across any publication or web site which explains money management / investments in a simple easy-to-understand manner. Please let me know. More about this in the next post.

ULIPS - mixing ignorance with greed

2010-01-28T17:29:00.006+05:30

By the amount of bad press ULIPS receive, you'd be surprised if they sell at all. But they don't just sell, they sell plenty. In fact, the total renewal premium paid between April -September 2009 amount to almost 26,000 crore .

So why do ULIPS sell so much in spite of being so universally reviled? I was wondering about this for some time and I feel the answer lies in the heady combination of greed and ignorance on the part of the investors. (And a lot of misselling - as the critics will add.)

The reasoning is simple. Every investor wants to earn the maximum amount of returns on his investment. And when they look at the numbers, they realize that equity beats every type of investment option. But the catch is that investing in equity is not easy. Many of them don't know how to begin investing in equity - the whole process of opening a demat account, getting in touch with a broker, or registering with an online site is too complex and too cumbersome. Plus, understanding how equity works is not simple either. Of course, they could invest in a good mutual fund; but surprisingly, many are not aware of how mutual funds work, either.

Enter insurance. Insurance is something that almost every Indian is familiar with. So when the investor is sold Equity + Insurance in the garb of ULIPS, there's no reason why they shouldn't fall for it. The numbers look so good! Plus everyone who reads newspapers or watches TV knows that one can make money in equity. So why not invest in ULIPS!

The huge amount of monies being invested prove that these investors do not lack money. What they lack is knowledge and a bit of greed. I say a bit of greed, because it's not wrong to expect the best returns for your money. But, expecting to earn the best returns without investing any effort on knowing whether you're doing the right thing or not is surely being greedy.

So as long as investors continue to remain ignorant and greedy, ULIPS will continue to outshine and outsell all other investment instruments - whatever the critics say, no matter how much bad press they receive!

Direct Tax Code

2010-01-27T13:55:00.003+05:30

Slowly but surely, people are becoming aware of the Direct Tax Code and the impact it will have on the way they invest.

The details are still not being discussed, but I hear it mentioned in conversations.

That's good news from a financial literacy point of view. Earlier, people would have ignored such things outright.

Flexible Recurring Deposit from Union Bank

2009-07-08T12:40:00.003+05:30

Union Bank of India recently announced "Union Monthly Plus" - a Recurring Deposit that allows you the flexibility to deposit varying amounts every month depending on your convenience. This is unlike the normal Recurring Deposits that you have, where you have to invest a fixed amount every month for the entire tenure. I had mentioned in my book how banks were working hard to make Fixed Deposits and Recurring Deposits attractive. This is another step towards that trend.

There are some conditions though:

1. The amount cannot be lesser than the "core" amount you decide. For example, if it's Rs. 500 - then you cannot deposit lesser than that every month.
2. You can only invest up to 10 times your core amount.
3. Minimum and maximum tenure is 6 months and 5 years respectively.
4. Interest rates for below 1000 days is 5.5%. Above that is 8%. Senior citizens get a 0.5% additional interest.

There could be more, but that's all I could gather from their help desk at 1800222244. If you have an account in Union Bank of India, you could check it out.

A quick search reveals that Bank of Baroda too has a similar scheme - although their website mentions the maximum tenure as 3 years.

Quick Reference: Union Bank of India website.

Insurance ads: Here, there, everywhere!

2009-02-01T22:49:00.004+05:30

If you happen to switch on the TV any time, chances are that you'd get to see at least one insurance ad. And that's the "only" type of financial advertising that you see. Gone are the Mutual Fund ads with their funny Disclaimer read outs, or advertisements related to trusting a bank, and so on. Almost all the advertising budget seems to be spent on getting people to buy insurance.

It started with the KILB campaign. Which was so long-drawn, I don't think many people figured out or bothered to link it to Insurance and least of all to the people behind the campaign. Would you know who the advertiser was? I checked with a few of my friends about it, and they didn't even seemed to recollect the ads. Only when they were specifically told about the ads and Irfan Khan did they seem to recognize it faintly. Any way, after that there has been a deluge of insurance schemes being advertised. Without doubt, the most successful of them has been LIC's Jeevan Aastha. The campaign itself is supposed to be hugely successful with LIC really raking in the numbers. But a lot of experts and financial planners have pointed out that the reason for it could be a misunderstanding or a miscommunication by agents to their customers about the actual returns.

I remember watching a show on one of the TV channels where they rate financial products and Jeevan Aastha got a thumbs down. The latest ad that I saw from IDBI FORTIS. They have an SMS code where you could send a message and get a free booklet. I tried to find about them on the Net, but google didn't turn up anything. Hmmm....

Why's insurance hot? I have a couple of theories on it. Let me firm them up before I write about them. Till then, have a good week.

New URL, New Look

2009-02-01T22:46:00.002+05:30

Finally, the site has a new URL which is short, and what I and my friends believe, much more easier than the earlier address. So that's one step closer to making this blog the way it should be.

I also toyed with the look; this look is plain and simple. Just how I would want it to be. But need a bit more formatting to make it read better and be a bit easier on the eye. Will work on it in the next few days.

The day after

2008-11-30T22:59:00.004+05:30

I came back late at night today. The day was spent listening to friends on what they thought about the attack and how India should react. After listening to few discussions, I realized it was pointless talking about a solution from what we know. Everyone had a different perspective and their solutions depended on that perspective.

As a layperson I just don't have the data to recommend any solution. But, I know what I want. I want to lead a peaceful life - some part of which depends on the fact that I can go out and return safely without feeling threatened. That my family doesn't have to fear every time I leave home - or that I don't have to fear for my family's safety when they need to travel. It's not asking for much. But at the moment, I'm not sure if this can be guaranteed. I don't have any suggestions to offer the government. Except to do something that makes a tangible difference. Don't procrastinate. Don't pass the buck. Don't let things be. Do something.

And it was in this state of mind that I switched on the television. And what do I see - people gathered with placards and lighting candles to mourn the dead. Not this time please, I thought to myself. What's the point about lighting candles and whom does it affect I've always wondered. I sorta understand if it was done to mourn people who have been killed in an accident - but this time, it was not an accident. It was deliberate. And lighting candle seemed just so... wrong. In stead, we need to keep the fire burning within us if we need to do something about it. We need to remember the hurt and pain so that we try to make a difference. Don't light candles and pass it off as an unfortunate incident. It was in this frame of mind that I came across a similar post by Deepak Shenoy. How I agree with him.

Terror in Mumbai

2008-11-27T13:39:00.004+05:30

One more terrorist attack and one more opportunity for everyone concerned to appeal to the "Spirit of Mumbai" and push the issue under the carpet.

Sure, there will be indignant voices asking for resignations and lot of anger vented out through the media - but in a day or two, you'd hardly find any traces that such a grave incident had actually happened.

So what can the ordinary Mumbaikar do? Apart from saying a quick prayer while leaving home and hoping that he or she is not at the wrong place at the wrong time? Most people get stumped here. After all - how does one tackle a problem like this. When the enemy is invisible and unimaginably powerful.

My answer to this, like it is to all other insurmountable problems that I see around, is: do what you can do to make the situation better. Whatever, however little you can do - do it. Don't postpone it or look at others for inspiration. If you are hurt, if you are angry, if it touches your soul - Then Do Something About It. NOW.

For example, you could make sure that you look under the seat in a bus before you sit. If you are keeping the bag for someone on the rack, in a local train, make sure that the person doesn't go out to hang outside. Yes, be insistent about it. If you feel suspicious about a bag in a train or a bus - ask around. Make a scene if needed. Check with people. You may seem paranoid - and in the beginning you may find people looking at you a bit strangely. But you'll also notice that if you are insistent, people will support you. Because the danger is real.

The important thing to remember is to do it every time. Not just on the the day after the attack - but every time you travel. Make it a habit. It almost seems inconsequential. But I'm sure that if each one of us takes it upon oneself to lookout for others, things could change.

This is also my response to many other problems to which I do not have a ready solution. Don't give up - just do whatever you can. From environmental problems to illiteracy, corruption, cleanliness, cruelty towards animals... Even a small act done in the right way can make a big difference.

G20 Summit - What Next?

2008-11-17T17:13:00.003+05:30

The Indian PM, Manmohan Singh made a very interesting point during the G20 Summit. He said the developing countries were not the cause of the problem - but they ended up being the worst affected due to it. This might seem a bit surprising when we hear reports that the US and Europe are reeling under the problem and without doubt going to have a recession. While in India, we are still feeling fairly OK.

What Manmohan Singh obviously refers to is the aftermath of the problem. Slowdown in exports, reduced foreign investments, and such that will affect the developed countries. So what's the solution? Manmohan Singh has listed these 7 points, reproduced in a rediff article.

There seems to be a consensus building on this. This is from a BBC article in which Linda Hueh, an economist with the University of Oxford had this to say:
" By recapitalising the West, China and other emerging economies can preserve their export markets by helping the world's richest economies weather the storm and prevent a drawn out recession, or even depression."

Which means, India and China will have to start spending their dollar reserves and make investments in the US and Europe.

Headlines from around the world

2008-11-14T22:29:00.004+05:30

Nov 14, 2008
The news keeps getting worse. A scan of the top headlines in two newspapers tells the story even without having to read the story. Read on...

Financial Times
1. Sun Microsystems to cut up to 6,000 jobs
2. Nokia warns handset sales to shrink in 2009
3. US retail sales plunge 2.8%
4. US jobless claims hit seven-year high on eve of summit
5. ANZ bank to axe more than 500 jobs. Fears for 10,000 jobs in the sector
6.

Wall Street Journal
1. Shinsei Bank's CEO Quits After Losses Over Lehman
2. Citi to Cut More Jobs
3. Hopes for GM Bailout Dim

Gave up after this. Didn't want to feel gloomier than I was already feeling....

Banking for the masses

2008-11-13T23:41:00.014+05:30

Last week, I had a surprise meeting with two people who are doing some wonderful work in the hinterlands of India. It's something that I wished I had known about and had been involved with earlier!

If you haven't come across a company named A. Little. World. (ALW) or an organization called ZERO Mass Foundation, it's not your fault. They have been low-key on the noise front, but have pulled off some very exciting stuff on the work front. If you are a resident of Mumbai, you'd have noticed the GO Mumbai cards which are so frequently flashed in BEST buses and used at railway stations. That's an ALW innovation. Then there's mobile cash transfer that they pioneered - and which they are using to great affect to bring banking to the masses. Starting from the poorest of the poor in the remote areas of India, across 21 states! That's a remarkable achievement, any way you look at it.

Anurag Gupta, President ZERO Mass and Sonjoy Mohanty, CEO ALW are onto something really wonderful here. These are business ideas and innovations that make a radical and positive difference to the lives of people. These are examples of product development keeping Indian needs in mind. This is what India needs if we have to justify ourselves as a nation that's on the move and on the pathway to economic superpower status. They may not make the stock markets zoom and make a few people become zillionaires, but they will help lakhs of ordinary Indians lead a better life.

And the best part about the whole project is, they are doing it using cutting-edge technologies with minimum disruption to the lives of the villagers. Plus, it's economical and environmental friendly - there are hardly any gadgets or resources required - and the paperwork is minimal - just a wee slip of paper to record the transaction.

A lot has been done, a lot needs to be done - that's what I got from them - which is true when you realize that around 40% of Indians do not have a bank account! Here's wishing the duo the very best to make it happen.

Oil continues to slip

2008-11-13T23:06:00.006+05:30

While Gold's behavior has been erratic, Oil has been consistent - in its spectacular downward fall. From a peak of $147 in July, oil today fell to $58 - which is a 60% decrease in 4 months. This, in spite of drastic cuts in oil production by OPEC.

So what's next? As many would have expected, OPEC has scheduled an emergency meeting on November 18th to decide on the steps ahead - mainly, further cuts in oil production. But by how much would they cut production to keep prices stable will be the question. With world consumption reducing, and with the fear of simultaneous recession in the US, Europe, and Asia, the situation will need some astute jugglery.

At home, the demand for a cut in oil price is increasing by the day. With each passing day, and every dollar's worth of fall in oil prices, the government is coming under pressure to announce a price cut. With inflation in single digit after a long time, this could be just the right time for the government to do so. That and some cuts in lending rates could be the impetus the economy needs to pick up some speed. At the moment, things are in a limbo. Maybe the government is waiting for the OPEC's decision and its impact on oil prices before wanting to make a decision.

The next one week should be interesting to see how oil performs and how the Indian government reacts to it.

Gold continues to slide

2008-11-07T11:20:00.013+05:30

A lot of investors had hoarded up gold the past few months anticipating a global meltdown and a runaway gold rally. But surprisingly, while the meltdown has been a reality, gold has not played saviour. In fact, its behaviour has been pretty erratic. And the last few months have seen gold continue to slide. A look at the charts for gold prices for the last 3 months show that gold actually fell by around 3 percent. And for the period between October and November, the decline is even sharper - at 15%. (Source: http://www.blonnet.com/forex/gold.htm)

How do we understand this strange behaviour? An article on Salon gives an interesting perspective on why gold has surprised economists by its volatile behaviour. Here's the article.

So what should one do about gold? The experts are not sure. They seem to have neatly divided themselves into two teams - one saying that prices will continue to decline, while the other team supports a huge jump in demand for the yellow metal. As usual, investors have to make the tough decision of whether to buy or not!

Banks unwilling to reduce rates

2008-11-03T17:14:00.006+05:30

The RBI did its best by reducing the rate at which banks can borrow money from them. But the banks haven't budged so far. Now the government is after them to reduce rates. But so far, the banks have not relented. They are still advertising the high FD rates and inviting people to make deposits.

What more can the RBI and the government do? Announce more cuts? Put more pressure? The government desperately wants the banks to reduce rates so that people consider spending the money, taking home and car loans. Just so that spending kicks off and there is more liquidity in the system.

I read that one of the public sector banks have reduced their home loan rates - think it was Union Bank. If other banks take the lead, things should be slightly better for the economy. Hope the banks listen!

Can read. Can't understand.

2008-10-30T10:49:00.003+05:30

That's how I'd sum up the issues with investing.

Most of us can read or know in a fuzzy manner what's being said when investing or finance is being discussed. But the majority of us cannot be absolutely sure that we got it 100% correct. Which makes us hesitant investors. People who'd rather stick with what we already know rather than expose our ignorance by asking questions that we are not sure is correct. Oh yes - even questions have to sound smart... right! Asking stupid or wrong questions gets us looks which many of us are not comfortable dealing with. So, just do away with questions. Let's stick to the tried and tested. That's why, in spite of all the noise about the stock market - in a country like India - just 2% of the population invests in the stock market.

I just want to highlight that what we have is a peculiar kind of literacy. The official statistic says around 65% of the population is literate. But of this, just a fraction of the literate could be classified as financially literate. Which should be a concern. Not just because just 2% of the population invests in our stock market. But also because people are not able to make investment decisions based on their requirements.

There will be a lot of people who may be thinking that in the present scenario "ignorance was bliss". The fact that they were ignorant about stocks and the fact that they didn't invest in it helped them escape the wrath of the falling markets. But, that's not sound reasoning.

A better reasoning would be that an investor identified that a bubble was being created and stopped investing realizing that it didn't make financial sense. Such a decision would be based on his/her knowledge of the markets and the principles of investing - rather than ignorance, in the earlier case.

My book explains some of the basic concepts of investing through a detailed glossary section right at the beginning. But it's not exhaustive. I'll have to make additions to it, I realize. Till then, I'm planning to send short explanations of key terms and concepts through SMSINVEST. It may not be very lucid, considering the space I get, but it should be enough to slowly start building a vocabulary.

Now, updates through MyToday SMS

2008-10-30T10:34:00.001+05:30

Today, I created SMSINVEST on MyToday Mobs. It's a more familiar application and interface for me than GupShup. It also has some more features like Future Publish which will help me manage my publishing better. I'm not certain GupShup has it; I'll call them and check.

For the subscriber, it shouldn't really matter which service they opt for. The choice is up to them.

To subscribe through MyToday, simply send START SMSINVEST to 575758 - that's it. And if you want to stop, simply sms STOP SMSINVEST to 575758.

You will know this I'm sure, but I'll reiterate - the sms that you send (viz. the START and STOP) will be charged by the operator, but all the sms that I send to you will be free (courtesy MyToday and GupShup).

Investment updates via SMS

2008-10-24T10:24:00.000+05:30

I've started an SMS group to keep readers of my book updated about the latest investment news and tips. It's free for everyone - irrespective of whether they've purchased a book or not.

To receive free updates on your mobile, simply send JOIN SMSINVEST to 567678.

Why investing is tough

2008-05-15T09:55:00.001+05:30

The biggest stumbling block to getting started on investing is to get our concepts clear.

What is Simple Interest, what is Compound Interest?
How do I calculate Simple Interest and Compound Interest?
What is Inflation? How does it affect my Investments?
What are the tax saving investments available in the market?
What are Section 80C, 80D, etc.?
What is Capital gain and Capital loss - how does it affect taxes?
How do I plan my investing?
How does PPF, EPF, Gold, Fixed Deposits, Mutual Funds, Saving Schemes, Real Estate actually work?

If you are comfortable with these concepts, it should be easy for you to start investing. If you are not, you'll always find yourself asking for tips and advice from "experts" - thinking that only they know the secrets to making your money grow. When the fact is, as the recent events have shown, each one of us have to be responsible for our financial future. And this change can only happen if each one of us acquires the knowledge to understand, question, analyze, and arrive at decisions regarding our investments.

Fortunately, it's not as tough as it seems. Or how it reads in the financial newspapers. Most of these concepts can be understood easily if we have a clear idea of how investing and investment instruments work.

It's never too late. Get started now. You can also pick up a copy of my book "What Every Indian Should Know Before Investing" to understand these concepts. It covers 15 of the most popular investment options in a simple, easy-to-understand manner. Click on the image of the book to read the table of contents and the instruments covered.