Financial Planning

Impact of PPF Rate reduced from 8.7% to 8.1 %  As expected, government do not want to take burden on it's own balance sheet, so they are going to pass it on to consumer by linking it to Gsec Rates in India. Example :- if someone is investing with a view that one will get return of 8.7% compounding returns over a period of 15 years of tenure of PPF, now that charm is gone as PPF rates are volatile. Someone having 20,00,000 Balance in PPF which were earning around 1,74,000 per year (tax free) will result in earning 1,62,000 (tax free) i.e loss of Rs. 12,000 loss every year from this time. above all, no one understand the Inflation scenario when investing in PPF.

In recent past we have seen many NFO's because some infra themes were not there so one needs to add one. but in past 1 year so many big and some small fund houses/ mutual funds have started business of asset gathering, everyone are in league of becoming the 1st prize winner, they are in race.  some of them feel NFOs are growth engines to build their assets and profits. What happens when you have more and more schemes? what happen in recent time - all people associated with mutual funds get more incentives as new offer comes in, fund houses can spare more money as fund sizes are small initially. some of the fund houses / mutual funds have similar schemes in their portfolio but they are still not merging it because everyone earns more on small funds. in this race of earning or making company big, who suffers is investor. So what should investor do? 

The first common reaction in seeing market 800 points down in red is, oh my god! it is the end of the world - It feels like it’s going to go down further, I should have waited some more time to make an investment. ask yourself (how much money is in equities of your total net worth ?) So let us understand what share market (sensex) is:- When you buy Equities- you buy a SHARE/ Partnership / Holding / Business by investing in particular stock / company / equity mutual funds (equity mutual funds consist of around 20-40 stocks in one particular fund) Let us understand that equities are for appreciation, it takes time to build businesses, it may not give you 8%-9% yearly returns like your FD’s / PPF or Post office money, but it gives you inflation adjusted returns in long term as the businesses grows / makes profits – it reflects in balance sheet of the company & stock prices goes up or down.

BEGAANI SHAADI ME ABDULLA DIWANA Many years ago I was working in a Foreign Company. At that time U.S. was dropping bombs in Afghanistan. There were reports that many a time bombs were being dropped waywardly and were hitting unintended targets. One day I get a call from an overseas colleague of mine checking if we were all safe in Mumbai as the US bombing was hitting unintended targets. To my well-meaning friend distance of more than 2500 KM was not good enough to stop a wayward bomb being dropped in Kabul from hitting us in Mumbai. May be he was influenced by the map proximity. This kind of incidence shows the reaction to events in faraway places. When 9/11 happened, Indian interest rates jumped up significantly as a risk of sell off. It took strong intervention by RBI to bring sanity in rates market. Irrationality can prevail in short term.

Sensex crossed 29000, What Next ?  Every time sensex crosses new numeric level, the same question arises in everyone's mind, right? At 9000 sensed level suddenly we all feel, it will go to almost zero and heard someone saying market will get close one day, but it didn't happened ? Right ? Same way now at 29000 level, people feel it will cross 30,000 and then cross 1,00,000 soon ? Really ? Can you predict the same ? Businesses do not stop like that. So how this numbers really comes from ?

As we always say, simple things are always tough to implement. When we talk about shares of a particular company ! The first thing which comes to everyone's mind is business that company is doing? Right ?  Now let us understand, when a company is making a product say for example in rs. 100 and out of that 20 rs is profit they make on one product. If the price rise / if inflation goes up and  now the same thing is costing them rs. 100, then they will not reduce the profit to zero and sell the product right ?  the business owner will pass that inflation or price rise to the end consumer and they will not reduce the profit. so when you invest in shares, the inflation always gets adjusted in equity as explained above.

I Can Make Huge Money In Stocks If I Invest Directly: - Somebody told me last week If everyone makes money in equity, then why there are only 3% of investors in the stock market? and rests are into FD's, Gold, Real Estate, and all?  You may be right, Say for example, if you have started investing in equities in 2007-2008, what you may have bought? Reliance Infra, DLF, Suzlon, Orchid, Rcom, and so on..... (They all were the talk of the town).this is better known to the investors who already burnt their fingers.  I must throw some light here – they all are below their investment price- some are even less than half the price. It’s always said, Retail investors never make money as big as Seasoned Investor makes(the one who does research or invest for long term through mf), retail investors come into market when other runs out, they would love to buy stocks when its already in bubble phase and sell it when actually, its time to buy stock, or in investment lan...