Category Archives: Economy

10 Commandments of Successful Investing

Guest Column: Expert-Speak

Let me unveil the 10 commandments of successful investing today. These commandments strictly followed can make you a successful investor; make you richer. The successful legendary investors like Benjamin Graham, Warren Buffet have followed these principles. So why not you?

1. Decide your investment strategy and stick to it: 

An investor may invest in SIP and when the market continues to fall he will discontinue his SIP. But market crash is the right time to continue your SIP. Because, during the market crash you will get more number of units and the averaging works out in your favour.

Another investor may decide 50:50 as his debt:equity asset allocation ratio. When the market goes up he may want to invest more in equity and hence he may change his asset allocation to 30:70. Actually when the market goes up one needs to reduce his equity exposure to bring the portfolio back to his predetermined asset allocation ratio.

Don’t change your strategies midway. You know what is best for you and this applies to deciding with foresight the ideal investment strategy for you. Once the strategy is set, do not fluctuate in your decision each time you decide to invest. This would only mean losses instead of profits.

2. Conduct your own research on stocks: 

It is not advisable to just depend on hear say and decisions of your neighbor, friend, relative or tips from the media or your stock broker and invest in stocks. It may seem easy but could amount to gamble. Being an informed investor, investing your hard-earned money needs you to ensure if the investment would meet your financial goal. This could be done through research from various sources.

3. Learn to overlook short-term fluctuations:

If you want to be a successful investor, you need to understand that it is futile to be affected by short-term fluctuations of the stock market. Investing in good and reputed portfolio ensures good quality of your investment and capital appreciation in the long run. The short-term volatility of the share market has nothing to do with the long-term performance of your investments and achieving your financial goals.

4. Resist investing in penny stock:

Some investors have a common misconception that it is better to invest in penny stock than in high value stocks. This is wrong as whether you buy stock at Rs.5 or 5000, you need to check the background of the company before looking at the price of the share.

5. Discard the losers and pamper the winners:

There is a tendency among investors to sell off appreciated stock and to hold on to depreciated stock in the hope that it would rise. It is wrong, as it is possible that the shares which are not doing well may continue to underperform and the shares that are doing well may continue to perform well in the future.

It is better to acknowledge you went wrong, swallow your pride and discard the loser stocks and lessen your losses. Your decision lies in deciding to suffer a one-time loss for future long-term gains.

6. Look before you leap:

Even good company shares bought at the wrong price can be a poor investment choice. So devise some strategies like SIP, asset allocation to avoid this mistake.

7. Adopt an open-minded investment strategy:

It may be advisable to consider investing in good companies, however it is wrong to overlook the point that small start-up companies can make profits as well. Even such companies with good strategies and growth plans could contribute to long-term capital appreciation. Always have an open mind in taking your investment decisions.

8. Base your investment strategy on the future: 

Investment decisions based on past happenings may not always be right. It is better to consider the happenings, but give more importance to the present and future prospects of the investment. An informed decision based on the fundamentals and mission of the company helps in long-term wealth creation.

9. Consider tax friendly investments:

Making investment decisions based on tax considerations may prove counter-productive. However minimizing taxes and maximizing returns after taxation would help. The long-term capital gain tax is nil. So if you invest for a time horizon of more than one year you will have better post tax return.

10. Adopt a long-term perspective:

Adopting a long-term prospective is advisable if you want to be a successful investor. If you want to get short-term results, then you will be able to cultivate only coriander leaves. If you want to grow a large banyan tree then you need to wait for years. So if you really want to be richer and create wealth, you need to be a long-term investor.

You could have seen a lot of success stories of people, who bought a good stock 10 or 15 years back and accumulated a good amount of wealth now because of the appreciation of those scripts. But have you ever heard of a person accumulating wealth by trading in the stock market or moving in and moving out of the market?

By trading in market you may make profits in a few transactions, but you will not be able to make profits forever. There is a lot of difference between making profit in a single transaction and being a successful investor forever.

Knowing Vs Doing

There is a huge difference between knowing what we should do and actually doing it. The knowledge piece appears quite sexy; being interested, learning something new, coming up with that cool idea. The doing part sounds comparatively like routine work, no matter how easy this work may be to do or how obvious that it should be done. Don’t fall into that “Knowing Vs Doing gap”.

Now you know the 10 commandments to successful investing; put it into practice to become richer.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.
Views expressed on this website are of individual writers and NOT of the website/blog-owner. Individuals are advised to exercise personal judgement before responding, using or contacting to any post/writer/organization.

Leave a comment

Filed under Economy

The (Un)Common Misadventure?

CWG-Delhi-2010

Abraham Lincoln once said:

God must love the common man, he made so many of them.

It seems that God did not like the Indian common man as he made so many politicians and bureaucrats to make their life tough if not hell.

Amidst rising inflation, poverty and lack of basic amenities plaguing the common man, politicians are busy playing the game they play best: mudslinging.

The latest example is the (non-)issue about the CommonWealth Games (CWG). Two of the top-notch politicians of the ruling coalition are busy mudslinging at each other while the repute of the nation is at stake. The worst part is the truth that billions have already been spent, overshooting the initial budget and still things are chaotic. All this at the cost of hard earned money of the poor common man.

This speaks of amongst other the following failures:

Old time arch-rivals senior Congress leader, Mani Shankar Aiyar and Suresh Kalmadi, Congress leader and Chairman of the organizing committee of the CWG, are busy making accusations against each other while the preparations for the games are in a limbo. To give the matter an even more shameful flavor, the recent revelations by the Central Vigilance Commission (CVC) ranging from allegations like:

  • Award of works at higher rates – One of the accusations here are:

In the bid of L1, rates of some items and discount offered by the firm at the end of BOQ were tampered either by cutting or by overwriting in the price bid after opening in order to increase the quoted amount to avail the difference of Rs. 3,62,72,229/- between the next higher quoted amounts without changing the overall status.

  • Poor quality assurance – One among a list of eleven accusations CVC’s inspection note reveals :

Lot of deviations taken from the approved scheme of the Government without obtaining the approval of the competent authority. Specially poles of 12 meter length (Agreement rate of Rs. 28,358/-) and 10 meter length (Agreement rate of Rs. 28,974/-) have been deviated in such a manner which is beneficial to the agency with extra burden of about Rs. 1,13,32,464/-.

  • Award of work to ineligible agencies – CVC’s note states in one case:

Work finally had to be terminated which resulted into time and cost overrun

    Source: cvc.nic.in

    What is even more shocking and disturbing is the CVC revelation that the materials used in the construction failed “stress-test”. Basic safety norms are being openly flouted. Electricity installations remained to be tested for common checks like insulation test. With rains pouring and large crowd expected for the event, it is a dangerous proposition.

    As different parties peg the amount spent on the games at different levels, everyone agrees that it has zoomed way past the initial estimates and the whole proposition to organize the games is being questioned. A Ministry of Youth Affairs & Sports, Government of India press release dated July 29, 2010 pegs the figures as below:

    • Expected Income as per the CWG Organizing Committee (OC)  – Rs. 1,708 crore
    • Expected Expenditure on condust of the games – Rs.2,394 crore (includes Overlays, Timing, Scoring, Result System and Games Time Sports Equipment)
    • Indian Olympic Association (IOA) estimate of expenditure (2003) – Rs.655 crore
    • Current estimates – Rs.11,494 crore (apart from expenditure of Sports Infrastructure and Conduct of the Games, also expenditure on Security, Broadcasting, Telecommunication, Training of Sportspersons, allocation to Government of Delhi etc.)

    Some sources peg the amount at Rs. 35, 000 crores (close to USD 8, 000 millions, Indian per capita GDP– USD 3, 100).  Mani Shankar Aiyar also alleged that India had bribed the various nations to take the game.

    “To take the Games, the Olympic association of every Commonwealth country was given $1 lakh ($100,000); it was given to Australia, New Zealand, Canada, and Britain. Those countries did not need this money,” he said. “I would call it a bribe, I don’t know what it is called from the legal point of view.”

    Source: EconomicTimes.IndiaTimes.com

    Aiyar openly declared that he would be happy if the “Games are spoilt”. Organizing such games and events are a good way to showcase the growth and cultural diversity of a nation to attract investment and tourism but the way this event is being managed, it will raise more doubts about Indian acumen and competence rather than creating a positive impact.

    “I am very happy with the rains, firstly because it will ensure a good agriculture for the country and secondly because it will ensure that the Commonwealth Games are spoilt,” Aiyar said candidly.

    Source: EconomicTimes.IndiaTimes.com

    As of now the CWG seems to have become a White Elephant which no one is ready to own. Games OC Chairman, Kalmadi has already wiped-off his hand from allegations of corruption.

    As the countdown clock on the games official page happily ticks away to the D-day, organizers are feeling the heat. CVC as well as the opposition parties and now even constituents of the ruling coalition are raising doubts on the successful conduct of the games. Delhi Finance Minister and a member of the Delhi government Commonwealth Coordination Committee, AK Walia has also gone on records, stating that he was not sure if all stadiums would be ready by the August 15 deadline for the Games.

    Come October 15, 2010, the day the games begin: the world is watching.

    3 Comments

    Filed under Development, Economy, World

    Major Advertisers Sit on the Bench of This Year’s Super Bowl – ABC News

    The following article appeared in: ABC News.

    <Future of Advertising: Ads That Stare Back and Interact: Companies Use Social Networking, 3-D and More to Reach Consumers>

    Major Advertisers Sit on the Bench of This Year’s Super Bowl – ABC News

    For advertisers, the Super Bowl is still the biggest game of the year. But in today’s marketplace, the buzz isn’t surrounding the ads during the game, it’s the advertisers opting to sit on the bench instead that have programmers shivering on the sidelines.

    For the first time in more than 20 years, Pepsi will not advertise during the game.

    “That was a real problem for the Super Bowl because they are one of the biggest advertisers,” says Suzanne Vranica, advertising columnist for the Wall Street Journal. “The economy is wreaking havoc with a couple companies. And you’ve got a couple companies, big companies like FedEx and GM, who are long-time Super Bowl fanatics, that have pulled out because of the economy.”

    Instead of paying an estimated $2.5 million to $2.7 million per Super Bowl commercial, big brands are using social networking to connect with consumers — hoping to click in a more personal way.

    “Social networking is the newest thing for marketers,” says Vranica. “You’ve got 60 ads fighting for attention, so if you use social networking as a marketer and drum up some excitement, you’ll have people specifically watching out for your commercial that night.”

    Instead of buying pricey ad time, Pepsi is launching a reported $20 million digital campaign to support charity projects initiated by consumers. Not to be outdone, Pepsi rival Coca-Cola, which is running two Super Bowl commercials, will partner with Facebook to incorporate charity into their message.

    “Every company out there has some kind of cause,” says Vranica.

    In addition to philanthropy, companies like Doritos and CareerBuilder.com are crowd sourcing their ads through social networking. All of this year’s Super Bowl advertisers have Twitter pages, and Facebook users were tapped to create Vitamin Water’s latest flavor and ad campaign.

    Ads are beginning to get plastered everywhere.

    “Ad clutter is a big problem, so advertisers are bending over backwards to find the most bizarre places to advertise,” says Vranica.

    Elevators, cars, garages, crosswalks and even breakfasts like Eggo waffles are getting branded.

    Advertisers also are producing viral videos that seem to be captured by amateur photographers but surreptitiously advertise a product. RayBan, for example, released a video of a tattoo lover who appears to get a permanent pair of sunglasses tattooed on his face.

    Advertisers Go High-Tech to Reach Audiences

    Trading football for futuristic, companies are trying 3-D advertising, too. This month, Visa was the first company ever to advertise in an outdoor space using 3D.

    “3D ads are the next gimmick,” says Vranica. “You’ve got a lot of technology out there, and advertisers realize the space they play in is very crowded, so they’re looking for technology to make something new. So if you make it in 3D, how could you go wrong?”

    Advertisers also are stretching the limits of technology with touch screens, holograms, and “augmented reality.”

    “Interactive advertising is a big draw for marketers because it proves that people are engaging with your ad rather than sitting back,” says Vranica.

    A fitness center ad at a bus stop in the Netherlands, for example, weighs people as they sit down. Sharpie markers encourages consumers to write on a virtual “eCast” on low-hanging electronic billboards, and the Mini Cabrio car’s “augmented reality” campaign allows users to hold up a Mini Cabrio convertible magazine ad to a webcam and watch as the computer screen displays a 3-D model of the car.

    As for what everyone will be watching by next year’s Super Bowl, commercials could be similar to the high-tech personalized ads from Steven Spielberg‘s 2002 movie “Minority Report.” “Smart signs” from tech companies like Quividi and TruMedia are in test phase now and could scan consumers as they walk by, telling advertisers the age, height, even clothing size of potential customers.

    Not every company is pinching pennies during the Super Bowl. Even at nearly $3 million for a 30 second spot, the game is sold out with commercials from big brands like Anheuser-Busch and Unilever, and lesser known companies like HoweAway.com and Boost Mobile, which both are making their Super Bowl ad debuts.

    “There is no way in today’s universe with such audience fragmentation that you can reach 90 million people with one ad,” says Vranica. “That’s why you see companies that you’ve never heard of advertising in the Super Bowl. So $3 million for 30 seconds is actually a bargain because they could never reach that kind of audience.”

    1 Comment

    Filed under Economy

    How Livable is Hyderabad?

    How Livable is Hyderabad? The city which packs a rich tradition and is an icon of the developing India, faces some of the same problems that any other cities face. As the city develops, the pressure on resources grow and need more support. The importance of the perspective of the citizens towards the state of affairs grows.

    An article discussing the state of the city of pearls, titled “Can Hyderabad be made livable” written by Karuna Gopal, which was invited by The Times of India – published in the edition dated: Nov. 23′ 2009. Karuna Gopal is the President of the Hyderabad based Urban Planning and Advisory organization, Foundation for Futuristic Cities. She is a distinguished authority in this field and has worked with national and international organizations in the areas of City Development, Visioning, Planning and E-governance among others. The article presents the view from a citizen’s perspective coupled the expertise of a urban planning expert.

    If livable cities give all citizens equal opportunity to lead healthy, comfortable and safe lives, how livable is our metropolis? Here’s a citizen activist’s perspective.

    Doctors prescribe half-an-hour walk everyday, among other things to stay healthy. For those who cannot afford the luxury of a gym, walking to offices is an option. How pedestrian-friendly are our Hyderabad streets? Fast food is fast becoming a pass time for children. How many outdoor choices can we show them in parks, municipal swimming pools and skating rinks? For teenagers who started relying on the Facebook for facing life’s challenges, what are the city avenues for adventure learning and sport facilities?

    The footpath to road ratio is poor in Hyderabad and the walkability index is a mere 0.68, making it one of the worst cities in India for pedestrian friendliness. With 30 lakh vehicles plying, Hyderabad has the highest density of traffic in India. Vehicle to road length ratio is bad, respirable particulate matter (RPM) several notches above the acceptable levels, 50% of the road accident victims are pedestrians and billions of working hours are lost with people stuck in traffic. Captive walkers may not be walking by choice; they have no access to public transport!

    My 65-year-old neighbour became healthy after a neighbourhood park appeared. He walks daily, made friends, does yoga and laughs his way to health. Studies on SROI (Social Return on Investment) show that parks also serve as instruments to forge communal, community bonding, resolve family conflicts, encourage informal official meetings reducing pollution.

    KBR Park that has been put in the league of Central Park of New York and Hyde Park of London is accessible only to Jubilee Hills residents. The rest of the city has not been so lucky. With just 600 parks developed in an inequitable fashion for eight million, citizens are desperately waiting to see parks in the 2,200 open spaces meant for that purpose. Currently, most colonies house fenced open spaces with faded boards declaring GHMC’s ownership!

    My maid who lives in a slum, fed up with contaminated water, disease burden and mounting medical bills asked me how much we pay for water. After quick calculations announced that she is willing to pay at the same rate! She just educated me about opportunity cost and her coping costs, technical term for lack of services and coping mechanisms used by the poor! In fact, all WTP (willingness to pay) studies prove that slums want basic services like water and sanitation and they are willing to pay for those. It is the government that is unwilling to charge!

    With 1,485 slums and more being created, our city has to act fast or Hyderabad while legitimising the illegitimate may well morph into a mammoth slum! Is it just insipid institutions, defunct departments and procedural pains that are responsible for this state of affairs?

    With a build-now, regularize-later culture, jurisdictional schizophrenia making a municipal ward nobody’s baby, multiplicity of agencies, conflicting executive and political interests, lake encroachments, lopsided development, rusted water pipes, gushing sewers, our greater city has to deal with systemic problems to get anywhere near livable status. Those, who expressed concern when Hyderabad became “greater” that it will have greater challenges of integration, providing equitable services and staying accountable to a larger population stand vindicated today! Why, the much hyped up Hi-Tech City has a maze of optic fibre lines, but sadly no sewerage lines!

    Governance framework is partly responsible for this state of affairs. Hyderabad, though a metropolis now is still a state’s baby. Despite the 74th constitutional amendment Act, it is not the city but the state that decides the urban infrastructure projects, levies and collects taxes. The state also interferes with the local governments property tax by deciding the tax base, rates and modes of assessment leaving the city government disempowered and financially weak. Though JNNURM (Jawaharlal Nehru Urban Renewal Mission) aims to rectify that, shuttle negotiations with the state have been leading to delays and sub-optimal development of Hyderabad.

    The City Development Plan of Hyderabad (CDP) that accessed the JNNURM funds for the city was sent without the mandatory stakeholder consultations. There is also a community participation law for urban projects just as there is a JNNURM framework for citizen participation. Citizens do not question enough. The government does not share enough. Town hall meetings that are the purest form of democratic governing are missing in our city. Citizens have to participate actively in city development. We must realize that managing cities is not just government business alone. It is ours too.

    We can make Hyderabad a livable city if citizens wear a reformer hat to cleanse institutions, an activist hat to question investment decisions and a partner hat to accelerate equitable development!

    SYDC2NUNQAN2

    2 Comments

    Filed under Development, Economy

    China says yes to free markets, no to free currency regime

    President Barack Obama on his tour to China has approached a very cautious approach. While raising issues of contention between the two nations, he has been subtle in his own right. He agreed to the importance of a stronger China while in a way also asking China to share the burden of being a regional leader.

    President Obama today urged Chinese President, Hu Jintao to allow his nation’s currency, Yuan to rise in value following strains over trade between the two economic giants.

    US Dollar-Chinese Yuan

    Mr. Obama while speaking after a summit in Beijing, made the U.S. expectations public. While voicing the U.S. expectation, that China will let its currency resume its climb against the dollar soon, the U.S. President was cautious to stop short of raising concerns that China is keeping its currency artificially low to boost exports.

    He said: “I was pleased to note the Chinese commitment, made in past statements, to move toward a more market-oriented exchange rate over time.

    Such action would be welcome in the United States and elsewhere, he hinted: “Doing so based on economic fundamentals would make an essential contribution to the global rebalancing effort.

    The Chinese government keeps a tight leash on it’s currency exchange rates. The rates for Yuan (CNY) have moved in a narrow range of 6.78 (August 27′ 09) to 6.86 (July 23′ 09) against the USD, which provides immense trade benefit to Chinese exporters.

    With the unemployment rate peaking at a 10.2% level, Obama is also under pressure to ensure protection of domestic industries against Chinese onslaught.

    The Chinese President while avoiding any direct reference to the currency issue, conveyed Beijing’s displeasure in a camouflaged fashion at new US tariffs imposed on Chinese-made products including tyres, steel pipes among others.

    He said that they needed to “oppose and reject protectionism in all its manifestations” and both sides would need continued “consultations on an equal footing to properly resolve economic and trade frictions“.

    The U.S. President is also set to meet the Chinese PM Wen Jiabao, tomorrow where he is likely to discuss the issue of allowing Yuan to appreciate against the US Dollar. IMF MD, Dominique Strauss-Kahn, also raised similar sentiments today in Beijing when he said that a stronger Yuan would be in the interests of China and the world.

    Industry analysts also feel that Yuan should be let to move in lines with the forces of demand and supply, a belief which is very unlikely to be echoed in any fashion by the Communist regime in Beijing.

    1 Comment

    Filed under Economy, World