Systematic Investment Planning

The SIP route is usually recommended because it helps you to:
1. Phase out your entry into the equity markets over an extended period of time.
2. Helping you benefit from market cycles.
3. If there is a significant correction in stock prices even as you invest, you reap the benefit of that by acquiring some units at relatively low prices.

What happens when the minute you start your SIP, the market goes on increasing and takes a breather only when the SIP period is over. Guess, you are a victim of the famous Peter's law!
Among other things, it also says that whenever you are alone in the house, the bell rings when you just enter your bathroom!

Invest in a Company serious about CSR & Corporate Governance

CRISIL launched a 50 scrip index which tracks the top Indian companies on the basis of Corporate Governance, Ethics and Social responsibility. It's called the ESG Index. (Environment, Social, Governance)This is what I was looking for when I am looking around for stocks to invest. Infosys, ITC was already in my radar and I am glad to see that they rank right on the top of the 50 scrips. The top ten companies by weight in the index are:
  1. Infosys
  2. ITC
  3. Aditya Birla Nuvo
  4. Dr.Reddy Labs
  5. Wipro
  6. Jubilant Organosys
  7. Axis Bank
  8. GTL
  9. RIL
  10. HUL
See Crisil website for all the detailsMint reports that the first sustainability index that was launched in Brazil in 2005 has given returns of 26%, higher than the 18% offered by the benchmark index of Brazil.So investors would be rewarded and you also have the satisfaction of investing in a company aware of its social responsibility and scores high on corporate governance.

Equity Investment Basics

When you buy a share of a company you become a shareholder in that company. Shares are also known as Equities. Equities have the potential to increase in value over time. It also provides your portfolio with the growth necessary to reach your long term investment goals. Research studies have proved that the equities have outperformed most other forms of investments in the long term This may be illustrated with the help of following examples:

a) Over a 15 year period between 1990 to 2005, Nifty has given an annualised return of 17%. b) Mr. Raj invests in Nifty on January 1, 2000 (index value 1592.90).The Nifty value as of end December 2005 was 2836.55. Holding this investment over this period Jan 2000 to Dec 2005 he gets a return of 78.07%. Investment in shares of ONGC Ltd for the same period gave a return of 465.86%, SBI 301.17% and Reliance 281.42%Therefore, Equities are considered the most challenging and the rewarding, when compared to other investment options. Research studies have proved that investments in some shares with a longer tenure of investment have yielded far superior returns than any other investment. However, this does not mean all equity investments would guarantee similar high returns. Equities are high risk investments. One needs to study them carefully before investing.

Broadly there are two factors: (1) stock specific and (2) market specific. The stock-specific factor is related to people's expectations about the company, its future earnings capacity, financial health and management, level of technology and marketing skills. The market specific factor is influenced by the investor's sentiment towards the stock market as a whole. This factor depends on the environment rather than the performance of any particular company. In the investment world we come across terms such as Growth stocks, Value stocks etc. Companies whose potential for growth in sales and earnings are excellent, are growing faster than other companies in the market or other stocks in the same industry are called the Growth Stocks. These companies usually pay little or no dividends and instead prefer to reinvest their profits in their business for further expansions. While looking for "Value Stocks" the task is to look for stocks that have been overlooked by other investors and which may have a 'hidden value'. To download the entire material for financial markets visit NSE, India

Buying gold from your bank? Beware!

Banks have hit upon a new idea to get a larger share of your wallet – retailing GOLD. While the banks claim that buying gold from them is a wise decision, but is it really wise!!!In fact i would go so far as to say that if you want to buy gold, don’t go to your bank!

Why Gold? There are various reasons for which you should own gold in your portfolio. The most important of these is that gold is a real asset whose value is driven by factors (such as the amount of gold mined) that are very different from those that impact the value of financial assets. Therefore, it brings in a much needed element of diversification in your portfolio. You can read our detailed note on the reasons for and against investing in gold. Suffice it is to say over here that you must have about 5% of your wealth in gold.

The next question that is often put to us is in which form should one hold gold? The one form which we all are familiar with of course is jewellery. However, from an investment perspective this is not the best option as the making charges for jewellery can be as high as 30% of the value of the gold i.e. if your jewellery has gold worth Rs 100, you are probably going to be buying it for Rs 130. So if you wish to sell your jewellery, all you will get is the value of the gold; the making charges will be a loss to you. Not to mention that sometimes jewellery that is promised to be made of 22K gold turns out to be of a poorer quality. "The best form to hold gold, from an investment perspective, is probably, gold BARS (or like they say “biscuits”!). Gold bars are standardised products whose purity is assured by the hallmark (seal of the producer) that it carries. There are no making charges involved and as the purity and quantity is assured, on liquidation you do not have any surprises in store for you.

Where to buy Gold?In recent months, banks have become very aggressive in marketing gold bars. This pick up in tempo is not only due to the festive season; it is also due to the fact that banks have hit upon a new idea to make a “neat buck” off you.

Here’s an eye opener for you. The bank, which pushed you into buying standard gold at a premium, will not buy the gold back from you! So, if you bought gold from a bank today for Rs 100, and you needed to sell it the same day (to a jeweler as the Bank will not buy the gold back from you), all your will realise is Rs 86! Of course, you get to keep the certificate!The jeweler on the other hand, will buy back gold from you any day at the prevailing price. Some jewelers also give you a certificate for the gold you buy, thus diluting a key selling point of the bank.The answer to the question of where you should buy gold from is simple – give the banks a skip in case you are looking at buying gold. Opt instead for a credible jeweller (even in the case of jewelers, we found that there is a lot of price variation with branded stores charging a premium – do your homework well before you buy gold). And, of course always buy standard hallmarked gold.If you do decide to go to a jeweler to buy gold in bulk, do negotiate. It is likely you will get a discount. In our conversations with a couple of brokers, we were offered a discount on bulk purchases.Beware: Based on our interactions with thousands of individuals every month, we find that instances of mis-selling of investment-related services and products is growing at an alarming rate. As an individual with limited knowledge about such products and services you probably are not geared to ask your advisor the ‘right’ questions. The best way then to eliminate the risk of being ‘cheated’ is probably to spend time in selecting an honest financial planner for you.

Gold, a better option!!! Think about it….

Not really ten reasons, but one step at a time.

  • So the US economy is crapping out. Big deal? Yes sir, very big deal. Dollar hits big time lows. What happens then?
  • Look, a lot of us Asian Economies including the guys who have lots of oil and desert, have our bloody reserves in dollars. Ok?
  • And if you flush the dollar down the toilet like the US is most likely to do with some grand slam rescue attempts to save some lousy bond insurers, we Asian Economies don't know what the frick to do with our reserves.
  • Oh you small little Asian Economies you say!Dude, our RESERVES are already fat. This is a huge deal, a few trillion dollars. China has some 1.5 trillion, Saudi Arabia has about 800 bn, and with Korea, Singapore, India etc. Don't even count Japan.
  • So what reserve currency if not the dollar? Uhm, the Euro? No thank you, you guys are even more clueless and more divided in a recession than we can trust. The pound sterling? Not very different from the dollar, and now we can't understand the accent either, depending on which part of the UK you're talking about.
  • So we'll set up sovereign funds, maybe. But what are we going to buy? The US won't let us touch defense etc. or even big telcos, and these are the only things worth buying in a recession. At least on the scale these funds want to think about.
  • Latin America, yes. Now good place for sovereign funds to invest. Unfortunately, we are also clueless out here and can't figure out Portugese or Spanish, so we will give that a miss, regardless of how good the investment might be.
  • That leaves precious METALS. We had a gold reserve earlier but it's gone now, but gold is still worth it. But which bugger will go buy at this obscene price? Answer: Everyone. They're all waiting for someone to jump in and then everyone's in.
  • When these guys talk some gazillion trillion dollars, gold is likely to jump up a little bit. And when it goes too high it's likely to get some regulatory interest (like saying "we'll control the price of gold") which will again cause it to shoot through the roof because that's how the market works.
  • If the world works like I said, someone who bought gold now would still make a lot of money.

So considering Gold (either in physical form or as an Exchange Traded Fund) as an investment is a viable option!!!!!

Allocating your ASSETS to Good Use

Asset Allocation (AA) sounds sophisticated, no? It assumes you have an asset to allocate and gives a boost to your ego, eh! Looks like a smart and sexy word for a thing as drab and dreary as planning your personal finance. And AA also gives you a feeling that you are holding some aces (AA) rolled up in your sleeves. It specially applies to the Financial Planners or Advisors.

But seriously, asset allocation is a useful concept to know. Simple too!! And once you get your fundas clear about AA, you can use it to your advantage. It is the first step of adding value to your money or putting your money to good use.

Asset allocation is the percentage distribution of your money into equity, debt and liquid instruments. Equity, as you know, gives the highest growth but comes with the highest risk. Debt instruments are more or less guaranteed but give you a lesser return. Liquid money is your money in your savings account.

Let’s start with the thumb rule of AA. Your allocation to debt should be equal to your age. And as you age, the percentage in debt should increase too. In other words, your investments in equity should be (100- your age).

But AA should be much more dynamic than the above thumb rule. I feel that it should depend on your age and your risk appetite. Guys at 20-25 years of age may want to invest everything into equities and I think that is the right strategy.

And before you set off to do some AA for yourself, I would like you to ask the following questions to yourself:

  1. What is your risk appetite?
  2. What are your financial goals?
  3. When do you need the money?

Keep the required liquid amount in cash or in savings account. And for the rest amount assigned for savings & investment, you can use the ready made formulas, here's some from allocation strategies from John Bogle:

  • Older investor in distribution phase: 50% equity; 50% debt
  • Young investor in distribution phase: 60% equity; 40% debt
  • Older investor in accumulation phase: 70% equity; 30% debt
  • Young investor in accumulation phase: 80% equity; 20% debt


For the first time in my life i am doing something that i am good at, in public. This blog is purely a cut-copy-paste work baring a few personal views. Their is a glut of sites, blogs, pages and views about investment & savings. Still understanding and finding the right instrument is difficult. This is an endeavor to simplify the complicated financial jargons and products to make it understood by laymen.

As the URL name suggests, it’s for laymen by a layman of finance. This blog is strictly meant for me, my family and my friends and their few friends. The blog is not meant for experts & gurus of finance.

The author of this page is not a registered financial advisor. One should not construe anything written here to be financial advice. All information is a point of view and is for educational and informational use only.