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The Home Loan Deposit


wealthymattersThe Reserve Bank of India (RBI) has decided to encourage banks and individuals to be actively involved in home loan deposits, a savings product that will help showcase the repaying ability of customers seeking to borrow money to buy a house.

The RBI feels that there is a felt need for financial innovation with respect to loan products and one such product could be savings-induced home loan or a home loan deposit.

The willing customer will be induced to generate a savings balance by way of monthly or periodic deposits. This will enable the creation of a track record for repayment of future home loan products. Once a customer reaches a threshold balance, financial institutions will consider sanctioning a housing loan. The balance in the product would act as a collateral or margin. The amount deposited every month would act as the basis of assessing repayment capacity of customers for calculating their monthly repayments.

Such a product will aid the Indian government’s efforts to promote affordable housing. The government has already laid out a plan to create 100 smart cities with the aim of “housing for all by 2020“ while reducing interest rates on home loans. This product may help lower interest rates as well, with better appraisal of potential borrowers.

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The Ten Baggers Of Dalal Street


10 Baggers of Dalal StreetEven the subdued markets of the last five years have produced multibaggers.

The Superinvestors of Graham-and-Doddsville


wealthymattersThe Superinvestors of Graham-and-Doddsville is a seminal essay by Warren Buffett.

Buffett begins this essay by imagining a nationwide coin-flipping contest. Everyone in the US participates and calls the flip of a coin. Call correctly and move on to the next round, guess wrong and you’re out.After 20 days, about 215 lucky flippers will have correctly called 20 consecutive flips. They gloat about their success, yet the nature of coin-flipping tells us they’re just lucky. It’s a game of random chance.

But what if all 215 flippers lived in the same town? What if they all hailed from the same school? The same fraternity? Then we’d get excited. The laws of probability suggest 215 winners after 20 days. But those same laws tell us that if all 215 belonged to an associated group, that almost certainly wouldn’t be the product of random chance. These 215 flippers clearly would know something we don’t.

The real flippers in Buffett speech are nine “superinvestors” — himself included. All nine crushed the market averages over multiyear periods by between 8% and 22% per year.In a world with millions of investors, such returns can occur by sheer luck — just like the 215 coin-flippers appeared at first glance. But all nine superinvestors hailed from the investment school of Benjamin Graham and David Dodd — Columbia professors now known as the fathers of value investing. That meant something big. It meant that their success wasn’t the product of luck. It almost had to be attributable to the only common link they shared: the investing philosophy learned from Graham and Dodd. The “intellectual origin,” as Buffett put it. Read more of this post

Paid Stock Advice


wealtymattersSometimes free stock advice is expensive. In the past, brokerage houses have come up with buy reports to help their larger clients offload a position and many brokerages release technical trading reports only to help generate brokerage income.

Equity investors who believe in buying stocks only after a thorough research and cannot access company managements on their own often seek independent research . Subscribing to fundamental reports makes economic sense if a family has a direct equities portfolio or is keen to build a portfolio of Rs 8-10 lakh at least. Equitymaster provides long-term stock recommendation services based on fundamental research. The service could cost anywhere between Rs2,000 and Rs30,000 annually. In their Hidden Treasure package, they recommend one small-cap multi-bagger every month. Also, they tell you when to book profit or exit the stock. Then there are individual-led firms like Kolkata-based Basant Maheshwari Financial Services, which gives stock ideas and access to archives of 8,000 questions across stocks which have been answered over the last decade. Read more of this post

Online ULIPs


wealthymattersLife insurers like HDFC Life, Aviva India and Bajaj Allianz have started focussing heavily on the online platform for selling ULIPS (unit-linked insurance plan), promoting them as low-cost products, in the last few months.These policies are cheaper than their offline counterparts, as the savings made on agents’ commissions are passed on to policyholders in the form of lower premium allocation charges.

Insurers are launching these online Ulips to counter distributors’ reluctance to promote ULIPS . Over the last four years (post September 2010, when IRDA imposed a cap on ULIP charges), many agents and brokers have stopped selling ULIPS.

While the broad structure of a lowcost ULIP sold online is similar to a regular ULIP, slashing of premium allocation charges is the key differentiating feature. HDFC Life’s online ULIP has completely done away with allocation charges.It only charges fund management fee and a risk premium for mortality cover and on this aspect, directly competes with ELSS Mutual funds. The entire premium paid by the customer gets invested. Aviva’s product levies a premium allocation fee of 4-5%, compared to its offline counterpart that charges 8-9%. Bajaj Allianz’s online ULIP levies premium allocation charges ranging from 0-5.5% in the first five years, depending on the premium amount and year. Read more of this post

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