Tool Kit | wealthymatters

Diamond Prices

February 2, 2011 4 Comments

As gold prices have climbed up steadily over the decade many Indians have been shopping for light weight gold jewellery studded with diamonds.

Through long experience,Indians are sophisticated gold buyers.But it’s a different matter when it comes to diamonds. Most people just have no idea of how much diamonds ought to cost.Here is a link to help get a better idea of diamond prices http://www.diaprices.com/parcel-rates/round-pacel-prices .This should help us bargain while shopping for diamonds.

Happy Shopping!

By the way if you are considering buying diamonds abroad here is a link to find out what you might have to pay in NY http://diamondregistry.com/price.htm and here are prices from Antwerp http://www.ajediam.com/Diamonds_Prices_Diamonds_Ratings.html

Filed under Alternative Assets, Tool Kit Tagged with Diamond Prices, Diamonds

Discounted Cash Flow Calculator For Share Valuation

February 2, 2011 6 Comments

When we buy shares we all want to buy cheap and sell dear.However the really difficult thing is figuring out whether something is actually cheap.To an extent we can try to rely on our memories and those of older people to compare current prices with historic prices adjusted for inflation.If we have preserved old papers we can do slightly better than rely on memories and impressions.This method however does not really work when the economy and the company itself has changed beyond recognition.So if our parents or grandparents bought SBI shares at IPO for 100 rupees a share we would have a long wait to see those prices ,or even those prices adjusted for inflation, again.

To buy at dips or corrections in the share price,or to buy only in bear markets is a good idea.But no one has been able to predict market bottoms consistently.So we are all faced with the decision of whether to buy a given company’s shares at a given price or not at any given time.And it helps to know whether we getting a good enough price if not the lowest price.To determine if we are getting a good enough price we can compare it with the fair value of the share we get by using this calculator http://www.moneychimp.com/articles/valuation/dcf.htm

The calculator takes values in US Dollars,but if we mentally replace the sign with any other currency sign we will be OK.We just need to focus on the absolute numbers.We can get The EPS numbers from the Annual Financial Reports(either buy one share and have this document delivered home every year or download it from the company website), financial websites, ads in the financial newspapers like Economic Times etc.Finding the growth in earnings figure to plug into the calculator is a bit more tricky.I just go over the last 3 years EPS(often found in the year’s AFR or you need to find the back reports often found on company websites) and work out the average year on year growth in earnings.I then look to the management discussion section and check overall forecast for the industry.I then check for any debt funded expansion plans that are likely to affect the EPS.I then use these three pieces of information to guesstimate a growth in EPS.I keep the growth estimate for 5 years only and the annual growth rate therafter at 0%.The discount rates I use is the average 10 year Sensex returns I get from here: http://www.hdfcfund.com/Calculators/SensexRollingReturnsCalculator.aspx?ReportID=C208C983-C4A5-41B4-B245-CB77C8D2EDC3

Then I accept my falliability and try to look for shares of good companies available at prices well below those I get from using this calculator and my inputs.I then try to forget about the stock market and the daily fluctuations of share prices till the next time I wish to buy shares.

Filed under Paper Assets, Theory, Tool Kit Tagged with Discounted Casf Flow DCF, Fair Value, Share Valuation

Self-Defeating Beliefs About Wealth

February 1, 2011 4 Comments

If a person says he/she would like to be wealthy but you find them struggling,you will find them having one or more of the following self-defeating beliefs about wealth.These beliefs sap energy and kill initiative.

Belief No. 1: How much you earn depends on how hard/long you work or how highly skilled you are

Such a person becomes a workaholic and often believes in driving other people to work.A person like this might have a professional degree and quite often believes in chasing professional qualifications.He/she believes that a professional qualification often entitles them to more money.With these people the focus is on the work and its length, hardness, unpleasantness and/or skill.They believe in their own merit and get upset when they feel the world does not reward them justly.These people focus on the process and not the results.Their focus is not on wealth generation, which should be their goal if they want to be wealthy, but on part of the process, i.e. the nature of the work they engage in to make money, which they believe will make them wealthy.

Belief No. 2: Work is not meant to be enjoyable.

Such people often unconsciously believe that the more they suffer at work,the more meritorious they are and the more deserving they are of wealth.As they believe in the virtues of suffering,these people often maximize their own suffering and those of others around them.They are resistant to the thought that pain might be an indicator that they are going about things the wrong way or the hard way that there might be better,easier and less painful ways of going about things.

As a contrast consider these words of Warren Buffet “I get to do what I like to do every single day of the year.I tap dance to work, and when I get there, I think I’m supposed to lie on my back and paint the ceiling. It’s tremendous fun.”

Obviously the more fun you find work the less you have to force yourself to do it.Your body and mind instead of rebelling and sabotaging your efforts are actually engaged in harmony to produce your best work. Read more of this post

Filed under Theory, Tidbits, Tool Kit Tagged with Age and Wealth, Education and Wealth, Enjoy Work, Enjoyable Work, How much you earn, Money as a Constraint, RandomBlog2011, Researching Business Plan, Self Defeating Beliefs, Self Defeating Beliefs about Wealth, struggling, Wealth from Unglamourous Businesses

Recurring Deposit Calculator

January 31, 2011 4 Comments

There is a saying in hindi ‘boondh boondh se sagar banta hai’ ie ‘Little drops of water make the mighty ocean.’
A life-time is but a sum total of seconds and our accomplishments are just a sum total of a lot of little actions.

Small sums of money saved in a recurring deposit account,tend to grow into nice lump-sums.Here is a calculator that graphically demonstrates this:http://www.religaremf.com/financial-goals.aspx .This calculator however does not allow you to input amounts less than 500 hundred rupees.Nor can you choose the frequency of compounding.Here is a calculator that allows for both:https://www.corpbanknet.com/Recurr_deposit_Calc.html.And in case you’re wondering just how small an amount will be accepted by anybody.The lowest I know of is India Post where the least monthly instalment is 10 rupees.The PORD offers 7.5% interest and is compounded quarterly.Here is a link to the PORD calculator:http://www.indiapost.gov.in/netscape/5YearsRD.html .This scheme is great for getting children to learn about saving and investment.

For any given term,banks generally offer an interest rate of one percent below fixed deposit rates for recurring deposits. Companies,such as Dewan Housing Finance ,too sometimes offer fixed deposits,though they are rarer.To find the best interest rates on offer for a given term please refer to my previous post : https://wealthymatters.com/2011/01/19/interest-rate/

Filed under Paper Assets, Tool Kit Tagged with Calculator, Dewan Housing Finance, Frequency of Compounding, PORD, PORD Interest Rate, PORD Tenure, Post Office Recurring Deposit, Recurring Deposit, Recurring Deposit Account, Recurring Deposit Calculator, Recurring Deposit Interest Rate, Tenure

8 Habits of Millionaires

January 30, 2011 2 Comments

Here is a to – do- list that can make almost anyone a millionaire.The operative word is millionaire as in a person with a few crore rupees.This list does not require a person to be specially talented with money.All that is required is the will to become a millionaire and the discipline and persistence to stick to doing small things repeatedly till you master them.You won’t get to live the life of the Rich and Famous but you and your family will be comfortable later in life.

Earn to Invest, Not Earn to Spend

The first skill you need to master is to learn to control your impulses and delay gratification.Just force yourself to postpone buying unnecessary things for longer and longer periods .Allow yourself to buy those things only when you have saved up and invested a certain amount of money first.After a while you will find it easy to first invest money and then spend the remaining.If you have debts, force yourself to invest first , pay your EMIs and then spend, in that order.

Have a Plan and Work the Plan

Then use this calculator https://wealthymatters.com/2011/01/26/target-crorepati/ to figure out how much you need to save and start putting it away monthly to make your first crore.To find the best interest rates refer to this post https://wealthymatters.com/2011/01/19/interest-rate/ .Now that you know how much to put aside and where you need to do it,you have your basic plan in place to become a millionaire.

Develop Many Income Streams

A person can work only that hard and that long and only at that many jobs in a day to make money.So its important to start acquiring assets that make you money.So ,for example, you will have to consider buying a good mutual fund or some good dividend yielding shares.

Understand your Finances

Also you need to be aware of exactly how much you are making, how much you need to save and learn to develop a budget for spending.You need to know how to evaluate how your investments are doing.For that you can take the help of this post https://wealthymatters.com/2011/01/26/cagr-calculator/ .The more you know the more you can make out of your investments and the less people can cheat you. Read more of this post