Paper Assets | wealthymatters

CIBIL and your CIR

April 3, 2011 8 Comments

Before a bank/other financial institute extends a loan to you,a potential borrower, it needs to take a decision on whether you would be able to repay the interest and principal or default and how much risk is involved in lending money to you.Banks rely on many factors to take this decision on your credit-worthiness – including your income and household income , your other loans and EMIs, your previous repayment history and defaults if any, etc.In the past, the banks had to collect all this information from you before analyzing it. But now, they have a readily available tool to make this decision simpler for them – your credit history in the form of your Credit Information Report (CIR).

In India, the Credit Information Report is created and maintained by a company called Credit Information Bureau (India) Limited, or CIBIL.The Credit Information Report is a compilation of your repayment history.CIBIL was promoted primarily by State bank of India (SBI) and HDFC. Now, most banks, financial institutions, non-banking financial companies, housing finance companies and credit card companies are its members, and regularly provide it with data about borrowers. Read more of this post

Filed under Paper Assets, Tool Kit Tagged with banks, CIBIL, CIBIL Report, CIR, credit history, Credit Information Bureau India Limited, Credit Information Report, credit-card companies, credit-worthiness, default risk, financial institutions, HDFC, Housing Development Finance Company, identity theft, loans, NBFCs, non-banking financial companies, postaday2011, RandomBlog2011, repayment history, SBI, State Bank Of India

The Importance of Having a Contingency Fund

March 30, 2011 3 Comments

This letter was written in 1939,ten years into the Great Depression, by Warren Buffett’s grandfather Ernest, to his youngest son (and Warren Buffett’s uncle) Fred, and his wife. Warren found it in a safe in 1970 while executing a will of a family member…along with $1000. I believe I will gift a copy of this letter and cash for a contingency fund to any children I might have.

Dear Fred & Catherine,

Over a period of a good many years I have known a great many people who at some time or another have suffered in various ways simply because they did not have ready cash. I have known people who have had to sacrifice some of their holdings in order to have money that was necessary to have at that time.

For a good many years your grandfather kept a certain amount of money where he could put his hands on it in very short notice.

For a number of years I have made it a point to keep a reserve, should some occasion come where I would need money quickly, without disturbing the money that I have in my business. There have been a couple of occasions when I found it very convenient to go to this fund. Read more of this post

Filed under Paper Assets, Theory, Tidbits Tagged with Catherine Buffett, Contingency Fund, emergency fund, Ernest Buffett, Fred Buffett, Great Depression, postaday2011, RandomBlog2011, Warren Buffett

Buffett’s 7 Filters

March 30, 2011 1 Comment

Anybody who has read anything about Warren Buffett knows he is superbly wealthy and has made all his money through his investment in stocks,that he is a value investor,that his favourite holding period is forever and that he loves his companies to have ‘big moats’.Following are a list of parameters that Buffett uses to evaluate companies.They are from the book ‘The Guru Investor’ by John P. Reese.Why not use these parameters to check out a company before buying its shares?

STABILITY OF EARNINGS:This can be checked by considering the earnings per share (EPS) for the past 10 years. EPS is derived from the residual profit left after payment of all expenses, taxes, depreciation, interest, preference dividends and belongs entirely to equity shareholders. A company should not have a negative EPS in the past 10 years. If the EPS is lower than that in the previous year, the dip should not be more than 45%.

DEBT TO EARNINGS RATIO: The second variable is the level of long-term debt to earnings ratio. Buffett likes conservatively financed companies. He prefers the long-term debt of a company to have been paid off from its net earnings in less than five years. This implies that the long-term debt to earnings ratio should be less than or equal to five.

RETURN ON EQUITY (ROE): The third variable measures how much money a company earns on its equity. The ratio is generally expressed as a percentage. For a company to figure on Buffett’s radar, its 10-year average ROE should be greater than or equal to 15%. Read more of this post

Filed under Paper Assets, Theory, Tool Kit Tagged with criteria, debt, Debt to Earning Ratio, earnings, EPS, filter, free cash flow, John P Reese, Market Share, parameters, postaday2011, RandomBlog2011, Return on Equity, Return On Retained Earnings, Return on Total Capital, ROE, ROTC, stock investment, The Guru Investor, Warren Buffett

Stock Market Quote

March 26, 2011 3 Comments

In these days when there is so much uncertainty and worry about which way the market is headed.I think the words below ought to help.I came across them while reading an old interview of Rakesh Jhunjhunwala.

‘ Bull markets always go up on a wall of worry and Bear markets always go down on a ray of hope. ‘

Filed under Paper Assets Tagged with Bear Markets, Bull markets, postaday2011, quote, Rakesh Jhunjhunwala, RandomBlog2011, stock market, uncertainty

Human Life Value Calculator

March 23, 2011 1 Comment

Wealthymatters.com In case of our demise we would all love to have provided well for our near and dear ones. A Human Life Value Calculator is a nice place to begin planning how to do so.A very enthusiastic insurance agent might tell you that various insurance products are the best way to provide for all these needs.This is strictly not so.Think if you want to provide for a child’s college education you do not need to buy an expensive children’s education plan but can for example use a plain term deposits.Here is a link to a fairly comprehensive Human Life Value Calculator: http://www.personalfn.com/tools-and-resources/financial-calculators/hlv-calculator.aspx .Remember to put in future values of the goals of your dependents.