Why ULIPs are not good for your financial health...

Source: Equitymaster Newsletter

Our dislike for Unit Linked Insurance Plans (ULIPs) is well known. Time and again we have highlighted why we are not fascinated by this bundled product which offers dual benefits of insurance and investment. And when recently we came across an article from one senior executive of a private Life Insurance Company propagating ULIPs, we thought it was an opportune time for us to re-iterate our stance on them. 

Well, the primary reason why people get attracted to such products in first place, is because of the twin benefit which is on offer. Plus, investment in ULIPs also presents income tax benefits to investors. Further, the bancassurance channel gave an easy platform to ULIPs. For the want of commissions they were pushed aggressively through the banking channel. 

However, when it comes to performance they have failed miserably. For one, their return was linked to market performance. And this factor was camouflaged when hard selling to a policy holder. So, when markets were in a downturn, many policyholders lost their net worth. And that too in insurance cum investment plan which is supposedly safe! Not to mention the host of charges that further ate away investor returns. 

Amidst huge losses, investors fled ULIPs. Since then, IRDA made rampant changes in the product proposition. It capped charges on them since September 2010. Even the fund management expenses had a fee cap. This was done to make the product more appealing. 

So, with regulatory changes having being made, should one invest in ULIPs? 

Well, investors need to know that charges were not the only factor that led to downfall of ULIPs. The primary reason why ULIPs failed is because they combined both insurance and investment needs of a participant. And investors failed to understand the nature of the product. For instance, the premium one pays includes mortality charges for providing protection. The balance is invested in stock markets. This not only raised ambiguity around the product but also led to a fall in fund value when stock markets fell. 

And when investors saw their fund value declining in an insurance plan, they redeemed in fear as they were unaware of such eventuality. High charges further erased their capital. With charges now being regulated, investors can draw some respite. However, the market risk will still prevail. 

Also, since these products are not tailor made, there is a scope of huge mis-selling. A 70 year individual can get exposed to equity risk by buying ULIPs which is undesirable at his age! The bottomline is that both insurance and investment needs are separate. We have highlighted this innumerable times. You cannot have a one size fits all policy here. These needs depend upon individual client circumstances. 

Hence, no matter what changes are being made to make the product more appealing, investors should be careful. They should keep in mind that lowering fund charges does not eliminate market risk which is inherent nature of this product. 

4 steps to an early retirement

With growing needs and increasing cost of living, people now-a-days are busy trying to climb the corporate ladder to earn a fatter pay-cheque. Every individual wants to earn a higher income than what he / she earned the previous year; so as to meet their family’s financial goals such as children’s education and / or marriage, buying a house and so on. Almost everybody is struggling and working hard to provide the best to their families. And while slogging out to achieve all such financial goals, there are some individuals who also wish to retire early and live their life in bliss after fulfilling their family responsibilities. But it is noteworthy that how early you retire or how will your post retirement life be, depends upon the approach that you adopt today. You see, even if you are not planning to retire early it is imperative to recognise that planning is paramount, especially if you are the sole bread earner of the family; because much depends on your income for your family to live a comfortable life once you are retired.

Hence for your benefit, we have listed down certain steps that can help you plan for an early and peaceful retirement.

• Determine the retirement corpus
  
  Unless you know where you are headed, it is very difficult to get there. In retirement planning as well, it is important to have a target in mind to live comfortably in your golden years. To arrive at this corpus, you might need to make certain estimations and assumptions. You have to work out – how early do you wish to retire, what is your life expectancy (based on family history and health conditions), how much will you spend every month, inflation that you expect on these expenses, pre and post retirement rate of return that you expect on investments, etc. Thereafter you can compute the corpus amount required for your retirement by taking the help of excel sheet. It is imperative that you set realistic expectations based on your current financial status and financial goals.
   
• Start saving regularly
  
  If you wish to retire early, it is extremely important that you save a fixed amount (as calculated) each month without fail. If your family expenditure leaves you with very little to save, it is high time you reduced unnecessary expenses and started working towards saving the requisite figure each month. It may also be wise to spend sensibly on necessities such as food, electricity, clothing and so on. If you prefer going for family dinners often then reduce these outings. Plan your shopping trips beforehand so that you can save on fuel costs and use coupons and discount offers to purchase required items. You or your spouse may also consider finding an additional source of income if you are yet unable to meet the target amount.
   
• Invest wisely
  
  Saving alone may never be able to help you to meet the desired retirement corpus as the inflation bug eats into your hard earned money every single day. Hence it is important to invest your savings in different asset classes (equity, debt, gold etc.) depending upon your risk appetite and time horizon. Different asset classes have different attributes, which help in maintaining the required balance in one’s retirement portfolio. While equity as an asset class has the ability to beat inflation and provide alpha returns over a longer time horizon, debt instruments usually provide stability to one’s portfolio and generate a regular income stream. Following a suitable asset allocation pattern will help your portfolio to grow at an attractive rate of return and also safe guard it from market volatility when your retirement age comes closer. However, you must remember that merely following a suitable asset allocation pattern alone will not help you reach your goals unless you invest in sound and appropriate investment avenues.
   
• Insure yourself adequately
  
  Insurance is inevitable in case of retirement planning. As an individual grows older, the number of physical ailments and emergencies also increase. Hence it is extremely important for you to have a suitable and adequate health insurance policy or mediclaim. Apart from this, it is also wise to opt for a personal accident and critical illness policy from an early age. It is advisable to maintain a medical contingency fund worth Rs 5 – 10 lakh (depending upon how much you can afford) and a general contingency reserve with 6 to 12 months of your expenses to compensate for unforeseen events. This will ensure that your retirement savings do not get eroded in case something unfortunate is to happen to you or your family.
  
  Moreover, everyone’s life is unpredictable and uncertain. While you might believe that something will not ‘happen to you’, God forbid but destiny may have a nasty surprise in the offing. Therefore, it is also important to insure your life with a term plan having an optimal cover which can take care of the family expenses in case the bread earner meets with an untimely death.

While you may think that you are too young to be thinking about retirement, let us apprise you that it’s never too early to start planning for it, as long as you have started making a living. In fact, if you want to retire early it goes without saying that you must begin the retirement planning process as soon as possible.

Have you secured your Family's Financial Future? 

 ✓ Child Education
 ✓ Child Marriage
 ✓ Dream House
 ✓ Retirement

Learn more about Value Investing Strategy in Simplify Investing eBook.

How to get maximum benefit out of Budget of 2014?

1) PPF increased from Rs 1 lakh to Rs 1.5 lakhs:

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In budget 2014 investment in PPF has been increased from Rs 1 lakh to Rs 1.5 Lakhs from this financial year. Investment in PPF is a good way to plan for child education plan, daughter marriage, retirement etc. apart from earning tax free income. If you can plan well by investing Rs 1.5 Lakhs by the 5th of April, you can earn higher tax free income in a year.

2) 80C limit increased from  Rs 1 lakh to Rs 1.5 lakhs

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In this budget, income tax 80C exemption increased from Rs 1 lakh to Rs 1.5 lakhs. Under 80C any amount invested in insurance, PPF, NSC, ELSS, ULIPS etc. are eligible for deductions. While all the options are good, you can bet for better returns from PPF and ELSS. PPF is a good option to earn 8.75%  tax free interest, which has a lock-in period of 15 years. This is good for low risk investors. Coming to ELSS mutual funds, these are a medium risk investment option which can help you to earn 12% to 15% returns per year. This has 3 year lock-in period.

3) Housing loan interest exemption increased from Rs 1.5 Lakhs to Rs 2 Lakhs

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This is a good news for everyone who are planning for or taken home loan. Interest from the home loan exemption has now increased to Rs 2 Lakhs per annum, i.e. Rs 16,667 interest would be exempted per month. If you can plan well by taking 30 years home loan tenure from the cheapest home loan provider, you can take maximum benefit from this.

4) Invest in infrastructure and banking Sector stocks / mutual funds

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It was not surprising that the new Government have provided preference to infrastructure sector in the Budget. It has allocated Rs 2 lakhs Crores to spend in infrastructure sector. This is 25% higher compared to previous years. We should invest in  infrastructure and banking sector stocks and mutual funds to get good returns in next 3 to 5 years. Apart from this you can directly purchase stocks like ACC, L&T, Ultra Tech and JP Associates which would benefit. Housing loan exemption limit increase could benefit to LICHFL, HDFC etc. where you can look to purchase such stocks.

5) Invest in specific stocks of consumptions

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Budget helped in reducing the prices of consumptions like television, telephone, refrigerators, footwear etc. This way consumptions will boost. Invest in stocks that deal with such business.  Excise cut on footwear could benefit Bata India, etc. which could be a good bet.

6) Invest in specific stocks  of insurance and defense sector

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In budget, there is an increase in FDI in insurance and defense sector and opens doors wider to foreign investors in the Indian debt market. Financial markets are expected to boost. You should invest in insurance and defense stocks.

7) Incentives for introduction of REIT's

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In this budget, the government has given the necessary incentives for the introduction of REITS (Real Estate Investment Trusts). This is going to increase valuations in the real estate industry. Companies like Prestige Estates etc. are going to benefit. You can look for undervalued stocks in this sector.

Conclusion: Markets have reached new peaks and expected to take some correction before moving ahead. Look for opportunities during these market corrections and start investing. Some of the above are promising sectors and you could benefit more.

Union Budget Highlights 2014-15 – In simple terms

Union Budget 2014-15 – Highlights – Personal Finance

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• Maximum IT exemption limit raised to Rs. 2.5 lacs for an individual.
• Uniform Know Your Customer (KYC) norms for the entire financial sector.
• Public Provident Fund (PPF) annual ceiling enhanced to 1.5 lacs.
• Senior Citizen are not liable to pay tax on income upto Rs. 3,00,000.
• Investment limit under Section 80C increased to Rs. 1.5 Lacs.
• Deduction for Interest on Housing Loan increased to Rs. 2,00,000.
• Finance Minister proposes one Demat account for all financial products.
• Special small saving scheme to be introduced for the education of girl child.
• Income of funds from portfolio investments shall be deemed as capital gains.
• Controversy over categorization of income of foreign investor funds as capital gains or business income shall end with this proposal.
• Finance Minister Proposes liberalization of American Depository Receipt (ADR)/Global Depository Receipt (GDR) regime.

Other Budget Highlights

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• Taxation issues for foreign funds with Indian managers to be clarified.
• The government will not bring any retrospective amendment, which is unfair to the taxpayers.
• Five more Indian Institute of Management (IIMs) to be set up.
• Four more Indian Institute of Technology (IITs) to be set up.
• Rs. 100 crores for Metro in Lucknow and Ahmedabad.
• Allocates Rs. 400 crores to incentivize the development of low cost housing.
• Rs 500 crores for solar power development project in Tamil Nadu and Rajasthan.
• Accounting Standards for Banks and Insurance sector would be notified separately.
• No change in tax rates for corporate tax payers.
• Concessional rate of tax on dividend from foreign subsidiaries continues.
• No sunset date for concessional rates for foreign dividends.
• Concessional rate of 5% on interest extended to all types of bonds.
• Government shall consider public comments received on DTC.
• 10 year tax holiday for power companies starting production and distribution on or before March 31, 2017.
• To boost manufacturing sectors – customs duty reduced on certain inputs such as fatty acids, etc.
• Import duty on steel increased from 5% to 7.5%.
• Government to provide investment allowance at 15% for 3 years to manufacturing company investing more than Rs. 25 crores.
• Portfolio income of Foreign Institutional Investor (FIIs) to be treated as capital gain.
• Imported electronics goods to cost more. A cess to be introduced.
• Customs duty reduced on certain types of coals.
• Government reduces basic customs duty on LCD/LED televisions.
• Customs duty cut to nil on import of LCD, LED Panels below 19 inch.
• TV sets, Solar power units, computers, oil products, soaps becomes cheaper.
• Footwear to go cheaper – excise duty reduced from 12% to 6%.
• Sugary carbonated drinks to get dearer.
• Cigarettes, Cigars, Pan Masala, Gutka and other tobacco product to attract more excise duty.
• Basic rates of customs duty @ 10%, excise duty @ 12% and service tax @ 12% remains intact.
• Excise duty hiked on aerated waters with sugar content.

10 Golden Rules to Boost Returns from Stock Market Investments

10 Golden rules to boost returns from stock market investments

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If you talk to some investors, they would say they are making good returns in stock market investments. Some say they burnt their fingers and stopped stock market investment. While there have been no foolproof rules on how to boost returns from stock markets, there are a few golden rules which one can follow and get good returns in the long run.

1) Understand before you invest

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Many of us would be in a hurry to invest and later blame the stock market that they incurred losses. Till 6 months back, I have seen that investors have seen good returns from Technology stocks / Funds and any new investors still felt that they can make 50%+ returns in the short term and started pumping more money. Now technology stocks are not doing good and in a down trend. I would have got more than 500 messages on this blog indicating they were new investors and they just invested without understanding them. You should first study various sectors, which are growing, which are declining, the risk appetite involved in such stocks or funds. If you are a new investor, spend 3 to 6 months just to understand on how they work before you invest. You should know stock market investments are high risk investments.

2) Invest in good options where you pay less

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Invest in options where you need to pay less fees. Understand various fees / charges which you need to pay while investing in the stock market. It could be brokerage fees for stocks purchased, fees charged by mutual funds brokers directly from mutual fund companies (trial fees), transaction charges etc. Try to avoid or reduce wherever possible. Open a demat account / mutual fund account which charge less transaction charges. Invest in direct plan of mutual funds where you can avoid trial fees. This could help you to get an additional 1 % to 2% returns.
3) Avoid market timings

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Don’t think you are too smart and investing at the right time and would exit at the right time. No one can predict market timings when it would go up or down. Many investors burnt fingers thinking they can exit at the right time. But when the market falls and keep falling, they sell with huge losses.
4) Don’t invest in too many stocks or mutual funds

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I have seen one reader commented on this blog indicating that he invested in 25 mutual funds and 50 different stocks. I got surprised that he spends several hours in a week to track how  they are being performed. Invest 5 to 8 mutual fund schemes and less than 10 stocks for investments.

5) Rumors are good to hear, bad to invest

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Don’t invest based on rumors. Though you may earn money in some cases, there are a majority of chances that you would lose. These cheap tricks are created by some of the stock brokers who want to earn money in the short term. They know that majority of investors has now become clever and keep targeting new comers to stock market investments.

6) Implement disciplined investment approach

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You cannot time the market, but disciplined investment approach in stock market would help you to come out from stock market fluctuations. Markets are booming now. If you ask who has earned more money, it could be short term investors and long term investors. However, what happens if the market falls now? Short term investors would lose money, but long term investors would have still made money as they have been investing for long term and their average cost of investing in a stock or a mutual fund scheme is less. Use System Equity Plan (SEP) in stocks and Systematic Investment Plan (SIP) in mutual funds to invest every month instead of lumpsum.

7) Avoid Emotions while investing

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Stock market is at peak now. Many of us are making money. However, don’t be too emotional and start investing in unknown companies or not well researched mutual fund schemes. Don’t judge with returns in last 1 year to make investment decisions. Soon you start incurring losses in such stocks or funds.

8) Believe in realistic returns

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When I write articles I indicate that one can expect 13% to 15% annualized returns in the long run in top stocks or good mutual fund schemes. I got several mails saying investors are making 30% annualized returns and in last 1 year on some stocks and mutual funds gave more than 60% returns and why I still indicate 13% to 15% only? Let us not forget stock market crash in 2000 (dotcom bust) and 2007 (financial meltdown). If you invest in next 10 to 15 years, consider all these points. If you are making good money beyond this, well, you can do party.

9) Invest your surplus money

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Last week there was a comment from reader Ms. Archana, indicating that she wants to invest in stock market for 1 year and she has some commitment to spend such money after that. She got disappointed when I told that we should invest in stock market for long term. We try to invest short term money. When we need money, markets are not in our favor and we sell such stocks or mutual funds with loss or less returns. If you invest your surplus money which you do not need for 10 to 15 years, you don’t need to book losses. You would wait and exit at the appropriate time when markets are giving good returns.

10) Track your investments regularly

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When you invest in the stock market, track your investments regularly. If you made a mistake, try to correct it immediately. If you have invested in good quality stocks, but they are not performing for short term reasons, be patient till you enjoy the fruits. I was indicating few months back that technology sector and FMCG sectors should be avoided at this point of time as these sectors are now under performing and one can lose money if you continue. While you may track your stocks or mutual funds, you also should track how well the sectors are expected to perform in coming years. This would help you to boost returns in stock market investments.

8 ways to control spending and start saving

Source: timesofindia: 

The biggest challenge for young investors is to control spending. Here are eight ways you can transform from a spender to a saver.

You may have landed yourself a good job, earn a fat salary and have a bright future. Yet, none of this is quite evident when you look at your savings . This is not a one-off case and you are not the only one to have not paid heed to saving for the future. Young people often find it difficult to save in the initial years of their careers. Studies reveal that discretionary spending can be as high as 18-20 % of the income for young people. A 2011 study by Assocham revealed that almost 35% of the urban youth spend up to 5,000 a month on clothing alone. This is one of the reasons most young people have such low savings . "Gen Y usually focuses on their EMIs, but ignores their SIPs. They want to splurge on the latest smartphones and the newest cars but not save for their future," says Sudipto Roy, business head, Principal Retirement Advisors.

Discipline and self-regulation are the cornerstones of a successful investment plan. We know it is difficult to salt away money when everyone around you is spending as if there is no tomorrow. There is tremendous peer pressure and even the most level-headed youngsters can stumble. Our cover story this week looks at 8 secret mantras that can help transform a spendthrift into a saver.



MANTRA #1 

Save before you spend 

Many people are not able to save enough because they don't have anything left after all their expenses. Their financial equation is: Income - Expenses = Savings . Legendary investor Warren Buffett offers a simple solution. He says the equation should be changed to Income - Savings = Expenses. Instead of saving what is left after expenses, you should spend what is left after you are done with your savings for the month.
We know controlling expenses is easier said than done. However hard you may try, there will be some expense that will gobble up the surplus and prevent you from saving. The solution lies in automating your savings. If you give an ECS mandate to your bank for an SIP, the money will automatically flow into your mutual fund even before you can withdraw it. Ideally, the savings should flow into an investment option that does not allow easy withdrawals. This is one of the reasons that make the Provident Fund such an effective tool for long-term savings. Every month, the employee's contribution is deducted from the salary and deposited into his PF account. The money keeps growing till the person retires. He can access the corpus before retirement only in certain circumstances.

MANTRA #2 

Wait before you splurge 

The urge to buy something you like can be overwhelming. Easy financing options and plastic money prevent an individual from distinguishing his wants from his needs. Whenever you want to buy something expensive but not essential , follow the 30-day rule. Just postpone the purchase by 30 days. During that period, think hard whether you really want the item. At the end of the month, if you still want to buy it, go ahead and purchase it. However, if the item was not really essential, you will get over the urge to buy and will probably junk the idea. This simple rule works very effectively in case of gadgets, apparel, footwear and accessories. It's also not very difficult to follow because you don't actually deny yourself the item. You merely postpone the purchase by a month. As a fringe benefit, you also get to research the item over the next 30 days. There is another guideline that can help you know the difference between wants and needs. The 30-minute rule says that if you are unlikely to use an item for a least 30 minutes a day on average , you should not buy it. The fancy coffee maker is really no use if you take it out once a month. Of course, this rule is only for gadgets and appliances and should not apply to other essential household items.



MANTRA #3 

Avoid using plastic money 

Credit and debit cards are essential because an increasing number of our financial transactions take place online. However, plastic can be dangerous in the hands of a reckless spender. Studies show that people tend to overspend if they use a credit card for a purchase. If they have to make the payment in cash, they feel the pinch. Since the credit card user only signs on the slip, the full impact of the purchase is not felt.

To suppress the shopaholic inside you, leave your debit and credit cards behind when you go to the mall. Take cash instead. Experts recommend some extreme measures for serious shopping addicts. Some say you should just note down the card details and then cut the card into pieces so that you can't use it anymore. Others suggest you keep the card in a paper sleeve and stick pictures of your kids or spouse on it. You will be reminded of the other goals you may be jeopardizing when you swipe the card for an unnecessary purchase. "Keep in mind that every craving sets you back when it comes to reaching your longterm goals," says P V Subramanyam, financial trainer, Iris. One bizarre idea is to literally freeze your card inside a block of ice. It won't damage the card, but the user will have to wait for the ice to melt before he can access it. However, we believe the average spender won't have to resort to such extreme measures. Just keeping the card in a safe place instead of carrying it around in the wallet is good enough.

MANTRA #4 

Start small to save big 

At the beginning of your career, your income may not be very high. In many cases, there is a very small investable surplus after the all the expenses. Still, this should not hold you back from saving . For a young investor, the low quantum of investment is more than made up by the long period available for the money to grow. The magic of compounding ensures that even a small sum grows into a gargantuan amount over the long term. The investment can be scaled up as the income grows in the coming years. However, it is difficult for the average investor to maintain the discipline required for this approach over a long period of time. Mutual fund investors start SIPs but don't enhance the amount every year. Ulip investors pay the same premium year after year without any top-ups . Investors in recurring deposits and fixed deposit don't even have the option to increase their investment in the same account.

MANTRA #5 

Don't be pressured to spend 

Everybody's financial situation is different . Just because your colleague has bought a new car or booked a flat in a fancy location does not mean you should follow suit. Bangalore-based Rajesh Prasad (see picture) learnt this early in his career. "When I started working, there was a lot of peer pressure to go out and splurge. However, my father and senior colleagues advised me against blowing away my entire income," he says. When it comes to big-ticket items like cars and houses, do the math carefully before committing expenses. For instance , the total cost of ownership of a car is much higher than the price quoted by the dealer. You also have to include the cost of fuel, insurance, servicing, spares and repair. There are a few rules for buying a car. The price of the car should not be more than 60% of your annual household income. The EMI should not be more than 15% of your monthly income or 30% of your investable surplus after expenses. Besides, a new car should be used for at least 8 years for complete return on investment . Similarly, assess how much you really need the new smartphone before upgrading.

MANTRA #6 

Levy luxury tax on yourself 

The intention of this article is not to make you deny yourself the very luxuries that you have worked for so hard to attain. Every now and then, you need to treat yourself and your family to some some fun as well. Take the case of Punebased Vikas Mathur (see picture). He has found a novel way to boost his savings everytime he spends. No, we are not talking about credit card reward points here. Every time Mathur indulges in some discretionary spending, he socks away an equal amount for his savings. If a dinner and movie with the family costs him 2,000, another 2,000 is put into his savings. There is another advantage of this rule. The luxury tax that Mathur levies on himself helps him get over the guilt of spending on discretionary items.

MANTRA #7 

Don't spend to de-stress 

For many people, spending can be therapeutic . It is a way to unwind after a stressful day and gives the person a sense of control. However, the aftermath of this de-stressing exercise can be even more stressful if it burns a big hole in your pocket. Worse still, if the bills you pile up remain unpaid, because it will definitely hurt your credit score and you might find yourself denied a bank loan if you happen to require one. "You must use your credit card wisely and with caution. If you use more than 30% of your total available credit card limit, it will affect your credit score adversely," says Nitin Vyakaranam, Founder & CEO, ArthaYantra.com. Do you also frequently head to the mall and pick up stuff to fight depression and anxiety? Get a grip on the situation and look for healthier (and less costlier) alternatives to unwinding. When you feel overwhelmed by the urge to go on a shopping spree, go for a stroll in the park or do some light exercise. This will act as a distraction and ease the urge to spend.

MANTRA #8 

Fix a budget and stick to it 

This should have been the first mantra, but has been deliberately brought up at the end because Gen Y is put off by the B word. The fact is that setting up a budget is the first step towards prudent financial planning, and it's not too difficult . You have to just set a limit on how much you are going to spend on your clothes, travel, movies and eating out in a month, and stick to your budget. Budgeting also helps you keep tabs on the itsy-bitsy expenses, such as casual shopping for clothes, eating out, gifting, and entertainment. Most of the time, these smaller items go unnoticed even though they take up a large portion of the total monthly expenditure.

In the good old days, financial planners advocated the 'envelope' method, where the outlay for each head was put in separate envelopes. Now you can sign up with a money management portal. These websites aggregate all your finances, from savings bank accounts and credit cards to loan payments and mutual fund SIPs. They help you keep track of your money, alerting you when a payment is due or when you have overspent under a certain head.

Boost your knowledge on personal investing -  Simplify Investing eBook. 

6/23 Non-Convertible Debentures (NCDs)

	Company	Yield	Duration	LTP ( ` )	(%)Chg	Volume
	MUTHOOTFIN-N9	15.33	1.42	1007.90	0.19	503
	SHRIRAMCIT-N1	15.33	1.67	970.50	-4.01	68
	MUTHOOTFIN-N6	13.59	1.12	1078.94	0.09	1317
	RELIFIN-N3	13.44	2.46	1000.00	-2.39	2
	MUTHOOTFIN-NA	13.07	2.46	1002.00	0.20	500
	SRTRANSFIN-NN	12.73	1.67	999.50	0.05	40
	IIFLFIN-N6	12.66	3.15	1030.00	-0.95	36

Debt: Key Terminology

Yield To Maturity (YTM)		The Yield to maturity (YTM) is the annualized rate of return earned by an investor who buys the bond today at the ...
Duration		Duration is a measure of the sensitivity of the asset's price to interest rate movements. It broadly corresponds to the ...
Credit Rating		Investors can decide how risky it is to invest money in a particular NCD by checking its credit rating, which is ...

Edelweiss NCD | Public Issue

Issue Details:

• NCDs with a tenor of 70 Months - Yield Upto 12.68% p.a
• Option of monthly , annual and cumulative interest
• Minimum Application Size of Rs.10,000/-
• No Tax Deducted at Source (TDS) on Interest if held in demat account
• Allotments on a first-come-first-serve-basis
• Subordinated debt eligible for Tier II capital

Suitability

• Investors Looking for Regular Income
• Investors Looking for Superior earning options to bank FDs

About the Company

ECL Finance Ltd. is the NBFC credit business arm of Edelweiss Financial Services Limited

Business of lending that includes corporate loans, SME Finance, Retial Finance and ESOP Financing.

For Year Ended March 2014, revenue grew by 25% to Rs.812 Crore. PAT Expanded 32% to Rs.160 Crore Total Loan Book, Including credit substitutues, stood at Rs.6,209 Crore as On March 31,2014 (FY13-Rs.5,070 Crore)

Learn more about NCD in Simplify Investing eBook.

Gold Prices are falling, what should you do now?

Gold prices are falling day by day. I have checked my gold portfolio where I am investing month on month in Gold ETF’s and seen a considerable amount of dip in the value. Gold has been evergreen and safe investment to Indian investors. It has given a record returns of 20%+ per annum in last few years. Analysts predict that gold prices would fall further to Rs 24K per 10 grams of gold. Why gold prices are falling? Can we see gold shining in the future? With falling gold prices, should we invest more in gold or should we exit from gold investment now?

Why gold prices are falling? 

Gold prices have seen a peak of Rs 33,000 / 10 grams in Aug-2013 and low of Rs 27,000 very recently which includes custom duty and premium charged by banks. It is important to understand why gold prices are falling now.

Current Account Deficit reduced: Last quarter of Financial year 2012-13, our current account deficit (CAD) was 3.6%. With such high CAD, RBI has taken several steps to bring down this CAD. One of the measures was to impose several restrictions on gold import. In the 4th quarter of financial year 2013-14, current account deficit has reduced to 0.2%. With this RBI has now eased gold import norms which are impacting the gold prices to fall.

Rupee in control: Stable Government would help Rupee to be in control. Rupee is one of the components that affects gold prices and determines its costs. Strong rupee would lower cost of gold. We have seen Rupee appreciating from Rs 62 to Rs 58/59 in the last few months.
Foreign capital inflow increased: In the last few months, we have seen foreign capital inflow has increased. Forex reserves increased by 15% in last 6 months.

Are gold prices expecting to fall further? 

Gold prices are expected to fall further.

• Rupee could become much stronger going forward. 
• Current account deficit may not have much change, but would be in control. 
• RBI has partially lifted restrictions on gold imports few days back. In future, it can completely lift restrictions on gold imports and gold prices could further reduce. 
• Analysts are expecting that the new government would reduce the import duty on gold from 10% to 6% approx due to correction in international prices. This could happen in the coming weeks. 
• Gold in international market is bearish. Dollar appreciation, rising interest rates in the US and boom in equity markets are some of the factors which are making gold to lose shine. Any downfall in gold prices in the international market could impact the Indian gold market and gold prices could still fall in India 
• Gold prices may fall to Rs 24,000 per 10 grams by Sep-2014. On the other hand, Joy Alukkas and Tanishq are reporting increased sales in gold jewelry in the last few days. 

What strategy I am adopting now? 

Now you would have got confused on what to do on gold ?. I personally want to adopt the following strategy.

1. I would not sell by existing gold investments which are in the form of Gold ETF’s as I do not want to book losses. 
2. I would continue to invest through monthly investment option (Systematic Equity plan) in Gold ETF’s. 
3. I would wait and watch on the gold prices. In case of any major dip, I would invest lump sum money. 
4. I would also ensure that my gold portfolio is not overloaded. I would maintain maximum of 20% for my investment in gold. 

What should be your strategy for investment in gold now? 

I would not expect you to do something different from what I am doing. It is immaterial whether you are investing in physical gold, gold mutual funds or gold ETF’s. If you have any immediate requirement to buy gold, there is no choice for you. You can go ahead. However, if you are looking to invest based on current gold prices, don’t rush. You should wait and watch for some more time before making a fresh investment in gold.

Conclusion: Gold is losing shine in international markets. Though Indians are gold lovers, several measures taken by Government and RBI are bringing down the gold prices. The gold prices are expected to fall further in coming weeks. You should watch the gold prices in coming weeks and then take a call for fresh investments in Gold.

06/06 Value Investing Opportunities

Name of stock	Current Price in Rs.
City Union Bank Ltd.	70
Navneet Educaton Ltd.	75
Engineers India Ltd	284
Swaraj Engines Ltd	867
Solar Industries India Ltd	1,570
NIIT Technologies Ltd.	378
Tata Investment Corporation Ltd.	518
IDFC Ltd.	130
State Bank of India	2,650
Bharat Heavy Electricals Ltd.	248
Esab India Ltd.	701
Infosys Ltd.	2,998
Shriram Transport Finance	942
Rallis	188
Bajaj Auto	1975
Piramal Enterprises	693
Tata Consultancy Services	2132
Voltas	193
eClerx Services	1123
Concor	1152
HDFC Bank	820
Cummins India	655

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