December 9, 2013 Leave a comment
For Whom Wealth Matters
December 9, 2013 Leave a comment
I rarely recommend specific financial products as I prefer to put up evergreen content on my blog.However 20 years is a fair length of time and so this recommendation.
I unreservedly recommend the HUDCO Tax-Free bonds Tranche-II,tenure 20 years, for retail investors.The bonds offer 9.01% interest,paid out annually.The interest is not taxable.So it won’t be clubbed with your future income and taxed.
In these inflationary times,there is the fear that the returns from fixed income instruments will not keep up with inflation.However,India s a functioning democracy and inflation does not remain high for decades on end.Witness yesterday’s results from assembly elections in 4 states.Governments pay for the distress caused by price rise.So,if you hold these bonds to maturity you won’t do badly.
Also being a government concern you can be sure of being paid back the interest and capital after 2 decades.
Lastly as the bonds tradable,you have the chance of withdrawing your capital in case of urgent need.
December 4, 2013 Leave a comment
If you are stuck with soiled and mutilated notes,you can get them exchanged and the RBI has prescribed the rules to do so:
RBI terms a note as soiled when it becomes dirty due to normal wear and tear and also when two pieces are pasted together in such a way that both the pieces actually belong to the same note and form the entire note with no essential features missing. Such notes can be exchanged for full value over the counter at any bank branch. And, as per the RBI’s rule this type of note has to be accepted by the bank branch, even if you are not a customer of the bank.
According to the RBI, a mutilated note is one of which a portion is missing or which is composed of more than two pieces.For Rs 5/10/20 you get the full value back if the area of the single biggest undivided piece of the note presented is more than 50 percent of the area of the respective denomination. If the biggest area (piece) is less than or 50 percent of the area of the note, you won’t get any money. If your note is of Rs 50 denomination or above, you will get full value of the note if the area of the single biggest undivided piece is more than 65 percent of the area of the respective denomination.But, if the biggest piece is between 40 percent and 65 percent of the area of the respective denomination, then you will get half the value of the note back. And, if the biggest piece is less than 40 percent, then you won’t get any value back and you will have to let go of the money
November 7, 2013 2 Comments
Retail behaviour is a very contrarian reliable indicator of market movements. There is never any meaningful retail participation in low P/E markets. Rather retail has invested large amounts in high P/E markets. For instance,in 1992, after the markets had moved up 10 times in the previous four years and P/Es were at a record 45 times, a single scheme collected nearly 4,500 crores (20,000 crores at today’s prices). In 1999, IT funds and IT stocks attracted very large sums of money at three-digit P/E multiples. In 2003, at record low P/Es of less than 10 times, the net flows in all equity funds in the country were around 100 crores in one year. In 2008, at high P/E multiples again of 20-25x, inflows in equity funds were 50,000 crore in a year. Since April last year till date, nearly 20,000 crores have been withdrawn from equity funds at P/Es of nearly 14 times.
Equities are a great compounding vehicle (Sensex is roughly doubling every 5-6 years in line with nominal GDP growth rates since inception in 1979) and investors should simply practice low P/E investing. Past data suggests that investments in equity mutual funds made in low P/E markets (say a P/E below 15) have done well over 3-5 years; on the other hand in high P/E markets (say a P/E of more than 20), investors should be cautious.