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.