Different ways to make money

Sumved Sane (name changed), a lawyer, calls successful equity investing a gamble or a game of luck. He is not a reckless trader or a naïve investor. He has been an equity mutual fund investor for the past five years. However, though the BSE Sensex has almost trebled since January 2005, Sumved’s money has only doubled.

His obsession with new fund offers (NFOs) and best-performing funds based on short-term returns has landed him mostly in the company of underperforming funds.

Sumved is not alone. Innumerable investors fall for eye-popping short-term returns or follow a star fund manager or invest in hot sector funds or become victims of NFO campaigns.

Investors need to be frank with themselves — if they feel that they don’t have the expertise to choose the right fund, then they should avoid doing so. There are other ways to make decent returns that are definitely better than what underperformers will give them. Read on to discover more:

Index Funds: Around 64% of large-cap equity funds underperformed the S&P CNX Nifty over five years to June 2010, according to the second edition of S&P Crisil SPIVA fund scorecard. So, while star fund managers can go to town claiming that India remains a stock-picker’s paradise, there is growing evidence that active fund management is indeed facing problems.

This is where index schemes come in: They do away with the fund-manager risk and offer cost-efficient returns. All you have to do is to invest in a fund with the minimum tracking error — the difference between the performance of the scheme and that of the benchmark index.

If you are a long-term investor with no view on a particular sector, it is better to own a diversified benchmark index than a sectoral index. Stick to your asset allocation and keep rebalancing your portfolio at regular intervals. You must also book profits as the index fund will not book it for you.

But be prepared to face the advocates of actively-managed schemes. “Index funds weather the downturn in a market better than most of the diversified equity funds, but in the long run outperformance can be brought to the portfolio using good diversified equity funds with a good long-term track record,” says Abhinav Angirish, managing director, investonline.in, a mutual fund distributor.

But here, we are dealing with investors, who do not possess the necessary skills to spot the best diversified schemes. So, they shouldn’t mind a slightly weaker performance of an index scheme — if at all there is any, that is.

Fund Of Funds: You have two options here. One, you can choose Asset Allocation Funds offered by fund houses such as Birla Sun Life, ICICI Prudential, IDFC and Franklin Templeton. They invest in a judicious mix of debt and equity funds factoring in the risk profile of the investor. If you are conservative, go for conservative option in Asset Allocation Funds.

The second option is to go for schemes that invest into various equity funds. This option aims to bring the best of equity diversified funds into your portfolio. Schemes such as Kotak Equity Fund of Funds and ING Optimix 5 Star Multi Manager Fund invest in a portfolio of good diversified equity funds and generate good long-term returns. You will have to pay up to 0.75% of the total money invested by you in the FoF as annual fees.

Of course, the funds in which the money is invested have their own expenses, leading to duplication of costs. “Fund of funds is treated as a debt fund for taxation purposes and that reduces the post-tax returns offered by these funds compared to equity funds,” points out Dhruv Raj Chatterji, senior research analyst with Morningstar India. “Most of the fund of funds schemes that invest in Indian mutual fund schemes, have failed to offer top quartile returns consistently,” says Angirish.

But again, we are looking at this option only for the convenience of avoiding the task of choosing the best-performing schemes.

Research Services: When you don’t have the time or skills to identify the right schemes, why not hire the services of someone? In most cases, the research comes free. The service providers make their living on the ‘commissions’ they earn on your investments in various schemes. The commissions may push the investor’s interest to the backseat. In that case, you can always look for independent advisory services.

“Subscribing to independent research ensures that there is no conflict of interest and you get unbiased advice,” says Vipin Khandelwal, CEO, personalfn.com, an independent mutual fund research provider. Such services come out with recommendations on individual schemes and also offer ideal portfolios.

They keep their subscribers informed about updates in their recommended schemes. For example, a change of fund manager in a recommended scheme may not be noticed by an investor, but the research house may not only report it but also advise the future course of action that the investor should take. For independent opinion, you have to pay an annual fee and also take care of your transactions.

Portfolio Management Services: If you have more than Rs 5 lakh to invest and do not want to get into research and executing transactions, portfolio management services may be an option worth exploring. Broking firms invest your money in a judicious mix of equity and debt schemes, taking into account your risk profile and your return expectations. Some of them charge a fee of up to 1% of the money invested for offering these services.

Services include timely monitoring and monthly updates on your portfolio. You will get a pass-through statement that will tell you how many stocks you own on a consolidated basis. For example, if the broker has invested in five different schemes and out of these four have invested in Reliance Industries , the pass-through statement will tell you how much of your money is invested in Reliance Industries.

It gives a clearer picture to the investor of the risks involved.

“We book profits at regular intervals taking into account the asset allocation of the client,” says Hiren Dhakan, associate fund manager, Bonanza Portfolio. The power of attorney enables the brokerage to do this, which a fund distributor cannot do. But given little publicly available information about the performance of these services, investors have to choose their service providers with utmost care. Remember, you can again be in the company of an underperformer.

Source: Economic Times

Top 10 Investor Fantasies!

In the past few months if reports are to believed, lakhs of new investors have jumped into the stock market. Especially after they saw a small minority of experienced investors getting extra ordinary returns. Anyone who has invested in value buys would easily have made over 100%. With a little bit of more research and knowledge companies like LIC Housing Finance and Jindal Steel have given returns between 300%-500%. These have rewarded investors all on basis of value and not ‘hot tips’ that are manipulated.

Unfortunately many new investors don’t realize this and have a lot of fantasies and myths in their mind when they enter. I had them too when I started out! Here are a few of them:

1. I will spend time trading every day and won’t do anything else. Isn’t that how hot shot multi-millionaires make money in the movies?

2. My uncle has been investing for several years. I will get tips from him. Of course it doesn’t matter that my uncle is on the verge of bankruptcy for the fourth time and has turned into a alcoholic.

3. I have magical powers and any company I invest in will give me returns in excess of 100% within a week.

4. The first company I invested it gave me 10% in a single day. This isn’t just co-incidence and luck, but because I am investment genius.

5. Everything I hear on the business news channel and everything I read in the newspaper actually needs to be followed.

6. Rich investors watch every single move of the Sensex and know exactly where it is headed.

7. I need to get tips from everybody – specially my broker. I don't care about knowledge, it won't make me rich.

8. My broker exists only to make me rich and wealthy. He loves me a lot.

9. I need to sell all my assets and remove all my money from the bank and pour it into a single share that can rise by 1000%. I read about it on an online forum – it must be true.

10. No need to study the business model, research reports, read or study financial statements. Losers do that!

I had many of the above fantasies when I started. They lead to losses – luckily I started investing with very small amounts. Following any of the above will most certainly lead to losses. You can be smarter than me and learn from my fantasies!

Keep smiling, laughing and happy investing!

Source: moneycontrol.com

5 investment products in current times

Young investors have varied objectives while choosing their investments, buying a home, purchasing a car, their child's education, early retirement plan etc are some of the goals individuals set for themselves early in life. Each of the goals may require a specific type of investment.

Further, it is important to time your investments in such a manner that they pay returns at a time when you need the money. For example, if A wants to buy a car on loan and wants to repay his EMIs using the returns on his investments, then his investments should pay him returns equal to the amount of his monthly installments.

So, if he invests in a FD, then the interest amount that A earns on his FD should equal the amount of monthly installment that A pays towards his car loan.

It is important to set your goals from your investment so that your investment can work accurately for you. For example, one must know the time and amount of money that he/she will need in the future.

At the same time it is important to evaluate the risk involved in the investment as well as the amount of returns and amount of initial investment required.

Say B would like to invest a lump sum now and time his returns to pay for his child's marriage somewhere after 10 years, he needs to choose an appropriate investment. An FD would be safe but returns may be lower.

Stock investments are likely to pay higher returns but the risk involved is greater. Here are 5 recommended investment options in current times:


This is a relatively new path of investment and one is likely to have the fear of the unknown. However, considering the returns that ETFs have fetched for its investors, it is certainly amongst the top 5 investment options of this era.

Much like stocks, an investment in ETF should be for the long run. Table of popular ETFs in India is given on the left side:

Commodity ETFs especially Gold ETFs have done very well in India. ETFs are yet an untapped market amongst individual investors.

However, we would recommend them as investment with high earning potential and also an investment type that has different source, like a commodity ETF can have its source in agriculture.


Gold is a high return and traditionally favored investment option and stands good in most economic conditions. Even during times of recession, gold prices increased at an average rate of 19.30 percent in 2009 and 12.5 percent in 2010.

On the left side is the table of changes in the prices of gold in the past 5 years.

An investor can buy gold as a long term investment. Long term goals like your child's marriage are well covered by investments in gold.

You can also use 24 karat gold coins/chips to make jewelry for the wedding. Or you may sell the gold and use the money to meet any other wedding expenses.

Fixed Deposits

This is another safe investment with reliable and known returns. One can invest in FDs with a predefined goal for its returns. One knows the amount of returns as well as the timing of returns on investment in case of an FD. Hence one can reliably plan expenses and time them with the FD maturity date.

For example, you can plan your vacation by using the returns on your investment in FDs. FDs are a good investment option to match with repayment of loans. Interest amount of FDS can be timed with repayment of loan installments.

So, if you want to buy a car or two-wheeler on loan, you can invest in FDs and match the interest amount with loan installments, either in whole, or part. On the other hand, you can time your purchase to make the down payment towards the vehicle from the proceeds of a FD.

In case you are willing to take higher risk, floating rate FDs may be an option for you. In a growing economy, a floating rate FD has a higher earning potential in comparison to traditional FDs.

Mutual Funds

Mutual Funds are another 'must have' in your investment portfolio. The SIP system enables investors to take modest steps into mutual fund investments.

You need not invest a lump sum, one can invest an amount of Rs. 500 per month only under most SIP plans of mutual fund houses. Since experts handle your money, mutual fund investments are less risky as compared to stocks.

They also have a large earning potential. However, it is difficult to predict the amount of returns. It is therefore difficult to time your investment for an exact amount of return.


As compared to fixed deposits, investments in equity, has on an average paid 26.5 percent higher returns in 5 years. Even for a longer term, investment in stocks have paid higher returns even in comparison to real estate and gold.

Equity investments are good for long term goals like retirement savings, purchasing real estate or buying a car. Mr. A has stocks in a reputed company that earned him high dividends and bonus shares over time.

He could pay for his Europe trip through the funds he got from selling these shares. Z used the money from selling his stocks towards the down payment of his vacation home! Now all he has to manage from his salary is his EMI.

Source: Economic Times

How to identify good diamond for investment?

The dazzling rock holds its sway the world over. Both women and men swear by it, and its popularity refuses to fade thousands of years after it was first discovered by man. Known for their perennial fixation for gold, Indians are now looking at the white bauble with greater interest.

More and more women consider gold as old-fashioned, and something that their mothers and grandmothers used to wear. No wonder then that these days, Indian weddings are not only an occasion for the bride to flaunt her designer trousseau, but also chic diamond jewellery.

So, it’s time for prospective grooms, brides and their families to shop for ornaments, hoping to benefit from discount schemes and other offers that several jewellery houses roll out in the run up to Diwali.

What’s more, this may be the right time to buy these most precious of stones, from the investment perspective too, given that the demand for diamonds has picked up significantly post the 2008 global slowdown, which saw a fall in diamond prices by almost 30%.

Industry experts say that though diamond prices have risen by 10-15% over the past one year, it still remains a favourite buy for most Indian brides and grooms. For instance, a Gili finger ring of VVS clarity and a weight of 0.04 carat set in 18-carat gold, weighing 1.94 gram, costs Rs 11,100. Similarly, a 0.15-carat earring of VVS clarity will cost Rs 22,000.

Unlike gold, there is no single price for diamond because of various determinants including cut, weight and clarity. “A major increase in gold prices and a shift in preference towards diamond-studded jewellery, as an accessory and style statement, is partly responsible for the increase in demand,” says Mehul Choksi, CMD, Gitanjali Group.

Even jewellery houses have been witnessing an increase in demand for diamond jewellery. “The demand for diamond has shown consistent growth over the past three years, and this year too, it has been in line with our expectations, which are based on our experience and overall economic conditions,” RK Nagarkar, general manager, TBZ — The Original.

However, while gold buying is relatively simpler, buying diamonds can be quite tricky, largely due to the absence of hallmarking practice. This is why you need to exercise more caution while zeroing in on your diamond-studded ornaments.

The best test is try breaking it with a hammer, if its does, you can assume it’s not a real one, say most jewellers in a lighter vein.

You may not have the heart to try out this exercise given the emotional value attached to your betrothal/wedding ring, but there is a more standardised approach to ascertain the diamond’s quality, which is commonly referred to as the 4Cs analysis — cut, colour, clarity and carat weight.

Cuts are of three kinds: proportional, shallow and deep. Proportional is the most expensive form of cut.

Diamonds are usually cut according to a mathematical formula. A round brilliant cut, for example, should have 58 “facets”. These facets should be in a certain proportion so that it has the right glitter and catches the customer’s eye.

Similarly, diamonds come in various shapes like round brilliant, marquise, princess, pear, heart and oval. Round brilliant is of the most superior variety.

In terms of colour, the diamonds can be classified into colourless, near-colourless, faint yellow, very light yellow, light yellow and yellow.

Lesser the colour, the better is the quality.

The grades range from D to V, where the completely colourless variety is assigned the grade D. As far as clarity is concerned, the clearest diamond is the rarest one and, hence, commands the highest price. Internally Flawless (IF) is the grade assigned to the clearest stone.

Other less superior varieties include very very slightly included (VVS1 and VVS2), very slightly included (VS1 and VS2), slightly included (SI1 and SI2) and imperfect (I1, I2 and I3).

Then comes the last parameter — carat weight, which determines the size of the diamond and accordingly, the price. The weight of a diamond is expressed in terms of carats. One carat is equal to 1/5th of a gram.

You may want to exchange your old jewellery for new ornaments to keep up with contemporary designs or simply liquidate them for cash. Hence, you should enquire about the buy-back value of the diamonds you purchase. Unlike gold, there is no standard practice when it comes to buy back of diamonds.

Most big brands offer around 80-85% of the trading value of your diamonds, if you sell it for cash. “We guarantee buyback at a 20% discount, i.e. customer gets back 80 percent of the price,” Mr Choksi informs.

“We don’t offer cash across the counter, we offer a cheque to the customer,” clarifies the store manager at Tanishq in Chembur, Mumbai. This figure could drop to around 75% in case of small-time jewellers.

Most well-known diamond jewellery houses refuse to buy diamonds not sold by them. “One of the biggest concerns here is the quality of diamonds. We trust the quality only of our inhouse diamonds. A shallow cut can make the diamond look bigger, but that doesn’t enhance its quality,” explains a Tanishq store manager.

Chitra Rajagopalan discovered this the hard way. She was looking to exchange her grandmother’s diamond earrings at Tribhovandas Bhimji Zaveri (TBZ). She had almost selected the design, but the store refused to exchange her old diamonds. She found it difficult to dispose the old diamond earrings.

A small jeweller at Zaveri Bazaar finally bought her earrings for Rs 30,000, out of which the jeweller took a commission of Rs 10,000 on the purchase, which is commonly called margin money in the diamond market.

“More than the quality of diamonds, it’s the margin money these jewellers charge, which amounts to almost 15-20%, that pinches your pocket,” Ms Rajagopalan adds. So, if you have bought a pair of diamond earrings from your neighbourhood jeweller, it’s better to have an exchange transaction with him only.

Similarly, if you buy branded jewellery such as Gili or Nakshatra you get the best buy-back deal only from them.

Diamond prices are expected to increase in the years to come, on the back of strong demand and constricted supply. “The output from the existing diamond mines is declining and no new mines have been discovered recently. So, the supply of diamonds is likely to be restricted over the next decade and beyond,” says Mr Choksi.

So you can buy diamonds if you are unable to resist their allure, but be clear about their intended use. If it’s for their ornamental value, you need not hesitate to go ahead. However, if you have investment on your mind, you need to think twice, given the ambiguity and lack of standardisation pertaining to diamond buy-back transactions.

Should I Discuss Finances Before Marriage

So you plan on getting married soon, and there’s just something that you’ve had on your mind, but you just don’t know what you should do or how you should say it. That would be the questions you have concerning your future spouse’s finances. You really need to know something about the finances before you say I do! You really don’t know how your future spouse has paid their bills and you just need to know now before it becomes a problem later on.

Well, as the old saying goes you can’t live on love, you need money to survive! Finance questions before marriage will help you and your future partner understand where you both are financially before marriage.

If your future spouse is not able to contribute financially, you will know this before you say your vows. That is why finance questions before marriage is so important!

How do I find out about my future spouse’s finances? You can find out by asking your future spouse, some or all of the following questions:

How much money do you earn? Can I see a copy of your credit report and score? Do you pay your bills on time? What is the balance on your outstanding bills? Have you ever filed for bankruptcy and do you have any judgements against you?

Do you pay child support? Do you have a savings account,insurance,investments and a retirement plan? Once we get married, will we both be able to spend freely? If we purchase a home will we own the home jointly?

Discussing your finances before marriage is important for future spouses who are planning to get married. It is a difficult subject for couples to discuss, however, it is crucial in maintaining a good relationship.

It may be beneficial to you and your future spouse to discuss your finances before saying your vows. It’s a good idea that you both are on the same page about how your finances are before the marriage and what your future goals will be for your finances. This may assist you both in getting past one of your most important hurdles for a marriage!

Discussing your finances prior to marriage, should assist you and your future spouse on keeping your marriage on track and in a positive direction for your future goals.

Finance is one of the most critical key components of a marriage. In many instances, marriages have dissolved due to the fact that couples have not discussed their finances prior to the marriage taking place. So make sure you find out about your future spouses finances before you get married, so this may not become a problem for you!


3 Schemes you should “NOT” invest your hard-earned money

It's very easy for someone to answer where to invest. Ask a person, who has just started earning and he will also tell you dozens name like PPF, LIC, Fixed Deposit, stock market, mutual funds, neighborhood group committee scheme etc. He has heard these terms number of times at his home.

But can yau answer where NOT to invest money. Apart from those stocks where you've lost your money.

Let us discuss such schemes.

1. Index Mutual Funds: These are mutual funds where the fund manager invests all the money purely on companies contributing Nifty-50 or Sensex-30. This is called passive fund management as the role of the fund manager is very limited here. He can not enter or exit any company by his choice, irrespective of major fundamentals or technical reasons of the company. He follows index blindly. So, the benchmark of these funds is also Index of the stock market.

Although, these funds are able to generate profit, but for long-term equity diversified mutual funds will pay more returns. They also sometimes outperform or under perform index. The reason of under perform is basically because the fund manager has to keep some cash always to meet day-to-day expenses and redemptions. This is called tracking error.

The average active fund buys and sells stocks a lot more than an index fund. This results in a higher portfolio churn, which in turn has a direct bearing on expenses. So active funds have a higher expense ratio than index funds.

So, as far as index funds are concerned, lower expenses and index-linked returns are the biggest draws for the investor. However, while returns have been index-linked after accounting in tracking errors, lower expenses are an unfulfilled promise with most index funds.

2. Investments made on SMS : Now-a-days, we're getting SMS everyday (at least I'm sharing my experience), giving target price of 10%-20% upwards in few days. I've not subscribed to these SMS services, but somewhere around the world, someone is trying to help me, and that too free of cost. Strange.

Few months back, SEBI has also warned the investors to avoid these SMS's. Generally, it has been observed that certain stock brokers and promoters of the company are trying to manipulate the share price of their company and after sending SMS, many times a sharp rise has been seen on such shares. That gives the opportunity to promoters to exit from their loss-making shares to profit-making shares. And in this process, the small investors becomes trapped in net.

So, avoid these SMS. Do your own research. If you can't, just invest your money in equity diversified mutual funds.

3. Fund of Funds: A fund of funds (FoF) is an investment fund that holds a portfolio of other investment funds rather than investing directly in shares, bonds or other securities.

For the funds the downside is that expense fees for such schemes are higher that in the case of ordinary schemes since management fees have to be paid twice – since their cost structure will include the fees already charged by the funds in which the investments are made.

For the investor the problem is how the FoF structures its cost based on its expenses and how much will be passed on to the investor. They have to pay the management fees twice.

Another flip side – since the fund of funds is investing in a whole host of schemes which are themselves invested in a wide range of stocks it is possible – sometimes inevitable – that it will be investing in the same stock through the different schemes.

Some conservative equity options for senior citizens

The retired folks are in a fix. Their favourite investment destinations like Public Provident Fund (PPF), fixed deposits (FDs) and so on — traditionally considered safe — are not generating the kind of returns they expected them to meet their spiralling expenses. Most of them are contemplating how to generate a little more from their corpus.

It is a real test for many because the first thing they do once they retire is to lock-in the corpus to generate regular income for the rest of their life. However, the trouble is that they never accounted for inflation while considering the regular income. They typically did some back-of-the-envelop calculation, depending on their corpus, and assumed that the regular income would be enough to keep them going. However, today they have been proved wrong. Mainly because they did not account for inflation at all while calculating the returns.

Though it is prudent to follow a slightly conservative approach after retirement, it is important to remember that one may need to depend on retirement funds for many years. Therefore, the key is to maintain a portfolio that will continue to grow for many years after one retires. Equity and/or equity funds should still be part of the portfolio, though in a moderate percentage.

The traditional investment options like bank deposits, bonds, small savings schemes and debentures have been the mainstay of their portfolio for years. Though as a category, these instruments do address their concern for the safety of their hard-earned money, most of them do not have the ability to beat inflation. That’s because they not only offer low returns but also are not tax-efficient, barring PPF. Besides, lack of liquidity in most of these instruments can be a major hindrance in the flexibility required to make changes in the portfolio from time to time.

No wonder then that of late there has been a small change in the outlook of these seniors. Many of them are seriously taking a look at investing in equity because they have realised that this is the only way to generate extra income. Earlier, the perception was totally different. Many people were of the view that retired people should stay away from equity, as it is the most risky instrument. However, the mindset is slowly changing.

It also helps their cause that today you have various mutual fund schemes to assist in their endeavour. Once you have discussed how much of your portfolio will be invested in equity, you have the choices of index fund or large cap schemes — just to name a few — to bank on. Those who are unfamiliar with equity schemes also opt for hybrid schemes because they consider them safer. In a way, it suits them because the portfolio would automatically get rebalanced as the fund manager doesn’t have the mandate to invest above a particular limit in equities.

Investing in equity is a wise move, but I would want these seniors to be mindful about the risk associated with it. Don’t entertain fantastic notions about the returns. Have a realistic figure of 12-15% annual over a long period. Also, don’t earmark a large part of your portfolio for equity investment. Ideally, you should limit your equity exposure to 10-15% of your portfolio — especially if you have a small corpus to begin with.

Source: Economic Times

2 simple habits to help you create wealth

All of us want to create wealth. Also we want to create it fast and with ease. It is really very easy to do it. Also it does not require any great efforts and skills to create wealth. We just need to develop right habits.

We all know that if we want to reach somewhere fast we need to start early. Similarly if we want to create wealth faster in our life – so that we can enjoy it while we are young – we need to start creating it earlier on. Legendary investor and wealthiest man on earth Warren Buffet made his first investment when he was 11 years old and according to him he started late. Warren Buffest was millionaire by the time he was around 30 years old.

Unfortunately most of us procrastinate our wealth creation. Initially when we start our career and earn our first income, we want to buy whole world from it. Soon we get married, we buy home, have our family, expenses keep adding up. Our income increase but so does our expenses. These are testing time for wealth creation. If we wait for next year, next increment, next bonus, next incentive to start saving it will never happen. The only thing that will happen is delay in wealth creation.

Vikram decided to set aside Rs 10,000 every month in an instrument that generated 8% return per annum in January 1991. His friend Rohit also thought he should start investing and hence he began investing same Rs 10,000 in same instrument one year later i.e. from January 1992. On 31st December 2000 i.e. when Vikram had invested for 10 years and Rohit had invested for 9 years both the friends looked at their investments. Vikram had created corpus worth Rs 18,29,460, while Rohit who had started one year later had Rs 15,74,295. Rohit had Rs 2,55,165 less as he delayed his investments by one year.

If Vikram and Rohit were to continue same investment of Rs 10,000.00 per month for 40 and 39 years respectively than the difference in their corpus at the end of the period will be Rs 27,90,415. Think of the loss Rohit incurred purely because he delayed investing just by one year.

Many times when I give similar examples in my articles, I get emails from readers stating they do not have Rs 10,000 to invest now and hence they will start investing only when they accumulate Rs 10,000. This is another way of procrastinating. Whether one starts with Rs 100 per month or Rs 1,00,000 per month, end result is that the individual who starts early wins with the race hands down.

Our spending habits also create hurdle in wealth creation. While prudent wealth creation philosophy is to follow P-I-P-E i.e. Prepone Investment, Postpone Expenses, we always Prepone Expenses and Postpone Investment. Rushing for ‘Sale’ and purchasing our future requirement today is preponing expenses. Note that I am not against purchasing from sale. I am only suggesting do not buy something which you do not require immediately. Retailers are always keen that we prepone our purchases. This will help them earn their income early. However our focus should be to make efforts to propone savings and investments. This will help us create wealth early.

It's not your salary that makes you rich; it's your spending habits.”- Charles A. Jaffe

Source: moneycontrol.com

Small saving schemes to earn you higher returns

In times of high prices, here's something to cheer small savers.

The government recently increased interest rates on a range of popular post office saving schemes, a move that will not only make these instruments more rewarding for millions of small investors who depend on
them, but also make more cash available to a government running low on funds this year.
While middle class Indians rely on small investment options offered at post offices for social security, the government depends on this pool of money, also called the National Small Savings Fund (NSSF), to part finance its budget. 
While post office savings accounts (POSA) will fetch 4% annually, up from 3.5%, the monthly income scheme (MIS) and the public provident fund (PPF) will earn an interest of 8.2% and 8.6% respectively, up from the present 8%.
But don't invest just yet – the new rates will be effective from December 1, 2011.
The government, however, decided to discontinue the Kisan Vikas Patra (KVP) and lowered the maturity period for MIS and national savings certificate (NSC) to five years from the existing six years.
It also introduced a new instrument – the 10-year-maturity NSC – offering 8.7%.
The annual investment ceiling in PPF savings has been increased to Rs 1 lakh from the present limit of Rs 70,000, but made loans against PPF costlier, doubling the interest to 2% a year.
The postal department runs small savings schemes that are a major source of borrowings by the government.
These had been losing sheen with the attractive interest rates on offer on bank deposits.
The government had constituted a committee on July 8, 2010, headed by Shyamala Gopinath, then deputy governor of the Reserve Bank of India, for a comprehensive review of government-administered small savings.
"The terms of reference of the committee included review of the existing parameters for the small saving schemes in operation and recommend mechanisms to make them more flexible and market linked," a late evening government notification said.
Source: Hindustan Times

How to sell your NSC, Mutual Funds, Shares, Fixed Depsoits

There are several occasions when you need cash urgently and may want to liquidate your existing investments. It may be for an overseas holiday or to buy a house or for a medical emergency. Here is a brief on how to go about liquidating your investment and the possible time frames needed to do the same.


Your mutual fund sends you a hard copy of the statement. The bottom part of it is a perforated transaction slip. You need to fill in the transaction slip and tick the relevant particulars in redemption form and submit it to any of the registrar’s office or office of the Asset Management Company before 3 pm. They will acknowledge the same with a time stamp. If things are in order, and you have filed all needed particulars, your cheque shall be ready within T+2 working days. If you have mandated a direct credit in your account, the funds shall be credited into your account. Else, a cheque will be couriered to your residence. it may take your bank to clear the cheque and realise the amount. All in all, it could take 7-10 days for you to realise your funds, if you do opt to get a redemption cheque. If it is direct credit, it could work out much faster.


When you wish to sell a share, you need to call a broker with whom you have a securities trading account. You could place a ‘sell’ order with him. Once the order is executed, you need to deliver the shares to your brokers account by filling in an demat transaction slip on the next day. On the pay in day you are eligible to get a cheque for the sale of your shares from your broker. That means if you sell your shares on Monday, typically you will get your cheque on Wednesday. If you deposit the cheque in your bank account on Thursday, you will get cash by Friday night or Saturday morning. In case you have an online bank account, the funds shall be credited in your account by Wednesday night itself. So all in all it could be 3-6 days to realise credits into your account.


In case of a (NSC), you must hand over the certificate, duly signed by the unit holders to the respective post office, a week before the maturity date (six years from the date of investment). In some cases, post offices might have to process such certificates through their head office, and hence would take 3-5 days for the same. So it is necessary to tender the certificate a week in advance. Once the application is processed the cheque for the amount due, will be given to you on maturity.


You could send the receipt duly signed to the company about a week before the maturity date. The company should be able to credit the amount in your bank account directly on the due date or courier a cheque to you so as to reach you before the maturity date.


It is easy to liquidate an FD if you have a savings bank account with the same bank. Just walk into the bank branch with your fixed deposit receipt (FDR) on the maturity date and the proceeds will be immediately transferred to your savings account.