December 10, 2007
So what is causing the Indian stockmarkets to rise at such a frenetic pace?
Even though there is consensus over the reasons for this unprecedented Bull Run on the Indian stockmarkets, no one is quite sure why it is happening at the pace at which it is happening.
However, the reasons for the Sensex's stunning rise are many:
1. Major foreign and Indian investors are pouring money by the buckets into the Indian stockmarkets because of the attractive returns they are getting from here. The reason why money has taken flight from some major foreign markets is because growth levels in those economies has stagnated for a while now, making them less attractive. Almost 85 per cent of the foreign investment into India in 2007 has been in the form of equity -? or stock market -- investment.
2. Stellar corporate results from Indian companies have made domestic and foreign institutional investors salivate. And as they buy more of these companies' shares, the entire market soars. Corporate India has a positive growth outlook which is rubbing off on their stocks too.
3. India's market reforms, better regulation, more opening up of the economy and a strong judiciary have added to the market boom.
4. Inflation has been contained, which will add to the nation's growth, making it a very alluring economy.
5. The country's political climate is very stable and there appear to be no threats to the country from any quarter in the near term. And despite the worries of rising oil prices, possible natural calamities or a weak monsoon or even an economic meltdown in the US, India remains a strong economy with all its fundamentals in a robust state.
6. In the long term, Indian markets are being considered as one of the most attractive in the world.
7. The Reserve Bank of India's monetary policy has kept the economy stable and the interest rates are at levels that foreign investors find very appealing.
8. With the US Federal Reserve cutting interest rates in America, investors are looking at markets like India to earn more on their assets.
9. Rising Asian markets, including Hong Kong and Korea, are also helping lift the entire region's markets.
10. Also, the Indian currency -- the rupee -- is strengthening against the US dollar leading to dizzying growth of its stockmarket.
11. And finally, there is this widespread perception that India is the place to be and that is what the global investor is adhering to.
from rediff.com
Monday, December 10, 2007
Thursday, December 6, 2007
Understanding the Sensex and the Nifty
In recent months, the Sensex has created headline after headline as it has marched seemingly unstoppable from 15,000 to 16,000 to 19,000 and, for a brief moment, 20,000.
Even people who don't follow stock markets closely may have a pretty good idea of the Sensex value. But what exactly is the Sensex? And what can indices like the Sensex and Nifty tell you about stock market movements?
What is a stock-market index?
A stock-market index is simply a convenient summary of market prices. There are thousands of stocks whose prices fluctuate up and down every day.
An index helps make sense of this chaos and gives you a single number which tells you how well the market is performing compared with earlier periods. The basic idea is to select a small number of stocks which are considered representative and important and calculate the index based on the prices of those stocks.
These are the two most popular indices for Indian stock markets and are produced by the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) respectively.
The Sensex which was first calculated in 1986 is based on the market capitalisation (share price times the number of shares outstanding) of 30 important stocks. The actual stocks have changed over the years along with the Indian economy but in general the Sensex represents the stock prices of the largest and most important companies from a variety of sectors. It is updated every 15 seconds during trading hours.
The S&P CNX Nifty is quite similar except that it is based on 50 large stocks, many of which are also represented in the Sensex.
Are there any other indices?
Yes, it is important to understand that the Sensex and the Nifty are just the most popular of many different indices. Both the BSE and the NSE produce several other indices which cover smaller firms and individual sectors.
For example the S&P CNX 500 is a broad-based index which covers 500 firms and therefore gives a broader picture of the stock market as a whole than narrower measures like the Nifty. The BSE-500 is another broad index produced by the BSE. These two indices cover more than 90 per cent of the market capitalisation of all the firms in their respective stock exchanges.
Both exchanges also produce sector-specific indices. For example you have the BSE Auto Index, BSE IT Index, CNX Pharma Index, CNX Bank Index and so on. Both exchanges also have indices which focus on mid-cap and small-cap firms: BSE Mid-Cap, BSE Small-Cap, CNX Midcap etc.
What are the uses of an index?
In addition to their general role as a summary of market conditions, indices are of great use to the financial sector.
They are used to benchmark mutual fund performance; ie to see how a particular fund is performing relative to the broader market.
They are used in creating new financial products called index derivatives (financial products whose value is derived from the level of a particular index).
Also they are used by index funds which invest passively in the stocks of a particular index instead of trading actively.
Look beyond the markets and invest
The bottom line is that the Sensex and Nifty are good starting points but investors need to look beyond them when it comes to understanding market movements.
For example it's possible that when the Sensex is booming, mid-cap firms may be lagging behind.
Or the booming Sensex may be driven by just one particular sector like capital goods while IT may be doing quite poorly. To get a full picture of what's happening, you need to look at a combination of indices.
from rediff.com
Even people who don't follow stock markets closely may have a pretty good idea of the Sensex value. But what exactly is the Sensex? And what can indices like the Sensex and Nifty tell you about stock market movements?
What is a stock-market index?
A stock-market index is simply a convenient summary of market prices. There are thousands of stocks whose prices fluctuate up and down every day.
An index helps make sense of this chaos and gives you a single number which tells you how well the market is performing compared with earlier periods. The basic idea is to select a small number of stocks which are considered representative and important and calculate the index based on the prices of those stocks.
These are the two most popular indices for Indian stock markets and are produced by the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) respectively.
The Sensex which was first calculated in 1986 is based on the market capitalisation (share price times the number of shares outstanding) of 30 important stocks. The actual stocks have changed over the years along with the Indian economy but in general the Sensex represents the stock prices of the largest and most important companies from a variety of sectors. It is updated every 15 seconds during trading hours.
The S&P CNX Nifty is quite similar except that it is based on 50 large stocks, many of which are also represented in the Sensex.
Are there any other indices?
Yes, it is important to understand that the Sensex and the Nifty are just the most popular of many different indices. Both the BSE and the NSE produce several other indices which cover smaller firms and individual sectors.
For example the S&P CNX 500 is a broad-based index which covers 500 firms and therefore gives a broader picture of the stock market as a whole than narrower measures like the Nifty. The BSE-500 is another broad index produced by the BSE. These two indices cover more than 90 per cent of the market capitalisation of all the firms in their respective stock exchanges.
Both exchanges also produce sector-specific indices. For example you have the BSE Auto Index, BSE IT Index, CNX Pharma Index, CNX Bank Index and so on. Both exchanges also have indices which focus on mid-cap and small-cap firms: BSE Mid-Cap, BSE Small-Cap, CNX Midcap etc.
What are the uses of an index?
In addition to their general role as a summary of market conditions, indices are of great use to the financial sector.
They are used to benchmark mutual fund performance; ie to see how a particular fund is performing relative to the broader market.
They are used in creating new financial products called index derivatives (financial products whose value is derived from the level of a particular index).
Also they are used by index funds which invest passively in the stocks of a particular index instead of trading actively.
Look beyond the markets and invest
The bottom line is that the Sensex and Nifty are good starting points but investors need to look beyond them when it comes to understanding market movements.
For example it's possible that when the Sensex is booming, mid-cap firms may be lagging behind.
Or the booming Sensex may be driven by just one particular sector like capital goods while IT may be doing quite poorly. To get a full picture of what's happening, you need to look at a combination of indices.
from rediff.com
Wednesday, December 5, 2007
Five money-saving shopping tips
Have you already squeezed every last penny out of your budget? Maybe not. Thanks to free market capitalism, we can choose from a wide variety of products at a wide variety of prices pretty much any time we want to buy something.
Unlike investing, saving money on purchases doesn't require any specialized training and is an easy way for anyone to stretch their budget a little farther.
No matter what your income level, you can give yourself more breathing room by becoming a savvy shopper. Here are five tips to help you get started.
Tip 1: Make the Store Your Last Choice
Most people's default response is to go to a store anytime they need something, but that's not the only way to obtain a needed item. Ask yourself these questions:
Can I get it for free?
If you don't need something right away, and you usually don't, it's worth searching on community ad sites like Craigslist or Kijiji, signing up with some local Freecycle groups, and asking around to see if anyone you know is getting rid of whatever you want.
Can I borrow it?
This tactic can be a great money-saver for any item that you use infrequently or will only need to use once. For example, if you only need to use a drill once a year when you change apartments and have to reinstall your curtain rods, you can get by with borrowing a drill from someone else. Many home improvement stores even have tools you can rent. Likewise, instead of spending money on the newest bestseller novel that you will probably only read once, head down to your local library and see if you can borrow the book. (New to budgeting? Check out Six Months To A Better Budget, Get Your Budget In Fighting Shape and The Beauty Of Budgeting.)
Tip 2: Negotiate When Possible - The Indian style
Some prices are set in stone, and it's a waste of time trying to negotiate with someone who won't budge. However, when you think there's some wiggle room, consider these strategies:
Can I negotiate a lower price?
While you probably can't negotiate the price on many items, like new DVDs or a package of gum, there are plenty of situations where you can negotiate, even in a retail store. For example, if an item is cosmetically damaged, a store may be willing to offer a small discount because that blemished items tend to be more difficult to sell. If a salesperson wants you to buy a bunch of extras with a new computer or cell phone plan, ask for a discount - the salesperson they may be allowed to offer discounts in order to close the deal on big-ticket purchases.
Of course, if you're buying an item from a private party, you can always negotiate. Also, you probably already know not to automatically pay the sticker price on a car or house, because negotiation is standard practice on these major purchases and the sticker price is generally higher than the real amount the seller will accept.
Can I barter?
Barter can be difficult because many people are not accustomed to doing it and it's hard to find someone who wants the service or goods you have to offer in exchange for the what another person is selling. If you have some valuable products or services to offer, however, and you're purchasing from a private party, it's worth asking. Even if the other party isn't willing to barter for the entire item, he or she may be willing to at least reduce the price in exchange for an hour of your expertise.
Tip 3: Time Your Purchase
If you wait to purchase something until you really need it, you're likely to pay the sticker price, but with a little advanced planning, you can save big bucks.
Will this item go on sale?
If you want an electronic good, you will probably have to wait patiently after it is introduced - a sale will emerge once a newer model comes out or the regular price will drop as supply increases and demand drops. As new items become more popular, even if they don't officially go on sale, you may be able to get a good deal on eBay. Certain everyday items, like groceries, toiletries and cosmetics, will always go on sale sooner or later, providing an opportunity for you to stock up when your favorite brands are priced at a discount. For anyone who doesn't closely follow the latest fashion trends, clothes are best purchased during end-of-season sales, even if it means you don't get much use out of them until the following year. (To learn more, read Patience Pays For Consumers.)
Might there be a coupon for this item somewhere?
Combine sales with coupons, and you'll save even more. For the internet-savvy, eBay can be a great source of coupons, such as 10 buy-one-get-one-free coupons (abbreviated B1G1 in eBay lingo) of your favorite deodorant. The coupons might cost you $2.50 total including postage, but if you use all 10 of them, your net savings on a $3 stick of deodorant will be at least $27.50 plus tax. If you have time to look through a few pages of content, then sites that offer free printable coupons, like Coupons.com could be a good option for you too.
When shopping online, search for the store's name plus "coupon code" before making a purchase. Many sites will advertise coupon codes to help give consumers a break. Sometimes you'll enter coupon codes to no avail, but sometimes you'll get lucky and get some savings like $5 off shipping fees or 20% off your entire purchase. It's always worth taking a few minutes to look.
Can I get a better price somewhere else?
It's usually a bad idea to buy an item at the first place you see it because it's very likely it is cheaper somewhere else. For expensive purchases where you have a lot to gain by comparing prices, and for situations, like online shopping, where it's extremely easy to compare prices, the savings you'll achieve are worth the extra time and effort.
However, if you don't stand to save much or are likely to waste a lot of time, gas and money by shopping around, don't bother. If you're pressed for time, you can avoid shopping around altogether by making a habit of doing all of your shopping at stores that regularly offer bargain prices, and you'll be confident that you're already getting a good deal.
Tip 4: Substitute
If the item you want to buy doesn't quite fit into your budget, think about similar but less expensive alternatives.
Is there something that doesn't cost as much, but does the job I need it to?
Figuring out the real reason behind a pending purchase can help you brainstorm ways to achieve the same result more affordably. For example, if you're worried about being bored during a long flight, you may want to buy a $125 spare battery for your laptop so you can get some work done.
In this case, your main concern isn't really getting more work done, but rather finding a way to occupy your time. Instead of buying that extra battery, you could use your laptop on the most energy-efficient setting until the battery runs out, and then spend the rest of the flight reading a library book.
Do I really want this?
Wish lists can go a long way toward preventing impulse buying. By keeping a never-ending wish list, a person is less likely to buy items that have not been contemplated for at least a month, which provides sufficient time to decide whether the item is a necessity or just a want.
If the mere prospect of saving money isn't enough incentive, consider the opportunity cost of buying an item. Maybe that new suit or purse isn't worth it when you could use the money toward going on a vacation.
Tip 5: Expand Your Shopping Universe
If you normally head straight to your favorite website, specialty store, or the mall when you need to buy something, consider these other shopping options that can save you a great deal of money:
Is someone personally selling what I need?
Garage sales, moving sales and estate sales tend to offer all types of merchandise at much lower than retail prices. You are most likely to benefit from this type of shopping experience for items that are not necessarily needed right away. For example, goods like canning jars, dishes or a jewelry organizer. This can also apply to more practical goods as well. However, don't expect to find absolutely everything at these sales, but do check them out from time to time to add value to your shopping budget.
Unlike investing, saving money on purchases doesn't require any specialized training and is an easy way for anyone to stretch their budget a little farther.
No matter what your income level, you can give yourself more breathing room by becoming a savvy shopper. Here are five tips to help you get started.
Tip 1: Make the Store Your Last Choice
Most people's default response is to go to a store anytime they need something, but that's not the only way to obtain a needed item. Ask yourself these questions:
Can I get it for free?
If you don't need something right away, and you usually don't, it's worth searching on community ad sites like Craigslist or Kijiji, signing up with some local Freecycle groups, and asking around to see if anyone you know is getting rid of whatever you want.
Can I borrow it?
This tactic can be a great money-saver for any item that you use infrequently or will only need to use once. For example, if you only need to use a drill once a year when you change apartments and have to reinstall your curtain rods, you can get by with borrowing a drill from someone else. Many home improvement stores even have tools you can rent. Likewise, instead of spending money on the newest bestseller novel that you will probably only read once, head down to your local library and see if you can borrow the book. (New to budgeting? Check out Six Months To A Better Budget, Get Your Budget In Fighting Shape and The Beauty Of Budgeting.)
Tip 2: Negotiate When Possible - The Indian style
Some prices are set in stone, and it's a waste of time trying to negotiate with someone who won't budge. However, when you think there's some wiggle room, consider these strategies:
Can I negotiate a lower price?
While you probably can't negotiate the price on many items, like new DVDs or a package of gum, there are plenty of situations where you can negotiate, even in a retail store. For example, if an item is cosmetically damaged, a store may be willing to offer a small discount because that blemished items tend to be more difficult to sell. If a salesperson wants you to buy a bunch of extras with a new computer or cell phone plan, ask for a discount - the salesperson they may be allowed to offer discounts in order to close the deal on big-ticket purchases.
Of course, if you're buying an item from a private party, you can always negotiate. Also, you probably already know not to automatically pay the sticker price on a car or house, because negotiation is standard practice on these major purchases and the sticker price is generally higher than the real amount the seller will accept.
Can I barter?
Barter can be difficult because many people are not accustomed to doing it and it's hard to find someone who wants the service or goods you have to offer in exchange for the what another person is selling. If you have some valuable products or services to offer, however, and you're purchasing from a private party, it's worth asking. Even if the other party isn't willing to barter for the entire item, he or she may be willing to at least reduce the price in exchange for an hour of your expertise.
Tip 3: Time Your Purchase
If you wait to purchase something until you really need it, you're likely to pay the sticker price, but with a little advanced planning, you can save big bucks.
Will this item go on sale?
If you want an electronic good, you will probably have to wait patiently after it is introduced - a sale will emerge once a newer model comes out or the regular price will drop as supply increases and demand drops. As new items become more popular, even if they don't officially go on sale, you may be able to get a good deal on eBay. Certain everyday items, like groceries, toiletries and cosmetics, will always go on sale sooner or later, providing an opportunity for you to stock up when your favorite brands are priced at a discount. For anyone who doesn't closely follow the latest fashion trends, clothes are best purchased during end-of-season sales, even if it means you don't get much use out of them until the following year. (To learn more, read Patience Pays For Consumers.)
Might there be a coupon for this item somewhere?
Combine sales with coupons, and you'll save even more. For the internet-savvy, eBay can be a great source of coupons, such as 10 buy-one-get-one-free coupons (abbreviated B1G1 in eBay lingo) of your favorite deodorant. The coupons might cost you $2.50 total including postage, but if you use all 10 of them, your net savings on a $3 stick of deodorant will be at least $27.50 plus tax. If you have time to look through a few pages of content, then sites that offer free printable coupons, like Coupons.com could be a good option for you too.
When shopping online, search for the store's name plus "coupon code" before making a purchase. Many sites will advertise coupon codes to help give consumers a break. Sometimes you'll enter coupon codes to no avail, but sometimes you'll get lucky and get some savings like $5 off shipping fees or 20% off your entire purchase. It's always worth taking a few minutes to look.
Can I get a better price somewhere else?
It's usually a bad idea to buy an item at the first place you see it because it's very likely it is cheaper somewhere else. For expensive purchases where you have a lot to gain by comparing prices, and for situations, like online shopping, where it's extremely easy to compare prices, the savings you'll achieve are worth the extra time and effort.
However, if you don't stand to save much or are likely to waste a lot of time, gas and money by shopping around, don't bother. If you're pressed for time, you can avoid shopping around altogether by making a habit of doing all of your shopping at stores that regularly offer bargain prices, and you'll be confident that you're already getting a good deal.
Tip 4: Substitute
If the item you want to buy doesn't quite fit into your budget, think about similar but less expensive alternatives.
Is there something that doesn't cost as much, but does the job I need it to?
Figuring out the real reason behind a pending purchase can help you brainstorm ways to achieve the same result more affordably. For example, if you're worried about being bored during a long flight, you may want to buy a $125 spare battery for your laptop so you can get some work done.
In this case, your main concern isn't really getting more work done, but rather finding a way to occupy your time. Instead of buying that extra battery, you could use your laptop on the most energy-efficient setting until the battery runs out, and then spend the rest of the flight reading a library book.
Do I really want this?
Wish lists can go a long way toward preventing impulse buying. By keeping a never-ending wish list, a person is less likely to buy items that have not been contemplated for at least a month, which provides sufficient time to decide whether the item is a necessity or just a want.
If the mere prospect of saving money isn't enough incentive, consider the opportunity cost of buying an item. Maybe that new suit or purse isn't worth it when you could use the money toward going on a vacation.
Tip 5: Expand Your Shopping Universe
If you normally head straight to your favorite website, specialty store, or the mall when you need to buy something, consider these other shopping options that can save you a great deal of money:
Is someone personally selling what I need?
Garage sales, moving sales and estate sales tend to offer all types of merchandise at much lower than retail prices. You are most likely to benefit from this type of shopping experience for items that are not necessarily needed right away. For example, goods like canning jars, dishes or a jewelry organizer. This can also apply to more practical goods as well. However, don't expect to find absolutely everything at these sales, but do check them out from time to time to add value to your shopping budget.
Credit card statement made easy
When was the last time you took a detailed and unhurried look at your credit card statement?
Do you understand every printed detail that appears on your credit card?
Your monthly credit card statement is the best document that will help you understand your monthly spending. Reading and understanding the fine print of your statement, will help you in practicing proper credit card management. It will also help you learn how your credit card works.
What is a credit card statement?
A credit card statement is the monthly billing statement you receive from your credit card issuer. It lists all the transactions done using your credit card, and the total outstanding balance, payment date etc.
Credit card statement essentially has two parts. One is the payment coupon which you detach and enclose with your payments. The second and the most important part of your credit card statement is where your credit activity is listed. We will examine this part in detail below:
Name and address: This is the card holder's name and full address as per the card issuer's records. The only thing you should keep in mind is that, if there is any change of address, you should immediately notify your card issuer/bank in writing and get an acknowledgement for the same.
Reference number: This is the number you will need to quote in case of dispute on any of your charges listed in that particular credit card statement.
Credit card number: Most of the credit cards have a unique 16 digit number assigned to your credit card, usually super-imposed across the credit card. Some credit cards like American Express (AmEx) have 15-digit number. You need to quote this number in your cheque or demand draft while making payments and also for correspondence with the card issuer.
Credit limit: Credit limit is the maximum amount your credit card allows you to borrow, whether as credit against goods purchased or/and cash withdrawn. The card issuing bank can revise credit limit based on your payment track-record. A good payment track record can help you in getting your credit limit increased and vice versa.
Available credit limit: It is the difference between your credit limit and total amount due. If your credit limit is Rs 50,000 and you have spent Rs 1,500, your available credit limit reduces to 48,500.
Cash limit: Cash limit sets the maximum money you can withdraw as cash using your credit card. Your cash limit is a part of your credit limit and so, necessarily has to be lower than your credit limit.
Assume your credit limit is Rs 50,000 and cash limit is Rs 20,000. If you have exhausted your credit limit of Rs 50,000 by making purchases on your credit card, then you cannot withdraw cash using your credit card, even if you have not used your cash limit at all.
Statement date: This is the date on which your bill is generated. This is also the date used to calculate interest rate if you do not pay the full outstanding amount by the payment due date, even though the due date may fall many weeks after the statement date.
Payment due date: This is the date before which your payment (cheque or demand draft) should get credited to the bank. To be more specific, this is the last date by which your payment has to be recorded in your bank's computer. This is not the date your bill has to be postmarked, or even the date it arrives at the company's office. So be sure that your cheque/DD reaches the bank well before the due date so that no late payment fee is levied to you.
Total amount due: This is the total bill amount to be paid -- the total unpaid accumulated amount outstanding in your account, including interest and any other charges like late payment fees, if any.
Minimum amount due: It is the minimum amount required to be paid to keep your account in a good credit standing. This amount is usually 5 per cent to 20 per cent of your total amount due. If you do not pay the minimum amount due by payment due date, it will be considered as a default and levied a late payment fee.
Tip to remember: Even if you pay the minimum amount due, you will be charged interest on the total amount due (including the minimum amount due that you paid). If you do not want to pay interest you have to pay the entire total amount due before payment due date. Even if you have paid 95 per cent of the total amount due before due date but there is still some small amount pending, you will be charged interest for the full total amount due.
Rewards point summary: This is the record of the rewards points you have earned/redeemed till date. The summary usually gives an account of your opening balance and the points or credits earned or redeemed. You should not confuse reward points with credit limit or balance outstanding. Reward points and the method of redemption vary from one credit card to another.
Transaction details: The transaction details will have the date of transaction, place of transaction (where you spent the money) and the transaction amount. This helps you verify the charges credited to your card.
It is important that you check your credit card transaction details regularly. This is the only way you will come to know if some transaction has been fraudulently credited to your card.
from rediff.com
Do you understand every printed detail that appears on your credit card?
Your monthly credit card statement is the best document that will help you understand your monthly spending. Reading and understanding the fine print of your statement, will help you in practicing proper credit card management. It will also help you learn how your credit card works.
What is a credit card statement?
A credit card statement is the monthly billing statement you receive from your credit card issuer. It lists all the transactions done using your credit card, and the total outstanding balance, payment date etc.
Credit card statement essentially has two parts. One is the payment coupon which you detach and enclose with your payments. The second and the most important part of your credit card statement is where your credit activity is listed. We will examine this part in detail below:
Name and address: This is the card holder's name and full address as per the card issuer's records. The only thing you should keep in mind is that, if there is any change of address, you should immediately notify your card issuer/bank in writing and get an acknowledgement for the same.
Reference number: This is the number you will need to quote in case of dispute on any of your charges listed in that particular credit card statement.
Credit card number: Most of the credit cards have a unique 16 digit number assigned to your credit card, usually super-imposed across the credit card. Some credit cards like American Express (AmEx) have 15-digit number. You need to quote this number in your cheque or demand draft while making payments and also for correspondence with the card issuer.
Credit limit: Credit limit is the maximum amount your credit card allows you to borrow, whether as credit against goods purchased or/and cash withdrawn. The card issuing bank can revise credit limit based on your payment track-record. A good payment track record can help you in getting your credit limit increased and vice versa.
Available credit limit: It is the difference between your credit limit and total amount due. If your credit limit is Rs 50,000 and you have spent Rs 1,500, your available credit limit reduces to 48,500.
Cash limit: Cash limit sets the maximum money you can withdraw as cash using your credit card. Your cash limit is a part of your credit limit and so, necessarily has to be lower than your credit limit.
Assume your credit limit is Rs 50,000 and cash limit is Rs 20,000. If you have exhausted your credit limit of Rs 50,000 by making purchases on your credit card, then you cannot withdraw cash using your credit card, even if you have not used your cash limit at all.
Statement date: This is the date on which your bill is generated. This is also the date used to calculate interest rate if you do not pay the full outstanding amount by the payment due date, even though the due date may fall many weeks after the statement date.
Payment due date: This is the date before which your payment (cheque or demand draft) should get credited to the bank. To be more specific, this is the last date by which your payment has to be recorded in your bank's computer. This is not the date your bill has to be postmarked, or even the date it arrives at the company's office. So be sure that your cheque/DD reaches the bank well before the due date so that no late payment fee is levied to you.
Total amount due: This is the total bill amount to be paid -- the total unpaid accumulated amount outstanding in your account, including interest and any other charges like late payment fees, if any.
Minimum amount due: It is the minimum amount required to be paid to keep your account in a good credit standing. This amount is usually 5 per cent to 20 per cent of your total amount due. If you do not pay the minimum amount due by payment due date, it will be considered as a default and levied a late payment fee.
Tip to remember: Even if you pay the minimum amount due, you will be charged interest on the total amount due (including the minimum amount due that you paid). If you do not want to pay interest you have to pay the entire total amount due before payment due date. Even if you have paid 95 per cent of the total amount due before due date but there is still some small amount pending, you will be charged interest for the full total amount due.
Rewards point summary: This is the record of the rewards points you have earned/redeemed till date. The summary usually gives an account of your opening balance and the points or credits earned or redeemed. You should not confuse reward points with credit limit or balance outstanding. Reward points and the method of redemption vary from one credit card to another.
Transaction details: The transaction details will have the date of transaction, place of transaction (where you spent the money) and the transaction amount. This helps you verify the charges credited to your card.
It is important that you check your credit card transaction details regularly. This is the only way you will come to know if some transaction has been fraudulently credited to your card.
from rediff.com
Benefits of investing in MFs
Open any newspaper or a magazine and you will not miss a story or two about the domestic equity market being propelled to new highs, personal fortunes of successful businessmen growing by leaps and bounds on the back of rising share prices, foreign investors pouring money into the Indian equity show with gusto to notch up double digit returns, etc.
Big investors, it seems, are always clued-in about the market movements and are able to ride out the ups and downs with relative ease. These investors are able to reap superior returns on account of access to research and advisory.
However, the small investors are not so lucky when it comes to direct investment in the equity market. They depend on tips from the so-called informed investors or brokers in the market or go by house views flashed on business channels. Gullible retail investors are easily taken in by market euphoria -- they invest when the market is close to peaking and are caught on the wrong foot when the market tanks.
In order to avoid getting mauled by the market yo-yo and earn good returns for their hard earned money over the long run, small investors will do well to park their money with mutual funds. Fund managers, with their wealth of experience in investing across asset classes, at fund houses help you make the most of market opportunities.
Volatility has now become a way of life in the Indian markets. A thousand points upside or downside is not uncommon. In this backdrop, Union finance minister P Chidambaram's caution to retail investors about volatility in the market and indirect suggestion that they should participate in the market through the mutual fund (MF) route assumes significance. MFs, hence, have become an attractive alternative to the retail investors.
A globally proven investment, MFs offer an investor the avenue to minimise risk through portfolio diversification while maximising returns thanks to the expertise of the fund managers. All investments whether in shares, debentures or deposits involve risk. While risk cannot be eliminated, skillful management can minimise risks. Generally, the longer the term, the lesser the risk.
So, what are the benefits of using the MF route?
First, benefit comes in the form of the fund manager. His/her expertise gained through experience helps an investor to diversify risk. What's more investors in MFs enjoy the advantage of convenient administrative cost, minimal paperwork and lower transaction cost.
MFs also offer other merits such as the ability to liquidate (sell units and get cash) an exposure fast if one feels that a fund is underperforming her/his expectations. It also makes high value stocks affordable to the small investor i.e. a small investor who would think twice before taking an exposure in a high value stock such as L&T say, is now able to do so using the MF route. This makes an MF a cut above the rest.
Last but not the least, MFs provide transparency in the form of frequently published Net asset values (NAVs) and flexibility through features like regular investment plans, regular withdrawal plans and dividend reinvestment plans.
The retail investor in India is spoilt for choice when it comes to mutual funds. There are 34 MFs and over 300 schemes with cumulative assets under management (AUM) of nearly Rs 4.7 lakh crores. India MF industry is regulated and regularly monitored by the market regulator The Securities and Exchange Board of India, Sebi.
Steps to invest in MFs
~ Step one: Identify your investment needs
Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments and level of income and expenses among many other factors.
Therefore, the first step is to assess your needs. You can begin by defining your investment objectives and needs which could be regular income, buying a home or financing a wedding or on education of your children or a combination of all these needs, the quantum of risk you are willing to take and your cash flow requirements.
~ Step two: Choose the right mutual fund
The important thing is to choose the right MF scheme which suits your requirements. The offer document of the scheme tells you its objectives and provides supplementary details like the track record of other schemes managed by the same fund manager. Some factors to evaluate before choosing a particular MF are the track record of the performance of the fund over the last few years in relation to the appropriate yardstick and similar funds in the same category.
Other factors could be the portfolio allocation, the dividend yield and the degree of transparency as reflected in the frequency and quality of their communications.
~ Step three: Select the ideal mix of schemes
Investing in just one MF scheme may not meet all your investment needs. You may consider investing in a combination of schemes to achieve your specific goals. ~ Step four: Invest regularly
The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum every month, you buy fewer units when the price is higher and more units when the price is low, thus bringing down your average cost per unit. This is called rupee cost averaging and is a disciplined investment strategy followed by investors all over the world. You can also avail the systematic investment plan (SIP) facility offered by many open-ended funds.
~ Step five: Start early
It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make more than if you wait and invest later. The power of compounding lets you earn income on income and your money multiplies at a compounded rate of return.
You may reap the rewards in the years to come. MFs are suitable for every kind of investor -- whether starting a career or retiring, conservative or risk taking, growth oriented or income seeking. To sum up, mutual fund is the way to go for the retail investors. This route to investment is less cumbersome and more rewarding in the long run.
from rediff.com
Big investors, it seems, are always clued-in about the market movements and are able to ride out the ups and downs with relative ease. These investors are able to reap superior returns on account of access to research and advisory.
However, the small investors are not so lucky when it comes to direct investment in the equity market. They depend on tips from the so-called informed investors or brokers in the market or go by house views flashed on business channels. Gullible retail investors are easily taken in by market euphoria -- they invest when the market is close to peaking and are caught on the wrong foot when the market tanks.
In order to avoid getting mauled by the market yo-yo and earn good returns for their hard earned money over the long run, small investors will do well to park their money with mutual funds. Fund managers, with their wealth of experience in investing across asset classes, at fund houses help you make the most of market opportunities.
Volatility has now become a way of life in the Indian markets. A thousand points upside or downside is not uncommon. In this backdrop, Union finance minister P Chidambaram's caution to retail investors about volatility in the market and indirect suggestion that they should participate in the market through the mutual fund (MF) route assumes significance. MFs, hence, have become an attractive alternative to the retail investors.
A globally proven investment, MFs offer an investor the avenue to minimise risk through portfolio diversification while maximising returns thanks to the expertise of the fund managers. All investments whether in shares, debentures or deposits involve risk. While risk cannot be eliminated, skillful management can minimise risks. Generally, the longer the term, the lesser the risk.
So, what are the benefits of using the MF route?
First, benefit comes in the form of the fund manager. His/her expertise gained through experience helps an investor to diversify risk. What's more investors in MFs enjoy the advantage of convenient administrative cost, minimal paperwork and lower transaction cost.
MFs also offer other merits such as the ability to liquidate (sell units and get cash) an exposure fast if one feels that a fund is underperforming her/his expectations. It also makes high value stocks affordable to the small investor i.e. a small investor who would think twice before taking an exposure in a high value stock such as L&T say, is now able to do so using the MF route. This makes an MF a cut above the rest.
Last but not the least, MFs provide transparency in the form of frequently published Net asset values (NAVs) and flexibility through features like regular investment plans, regular withdrawal plans and dividend reinvestment plans.
The retail investor in India is spoilt for choice when it comes to mutual funds. There are 34 MFs and over 300 schemes with cumulative assets under management (AUM) of nearly Rs 4.7 lakh crores. India MF industry is regulated and regularly monitored by the market regulator The Securities and Exchange Board of India, Sebi.
Steps to invest in MFs
~ Step one: Identify your investment needs
Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments and level of income and expenses among many other factors.
Therefore, the first step is to assess your needs. You can begin by defining your investment objectives and needs which could be regular income, buying a home or financing a wedding or on education of your children or a combination of all these needs, the quantum of risk you are willing to take and your cash flow requirements.
~ Step two: Choose the right mutual fund
The important thing is to choose the right MF scheme which suits your requirements. The offer document of the scheme tells you its objectives and provides supplementary details like the track record of other schemes managed by the same fund manager. Some factors to evaluate before choosing a particular MF are the track record of the performance of the fund over the last few years in relation to the appropriate yardstick and similar funds in the same category.
Other factors could be the portfolio allocation, the dividend yield and the degree of transparency as reflected in the frequency and quality of their communications.
~ Step three: Select the ideal mix of schemes
Investing in just one MF scheme may not meet all your investment needs. You may consider investing in a combination of schemes to achieve your specific goals. ~ Step four: Invest regularly
The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum every month, you buy fewer units when the price is higher and more units when the price is low, thus bringing down your average cost per unit. This is called rupee cost averaging and is a disciplined investment strategy followed by investors all over the world. You can also avail the systematic investment plan (SIP) facility offered by many open-ended funds.
~ Step five: Start early
It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make more than if you wait and invest later. The power of compounding lets you earn income on income and your money multiplies at a compounded rate of return.
You may reap the rewards in the years to come. MFs are suitable for every kind of investor -- whether starting a career or retiring, conservative or risk taking, growth oriented or income seeking. To sum up, mutual fund is the way to go for the retail investors. This route to investment is less cumbersome and more rewarding in the long run.
from rediff.com
Beginner's guide to ideal financial planning
The investment requirements of a family keep changing over time. This is primarily because of the adjustments that need to be made with different stages of life.
Though investing needs will differ depending on individuals and families, there are certain investing patterns that are typical of certain ages and stages in one's life cycle.
Let us explore these life stages and what people should ideally be doing with their finances at that time.
The sowing stage
Yes, you are in your mid-20s and have just received your first salary. To start thinking about retirement right now does sound like a bit of a drag. But starting early allows you to save that little bit more and with smaller amounts as well.
The ability to save at this stage is higher as you have little or no responsibilities. So, channelising a part of your newfound cash flows into a retirement corpus is just ideal. Also, it is a big help at the latter stages when the responsibilities are more.
Let us illustrate this with some numbers. If you started investing for your retirement at 25, and plan to retire at 55, with a retirement corpus of Rs 3.5 crore (Rs 35 million), then if you start saving at 25, you need to save Rs 8,772 per month till age 55 in a balanced portfolio.
This portfolio is expected to give you an average return of 12 per cent annually. If you start five years later at 30, the monthly outgo for the same retirement corpus would be Rs 16,270.
Ideally use the systematic investment plan route in diversified equity mutual funds or even some mid-cap funds. Since you are young, aggressive investments are possible.
Also, buy personal medical, accident, critical illness and disability insurance for support, in case of any unfortunate incidents.
Accumulation stage
Upon marriage, consider adding term life risk cover policies for income protection. Also, start planning for a house, if you need one. A housing loan at this juncture will be not a burden as expenses are still not so high. Once you have children, expenses are sure to spiral.
Also, this stage is initially marked with marriage and then with children. With children, you will need to start investing towards their education and marriage as well. This is one of the most financially challenging periods in one's life, since demand for expenses as well as need for investment for various goals is at the highest point.
But you should take it up as a challenge and make it a point to invest towards all these goals.
With rising responsibilities comes the need to create a contingency fund. Ideally, you should have 6-12 months' expenses in a bank fixed deposit with overdraft facility or a liquid/short-term debt fund. This helps a lot in meeting expenses in emergencies or while shifting jobs.
The ideal investment avenue for children's goals would again be equity mutual funds. Look even at children's plans offered by various mutual funds. For marriage purposes, start an SIP in a gold exchange traded fund, which can be converted to physical format.
Transitional stage
In your forties, it is time to reassess your financial goals as your children are older and you are also approaching old age. If you have diligently done the above in the earlier years then there is a lot of breathing space and you should be in a position to review your goals upwards. For instance, you may want foreign education for your children, a bigger flat at a better location and so on and so forth.
Empty nesters
As you approach 50, the situation could have taken a dramatic turn. The children might have left to complete their higher education elsewhere. And to fund this, you would have started drawing out from their education corpus.
Since investment for children's education goals have ceased, you can use the extra sum to retire any existing loans. Moreover, this an opportune time to take a final call on your retirement plans and other goals post-retirement.
Harvesters
You have retired now. And there are three important things that you need to keep in mind; regular income, capital protection and liquidity.
Accordingly, put a large part of your retirement corpus into fixed income instruments, like senior citizens' savings scheme, bank fixed deposits or fixed maturity plans of mutual funds. If you want an equity exposure, it should be marginal, through monthly income plans or balanced funds.
If these investments are leading to taxation, you may also think of investing in debt schemes or FMPs with indexation benefits, to lower your tax burden. Another suitable avenue to park part of one's retirement corpus would be to purchase property, which will provide monthly rental income as well as capital appreciation.
As you can see there are different plans that one needs to put at different times in your life cycle. Start investing now for great results.
Though investing needs will differ depending on individuals and families, there are certain investing patterns that are typical of certain ages and stages in one's life cycle.
Let us explore these life stages and what people should ideally be doing with their finances at that time.
The sowing stage
Yes, you are in your mid-20s and have just received your first salary. To start thinking about retirement right now does sound like a bit of a drag. But starting early allows you to save that little bit more and with smaller amounts as well.
The ability to save at this stage is higher as you have little or no responsibilities. So, channelising a part of your newfound cash flows into a retirement corpus is just ideal. Also, it is a big help at the latter stages when the responsibilities are more.
Let us illustrate this with some numbers. If you started investing for your retirement at 25, and plan to retire at 55, with a retirement corpus of Rs 3.5 crore (Rs 35 million), then if you start saving at 25, you need to save Rs 8,772 per month till age 55 in a balanced portfolio.
This portfolio is expected to give you an average return of 12 per cent annually. If you start five years later at 30, the monthly outgo for the same retirement corpus would be Rs 16,270.
Ideally use the systematic investment plan route in diversified equity mutual funds or even some mid-cap funds. Since you are young, aggressive investments are possible.
Also, buy personal medical, accident, critical illness and disability insurance for support, in case of any unfortunate incidents.
Accumulation stage
Upon marriage, consider adding term life risk cover policies for income protection. Also, start planning for a house, if you need one. A housing loan at this juncture will be not a burden as expenses are still not so high. Once you have children, expenses are sure to spiral.
Also, this stage is initially marked with marriage and then with children. With children, you will need to start investing towards their education and marriage as well. This is one of the most financially challenging periods in one's life, since demand for expenses as well as need for investment for various goals is at the highest point.
But you should take it up as a challenge and make it a point to invest towards all these goals.
With rising responsibilities comes the need to create a contingency fund. Ideally, you should have 6-12 months' expenses in a bank fixed deposit with overdraft facility or a liquid/short-term debt fund. This helps a lot in meeting expenses in emergencies or while shifting jobs.
The ideal investment avenue for children's goals would again be equity mutual funds. Look even at children's plans offered by various mutual funds. For marriage purposes, start an SIP in a gold exchange traded fund, which can be converted to physical format.
Transitional stage
In your forties, it is time to reassess your financial goals as your children are older and you are also approaching old age. If you have diligently done the above in the earlier years then there is a lot of breathing space and you should be in a position to review your goals upwards. For instance, you may want foreign education for your children, a bigger flat at a better location and so on and so forth.
Empty nesters
As you approach 50, the situation could have taken a dramatic turn. The children might have left to complete their higher education elsewhere. And to fund this, you would have started drawing out from their education corpus.
Since investment for children's education goals have ceased, you can use the extra sum to retire any existing loans. Moreover, this an opportune time to take a final call on your retirement plans and other goals post-retirement.
Harvesters
You have retired now. And there are three important things that you need to keep in mind; regular income, capital protection and liquidity.
Accordingly, put a large part of your retirement corpus into fixed income instruments, like senior citizens' savings scheme, bank fixed deposits or fixed maturity plans of mutual funds. If you want an equity exposure, it should be marginal, through monthly income plans or balanced funds.
If these investments are leading to taxation, you may also think of investing in debt schemes or FMPs with indexation benefits, to lower your tax burden. Another suitable avenue to park part of one's retirement corpus would be to purchase property, which will provide monthly rental income as well as capital appreciation.
As you can see there are different plans that one needs to put at different times in your life cycle. Start investing now for great results.
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