Mutual Fund SIP with Online Term Plan can be a good investment strategy for layman investors

Mutual Fund SIP with Online Term Plan can be a good investment strategy for layman investors

Mutual Funds or ULIPs: Where should you invest

Mutual Funds or ULIPs: Where should you invest

Know Your Rights and Fulfil Your Duties as a Mutual Fund Investor

Know Your Rights and Fulfil Your Duties as a Mutual Fund Investor

Three mutual fund investing benefits you may not know

Three mutual fund investing benefits you may not know

10 Common Myths about Mutual Fund Investments

10 Common Myths about Mutual Fund Investments

Below is a list of 10 common myths about mutual fund investments:

1. Investment in mutual fund (MF) is always risky: No, it is not. Mutual fund is not necessarily all about equity or stocks. Mutual funds also deal into debt instruments like Certificate of Deposits (CDs), Bonds, Govt. Securities (G-Sec.), Non-convertible Debentures (NCDs) etc. This means that a mutual fund scheme can also have all or some of these debt instruments in its portfolio. Different debt instruments have different maturity periods. MF schemes which are having debt papers of very small duration are least risky. Such schemes are known liquid MF schemes. These schemes can be as safe and as liquid as your savings bank a/c. Similarly carefully chosen debt MF schemes can be as safe as fixed deposits along with better tax-adjusted return.

2. Investment in MF requires demat a/c: No, it does not. Though equity MF scheme does invest into stocks of companies, but you need not to have a demat a/c to hold units of such MF schemes. All you need is to be KYC compliant (i.e. having PAN and valid address proof) and have an active bank account. That’s it. At FundzBazar site you can even invest completely online and instantly that too without having any demat a/c!

3. Investment in MF requires timing the market: No, you need not to time the market if you are investing for long term through Systematic Investment Plans (SIP) i.e. investing a small amount at regular intervals for a number of years. If you do that then, your investments will reap the benefit of rupee cost averaging i.e. buying more units when price is low and buying lesser units when price is high by investing same amount every time.

4. Higher unit value (NAV) means a costly purchase: No, it does not. Let me give you an example. Suppose you asked me, the rate of inflation in last 2 financial years (FY) and I told you that in FY 2013-14 cost inflation index (CII) stood at 939, and in next two FYs CII values were at 1024 and 1081. Does it mean anything to you? No. It would have helped you instead if I had told you that in last two FYs rate of inflation were 5.57% (FY 2015-16) and 9.05% (FY 2014-15). So what matters is percentage of relative change and not the value itself as the base values in cases of both inflation (at 100) and mutual fund NAV (at 10) are assumed for ease of understanding and measurement. So look at yearly growth rate of a scheme’s NAV rather than NAV itself. If it’s consistently beating its benchmark return then it’s worth considering.

5. Having many schemes in portfolio means diversification: Remember one fundamental advantage of a mutual fund scheme – the diversification that it offers. Say, I am investing directly into stocks of companies and with the money that I have, I bought two stocks. On the contrary, you are investing into MF. In that case with the same money that I have, you bought some units of MF scheme and that MF scheme’s portfolio might consist of many stocks, say, 30 stocks. So your investment portfolio is much more diversified than mine. Now when a single MF scheme offers me enough diversification, investing more into similar type of schemes will not make much sense. But I can surely buy some other type of schemes to get exposure into different types of investment styles.

6. Returns from all MF investments is taxed similarly: If in portfolio of a MF scheme, percentage of exposure into equity type of instruments is more than or equal to 65% - such schemes are then known as equity schemes. Similarly if percentage of exposure into debt type of instruments is more than or equal to 65% - such schemes are then known as debt schemes. Equity schemes and debt schemes are taxed differently. Taxing also depends on how long you hold the investment before you sell. If equity schemes are sold after holding for more than a year – then NO tax is to be paid. If debt schemes are held for more than three years then on indexed gain 20% tax is to be paid. If investments are held for shorter term then short term capital gain tax is to be paid.

7. Redeeming from MF investment is a cumbersome process: No it is not. Investments can be redeemed anytime online or offline (signing on a transaction slip) provided it is not within the lock-in period (like in cases of ELSS or close ended scheme). Redemption amount will be credited to your registered bank account within a stipulated time period.

8. MF investment is mandatorily for long term: No, not necessarily. As discussed above one can keep money in liquid MF schemes also which is often used to park money for a very short term. There are other debt schemes (arbitrage fund, accrual fund, income fund) which can be held for short to medium term. Contact your financial advisor for the same and mention clearly about your investment horizon.

9. MF investment cannot be used for regular periodical income: No, it can definitely be used. Like you can invest systematically, you can withdraw also from a scheme systematically i.e. withdrawing a fixed amount at a regular interval for a specified period or till the money lasts whichever is earlier. This is known as Systematic Withdrawal Plan (SWP). This is really helpful for retired people or for anyone who needs regular income. 

10. MF is full of strange abbreviations: Agree to some extent. But we should look into each abbreviation and understand it fully – what it stands for. There are too many – NFO, NAV, SIP, STP, SWP, MIP, FMP, ELSS etc. Then there are terms like Growth, Dividend, Regular, Open Ended, Close Ended. All these can be intimidating at start. But please note that there are plenty of helps available online if you Google any of these terms. A good financial advisor also should help you to understand relevant terms and abbreviations. You need not to know everything but only the terms that matter to you. Ask questions in the comments section. Take some effort from your side. These small efforts will take you miles

Multiple mediclaim policies settlement

Many of us or may have multiple health insurance policies. Most of the salaried persons anyway have a group mediclaim from their employer. Someone might have bought a health insurance cover from PSU insurer long back and now took a higher cover from a private insurer.

Let's take an example here: I have a health insurance cover from company A of Rs. 2 lakhs and from company B of Rs. 3 lakhs.

If my claim amount is less than Rs. 2 lakhs - I can then choose any insurer (A or B) to settle the claim; if  claim amount is more than Rs. 2 lakhs but less than Rs. 3 lakhs - I can only approach company B for settling the claim.

But if my claim amount is more than 3 lakhs (say 4 lakhs) - then I have to approach both the company A and B.

In such a scenario 'contribution clause' may come into effect. Out of my total cover of 5 lakhs - company A's contribution is 40% ((2/5)×100) and company B's contribution is 60% ((3/5)×100). So out of my total claim Rs. 1.60 lakhs (40% × 4 lakhs) will be reimbursed by company A and Rs. 2.40 lakhs (60% × 4 lakhs) will be reimbursed by company B. Some companies may also decide to settle the maximum claim amount that it can within its limit without resorting to 'contribution clause'.

But in such a case you cannot send the original bills and original discharge certificate to both the companies. So before sending the original documents to first company - take photocopies of everything and also attest. Once the claim is settled by the first company - take the 'settlement certificate' from them and if possible also ask from them for a declaration that they have all the original documents with them. Now approach the second company with duly filled claim form, attested photocopies and 'settlement certificate' received from the first company.

While taking a new policy you must declare details of your existing policies, if any. Though in most of the cases group mediclaim policy details are not asked but still read the instructions in proposal form carefully. Preferably you should have one large cover from a single insurer rather than having several small covers from multiple insurers.

If you have any experience in helping your clients settling multiple claims - please share.

The Story of Eggs and Baskets

Do not put all your eggs in one basket. We heard this from time immemorial. This is frequently quoted whenever we discuss the topic of asset allocation. Let us look deeper into the characters of this story - namely eggs and baskets.

Eggs are nothing but my investments (amount of money that I am going to invest) and baskets are different asset classes (debt, equity, hybrid, gold, real estate etc.)

Who came first - egg or chicken? Mystery unsolved. But when we talk of asset allocation we know the answer. Eggs came first. And depending on the number of eggs (amount of money to be invested), baskets are chosen. Not the vice versa. The amount of money that you are going to invest - you will invest that anyway. Because that is your investible surplus - you cannot increase that and you should not decrease that. As far as choice of basket is concerned it depends on many things and hence can be little complicated at times.

Let us talk of two scenarios here:

Mr. A can invest Rs. 1 lakh now and also Rs. 20 thousand every month. He does not have any critical goal left to map with this investment. All his goals are either fulfilled or are already taken care of. He just wants to see his money growing. At this scenario Mr. A has ample choices to make. He may decide to invest fully into equity (if his risk appetite is high) or fully into fixed deposit (in case of low risk appetite) or into an appropriate mix of debt and equity (moderate). So choice of basket is entirely at Mr. A's discretion.

Mr. B can also invest Rs. 1 lakh now and Rs. 20 thousand every month. But he has goals to achieve - short term, medium term as well as long term goals. Let whatever be Mr. B's risk appetite - he doesn't have much choices. For short term goals he cannot put his eggs in a basket which can shake anytime. Similarly for long term goals even if he wants to invest only into FD - he may not be able to do so - as he may fall short of his target. If that happens then he will have to either increase his investment amount or adjust his target to a lower level. If none of these is possible then he has no choice but to choose the optimal set of baskets suitable for him.

The crux of asset allocation lies in minimizing risk. If my different asset classes respond differently to a particular event – then my overall portfolio is in a very healthy shape. Lesser risk needs not necessarily lead to lesser return but assuming a realistic return from the portfolio is a very important step while planning investments. If that means more amount of money to be invested – check if you can. If not, then adjust your goal amount. Somewhere somehow you have to strike a balance, otherwise get ready for a nasty surprise. No one knows, what future will turn out for us. But if you assume a lesser return than the market standard and also set a higher target value for your goal – and your investible surplus matches the requirement – then chances are more that you will achieve your goal comfortably.

What should be the right mix of assets for a goal? There is no right or wrong answer here. It depends on many factors like – thecriticality of the goal, your overall net-worth, market trend, available investible surplus, your understanding about different asset classes and so on.Still if we try to present a standard set of rules for asset allocation (which may or may not fit your particular case – hence it is highly recommended that you contact your financial advisor for the same) that may look like this:

If my goal is very short term (< 1 year), I should not look beyond pure debt instrument with assured return. If my goal is short term (<=3 years), majority of my investments should go into debt and/or hybrid instruments. If my goal is medium term (<=7 years), 50 to 70% of my investments can go into equity and the rest(30 to 50%) into debt/hybrid instruments. If my goal is long term (> 7 years) majority of my investments (70% or higher) should go into equity and rest into debt/hybrid.

Also remember here that a long term goal does not always remain long term. A goal which is 10 years away from now – is surely a long term goal today. But after 7 years from now that same goal will turn medium term and thereafter short term. So we have to change asset allocation accordingly.

[While we talk of assets, it should be noted that ‘mutual fund’ as a whole doesn’t fall in any asset class. It can take different shape (equity, hybrid or debt) depending on your choice of schemes.]

Here is how to apply for an IPO through ASBA

Here is how to apply for an IPO through ASBA

Fixed Deposits vs Debt Funds: Which is a better investment option?

Fixed Deposits vs Debt Funds: Which is a better investment option?

Happy Financial Independence Day

Happy Financial Independence Day

To win independence India had to wait for 200 years. Consider yourself lucky enough that to become financially independent, you need not to wait that long. By the way what it takes to become financially independent?

As per definition if you can achieve all your financial goals without making any further investment, you are then truly financially independent. But in real world this definition may not work for most of us. So how and when can we become financially independent? We need to secure only 3 things:

(1) We cannot achieve all our financial goals today itself. Fine. Agreed. And we need not to worry for that, because we are earning well and will keep on doing the same for years down the line as long as we enjoy our work. But life is unpredictable - so we need to secure our family's future in case tomorrow I am not there for them. So calculate and get adequately insured yourself. Also take sufficient amount of health cover to cater to medical emergencies and hospitalization. Last but not the least keep emergency fund (equivalent of 4 to 6 months of expenses) ready always. This helps you to live a stress free life.

Two more points: (a) Invest in yourself. If you improve / sharpen your skill-sets regularly then only you can expect a steady upward earning curve. (b) Exercise. Have good and healthy food in time. Keeping yourself fit is a must.

(2) Manage your liabilities properly, if any. Ideally you should live a loan-free life. With loans running, you can never taste the sweetness of independence. Can you? But at some phases of life, most of us have to live with liabilities. That is ok, if loan has been taken for some crucial goal. But again affordability should always be kept in mind here. It is desirable that our loan EMI never crosses 30% of our net monthly income. Never. And we should also have a clear road map ready to payoff the loan as soon as possible but not in the price of sacrificing any critical family goal.

(3) We should also be able to make sufficient investments to achieve all our financial goals - number one among them is retirement goal. While making investments for our goals preferably we should not assume that our salary will keep on increasing steadily and hence we will make increased investments in future. Better we go for a fixed SIP approach instead of a top-up SIP approach. Your salary will increase, but so is your expenses and social status. Then why take additional stress? After all we are talking here about financial independence. How much to invest for each financial goals of yours? Click here to calculate in detail. There you can plan your goals and come to know how much to invest. Or better call your financial advisor and ask him/her what, when, how, where about all your investment queries.

Take necessary steps today. And check your steps at regular frequency to make sure that you are on the right path. If you start taking your finances a little bit seriously and with lots of discipline then no one can stop you from becoming FINANCIALLY INDEPENDENT.

Why global investors now want to be in Mumbai rather than London

It is possible that you fretted all through May and June as the domestic stock market gyrated between gains and losses in response to various global cues. But at the end of the day, Dalal Street ended the June quarter as Asia's best performer. 

That, despite the Brexit vote almost bringing Dalal Street down on its knees and when concerns over a possible rate hike by the US Fed haunted stock markets globally all through the quarter. 

What seems to have helped the domestic market were improving macros, supportive monsoon forecast and a slew of reforms, including the GST, which helped calm investor nerves on Dalal Street. 

The BSE Sensex ended the quarter with a 6.54 per cent gain, the biggest for the 30-pack index since its 14 per cent rally in the June quarter of calendar 2014. 

This compares with a 7.05 per cent slump in the Japanese Nikkei, which reeled amid concerns over slowing of exports and a rise in the yen against the US dollar. European indices such as Italy's IBEX 35, France's CAC40 and Germany's DAX dipped 6.4 per cent, 3.36 per cent and 2.86 per cent, respectively, during this period, thanks to tepid growth and absence of any stimulus from the European Central Bank (ECB). 

Sensex's Asian peer Shanghai Composite declined 2.47 per cent during the quarter, while Korea's Kospi and Taiwan's TWSE index fell 1.27 per cent and 0.90 per cent, respectively. Markets bled amid concerns that political risks globally may trigger risk-off trade, leading to a selloff by emerging market funds. 

But despite last week's steep fall, the UK's FTSE100 surged 5.33 per cent during the June quarter, while Brazil's Bovespa rose 2.94 per cent and US' Dow Jones 2.94 per cent. 

Market watchers said inflow from institutional investors remained strong during the quarter owing to an improved macro-economic outlook. They were quick to note that the domestic market showed immense 'maturity' in dealing with the external headwinds. 

"Over the next 6 to 12 months, India is going to be a better place relatively as growth is going to be scarce everywhere else. The world has been struggling to grow and that is why India will stand out. The growth momentum is picking up in India, and as we move into the end of the calendar, then into the next year, we will see more visible signs that growth is coming back," said Jyotivardhan Jaipuria, Veda Investment Managers. 

Frankly, I would love to be in India today, rather than in London. I think the stock market is looking extremely interesting. It is never the cheapest market in the emerging markets, but if you separate the fact that Brexit could easily lead to a global recession, it will not be great for commodity producers, but for countries like India." 

The June quarter saw DIIs buying Rs 3,712 crore worth of stocks. This was against a Rs 21,143 crore share purchase they did in the March quarter and an outflow of Rs 3,344 crore that they witnessed in the year-ago quarter. FPI flows, on the other hand, improved for the fourth consecutive quarter. The flows stood at Rs 14,671 crore, which were higher than Rs 4,495 crore inflow recorded in the March quarter and Rs 2,608 crore reported for the year-ago quarter 

"I would be surprised if we do not get a better share of FII flows in the Indian equity market. India will keep attracting perhaps an inordinate amount of FII flows," 

SOURCE(ET MARKET)

MFs plan to offer SIP variants to attract more investors

Mutual fund (MF) houses are mulling to launch more variants of systemic investment plans (SIPs) to attract investors as growth in the sector picks up. 

The variants include SIP top-ups and Smart SIPs. 

SIP top-up will be available in two forms -- variable and fixed. Variable SIP top-ups allow investors to increase their monthly instalments by certain percentage points on a monthly basis. In Smart SIPs, investors are free to increase their monthly instalments in multiples of Rs 500 or so. 

Enthused by the 100 per cent growth in its SIPs in the year gone-by, Kotak Asset Management Company is now looking at launching different variants of the plans. With an AUM of Rs 63,000 crore, Kotak AMC is ranked among the top 10 fund houses in the country. 

"Our SIPs have grown by 100 per cent in the last fiscal year, driven by better fund performance and the efforts made by the company," Kotak AMC Managing Director and Chief Executive Nilesh Shah told PTI on the sidelines of an industry event here today. 

"Now we are planning to come up with different variants of SIPs in the later part of the year, which include Smart SIPs and SIP Top-ups,"

ICICI Prudential Asset Management Company, which is likely to come up with its new SIP top-up offerings shortly, has made changes in the scheme information document and the key information memorandum of all the schemes to allow top-up facility. 

Last week, Mirae Asset Management launched a SIP top-up scheme. Mirae Asset Chief Investment Officer Gopal Agrawal said, "We launched SIP top-up last week in which we are advising our investors to increase their SIP amount every year in multiple of Re 1." 

According to an industry estimate, SIP folios in the MF industry increased by 30 per cent in March to 93.44 lakh from 71.70 lakh a year ago, while the inflows jumped 39 per cent during the same period to Rs 2,747 crore from Rs 1,971 crore a year ago. 

 SOURCE(ET)

Brexit, and that huge investment fund you’ve never heard of

It is an open secret among British venture capitalists that many of their funds would have never gotten off the ground without a hefty check from the European Investment Fund -- the EU institution that pools billions in financing from European governments, the EU itself and a number of private banks, to fund investments. 

After the U.K.'s vote to leave the European Union, the community faces concern that this important source of funding could be in jeopardy. 

Between 2011 and 2015, the EIF committed 2.3 billion euros ($2.5 billion) to some 144 U.K.-based venture firms. That amounts to about 37 percent of all venture funding raised in the U.K. during those years, according to data from Invest Europe, the trade association for European VC firms. 

By the end of 2015, the EIF had 9.9 billion euros committed to venture capital and private equity in Europe. As of the end of 2014, the fund directly contributed about 12 percent of all venture money raised in Europe and funds that had the EIF as a key limited partner were responsible for about 45 percent of all European venture money raised, according to a report the fund published in June. 

Joe Steer, research director of the British Venture Capital Association, said in a guide to Brexit published this week that, "any loss of this funding could prove damaging to the industry." 

The EIF issued a statement the day after the referendum noting the result "with regret". It said the fund's future activity in the U.K. would be decided as "part of the broader discussions to determine the future relationship of the U.K. with Europe and European bodies." 

Source(ET)

HOME LOAN : THINK SMARTLY

Think smart...

Invest smartly..

Dear friends,

You all must be paying home loan EMI for your dream home. It pinches a lot. Ever thought of a way to get all the principal and interest back.

Is it possible. How?

If interested, read on...

Invest 20% extra of your Home Loan's EMI in mutual fund Equity SIP and all your home loan principal and interest will recovered with profit in 20 years.

Example: For Home Loan of 20 Lac for 20 Years with ROI 10.50%EMI will be Rs. 19,968.

In 20 Years one will pay total towards HL Rs. 47,92,930. 

Interest: 27,92,930 &

Principal: 20 Lac

For SIP of 4000 for 20 Years with just 15% expected return, Fund Value will be Rs. 6063821

(SENSEX has given avg return 20.4% in Last 36 years from 1979 to 2015)

Thus you get back all your principal and interest back and plus earn a cool profit of around Rs. 1300000..

Happy Investing..

BREXIT

What is 'Brexit'?

It's the issue of whether Britain should exit the European Union or not — a question that will be decided in a historic referendum on June 23. 

What is happening?

A referendum to decide whether Britain should leave or remain in the European Union.  Prime Minister David Cameron promised to hold one if he won the 2015 general election, in response to growing calls from his own Conservative MPs and the UK Independence Party (UKIP), who argued that Britain had not had a say since 1975, when it voted to stay in the EU in a referendum. For a start, those wanting Britain to leave the EU see it as an opportunity to reassert British national sovereignty and in a sense liberate Britain from the bottlenecks of EU both politically and financially.

What is the European Union?

The European Union - often known as the EU - is an economic and political partnership involving 28 European countries . It began after World War Two to foster economic co-operation, with the idea that countries which trade together are more likely to avoid going to war with each other. It has since grown to become a "single market" allowing goods and people to move around, basically as if the member states were one country. It has its own currency, the euro, which is used by 19 of the member countries, its own parliament and it now sets rules in a wide range of areas - including on the environment, transport, consumer rights and even things like mobile phone charges. 

Why do they want the UK to leave?

They believe Britain is being held back by the EU, which they say imposes too many rules on business and charges billions of pounds a year in membership fees for little in return. They also want Britain to take back full control of its borders and reduce the number of people coming here to live and/or work. One of the main principles of EU membership is "free movement", which means you don't need to get a visa to go and live in another EU country. They also object to the idea of "ever closer union" and what they see as moves towards the creation of a "United States of Europe".

Advantages of Brexit 

Economically, Britain would immediately save $12 billion a year in EU budget payments. Freed from famously cumbersome EU regulations, Brexit supporters say, Britain would attract greater investment and become a more dynamic economic hub — particularly if it still had full access to the EU's tariff-free single market. But that's a big if, and would rely on Britain renegotiating a new trade deal with the EU's remaining 27 member states — many of whom, post-Brexit, would want to make a bitter example of the U.K., to discourage other members from fleeing.

Under the EU's labor rules, any citizen of a member state has the right to live and work in another member state — a rule that has allowed some 942,000 Eastern Europeans to move to the U.K. as the EU has expanded its borders. Brexiters say these migrants have overwhelmed the housing system and abused Britain's generous in-work benefits. At least 34,000 of them are getting child benefits for children who do not even live in the U.K. and sending that money — totaling about $42 million a year — back to their home countries. Leaving the EU would allow Britain more control over how many migrants are allowed to enter. That's become a big selling point after the influx of 1 million refugees into EU countries.

Risks of a Brexit

The uncertainty it would create could destabilize the markets and cause the pound to plummet.  Some extreme predictions are  that a Brexit will blow a £100 billion hole in Britain's economy, and Britain will lose 3 million jobs!

What will the referendum question be?

"Should the United Kingdom remain a member of the European Union or leave the European Union?

The two campaigns, "In " and "Out", are likely to form the offical lobby groups for each side in the referendum have set out their positions on the main topics that will form the basis for the referendum.

IIF Chief Warns “Brexit Bigger Threat To Global Economy Than Lehman”

As Brexit appears to gathering pace among British voters,  Hung Tan, executive managing director at the Institute of International Finance in Washington, DC., to understand the global impact of a decision by Britain to leave The EU…

Q: What would happen if Britain voted to leave the EU?

A: It is not Lehman in the short term in terms of markets being in a panic or chaotic mood, because the central banks will try to pacify that. But it is more significant than Lehman in its longer-term impact on global growth. Through trade and investment channels, there will be a downward impact on growth.

Q: Isn’t it just a European issue?

A: It’s not just a vote for the U.K. exiting Europe, it is a symptom of the discontent and unhappiness of citizens with the status quo. They want change, but nobody can articulate what is it that they want. The impact in an exit vote of “leave” winning would be very far-reaching and impact long-term events. Near term there would be significant adjustment in financial markets.

Q: How much could markets move?

A: The Bank of England, ECB and others have said they are prepared to supply a significant amount of liquidity just to calm the volatility. Over a week’s time [after the vote], I think it would reach some kind of lower equilibrium.

Q: What would central banks buy?

A: The Bank of England so far has bought U.K. gilts and they may want to look at high-grade corporate bonds. If they feel they may have exhausted buying in a certain asset class, they may want to widen the list of assets that they are able to buy.

Q: Which countries would suffer most if the U.K. voted to exit?

A: First the U.K. and Europe, but then emanating from there to trading partners of Europe, and then to emerging market countries through the decline in world trade. Large economies able to rely on domestic consumption and the services sector should be able to generate a measure of growth and cope with it better than others. More open economies that have been reliant on world trade as a growth model will suffer more.

Q: What happens to the U.K. after exit?

A: Whatever new arrangement the U.K. may manage to have — the Norway model, the Switzerland model, or relying on the WTO to manage its relationship with the EU — is very problematic. All of those still require U.K. firms to observe and respect EU rules if they want to do business in the EU.  Most important for the City of London, financial services passporting will be either not available or significantly curtailed.

Q: What’s the U.K. economic impact?

A: The true problem is uncertainty causing loss of business confidence and further decline in capital expenditures and investment. That would reinforce the collapse in productivity — which is very pronounced in the U.K. — and make for an even worse outcome in terms of potential growth.

Q: How does it affect the EU?

A: If you put the Brexit vote against a very clear decline in trust and confidence of the citizens of Europe in the EU and its institutions, and the rise in populism and anti-Brussels, anti-EU, anti-integration sentiment, the contagion risk of a successful Brexit vote will be quite

damaging. Periphery countries have undergone a lot of adjustment after the crisis. The cost of fiscal consolidation is perceived to be quite significant and unfairly distributed, so there could be a lot of discontent, and that will support the further rise of populist poltical movements.

Q: What does Brexit mean for trade?

A: The mood is anti-immigration and anti-free trade.In the past year, more than 500 trade protectionist measures have been implemented by governments worldwide, more than twice the number of such measures two years ago. Against ths anti-immigration, anti-free trade public mood — even here in the U.S. — the risk of a further increase in trade protectionism is high.That would continue to depress the growth of world trade, which actually fell in volume terms by 1.6 percent, year-over-year in the first quarter.

Q: How significant was that?

A: There has been some small decline, particularly after 2008-2009, but this is one of the rare instances of outright decline.

Q: Do you expect Britain to exit?

A: I’m an Anglophile, so I believe in their basic reasonableness. I think that reason will prevail — that’s the hope. Everything we have seen in the past 10 days seems to be suggesting that the momentum for “leave” is really accelerating, so that is worrisome.Another lesson we learned in elections is that big momentum is what tends to carry the day.

Just more proxy-scaremongery? Unclear at the moment but markets are certainly acting like this is the case.

But in a new and improved way to scare people, UK Chancellor George Osborne ‘warned’ that taxes would have to rise if Britons voted to leave The EU…

Reduced trade and investment would leave a 30 billion pound ($42 billion) “black hole” that would have to be plugged by increased taxes and cuts to spending on health, education and defense, Osborne is set to say in a speech on Wednesday. The increasingly confident “Leave” campaign will meanwhile be talking about its agenda should it win, pledging legislation to restrict free movement and reduce the influence of EU judges, with the goal of negotiating a so-called Brexit by 2019.

While they’re talking about the next four years, the focus of both sides is the eight days until the June 23 vote. The goal of “Leave” is to reassure voters that departure from the EU would be swift but controlled. Osborne’s aim is to convince waverers that it will hurt

How is Mutual Fund's NAV calculated?

Say, during an NFO (New Fund Offer), an investor (named 'A') invested Rs. 100 and another investor (named 'B') invested Rs. 200. So total assets available with fund manager is Rs. 300. As during NFO a unit costs Rs. 10, 'A' will get 10 units of fund (100/10) and 'B' will get 20 units of fund (200/10).

Then say after an year that Rs. 300 (total funds collected during NFO) becomes Rs. 600 (as fund manager really managed the fund well).

Let us assume that no new investor has invested into the fund and existing investors did not make any redemption in the meantime. Hence total number of units remain same - 30 - 'A' is holding 10 units and 'B' is holding 20 units.

Then fund's NAV will be 20 (Current value of total assets / number of units i.e. 600/30).

So each unit's value (NAV) has changed now from 10 to 20. 'A's investment of Rs. 100 is now worth Rs. 200  (No. of units held × each unit's value i.e. 10 × 20) and 'B's investment of Rs. 200 is now worth Rs. 400 (20 × 20).

Now, let us assume that a new investor (named 'C') invests Rs. 100 into this fund. 'C' will get 5 units (amount invested / NAV i.e. 100 / 20).

So now total value of assets is Rs. 700 (600 + 100) and total no. of units is 35 (30 + 5).

NAV remains same: 20 (700 / 35)

Now, let us assume that existing investor 'B' redeems Rs. 200 from this fund. 'B' is actually redeeming 10 units (amount redeemed / NAV i.e. 200 / 20).

So now total value of assets is Rs. 500 (700 - 200) and total no. of units is 25 (35 - 10).

NAV remains same: 20 (500 / 25)

So when value of total assets changes in proportion with no. of units then NAV remains same.

When value of total assets changes not due to change in no. of units but due to market forces - then only NAV changes.

So movement of NAV only indicates the performance of a particular fund, nothing else. Lower NAV does not mean that a fund is available at cheap price or higher NAV does not mean that a fund is costly.

*The costs and expenses of the fund, such as management fee and operating expenses (registrar and transfer agent fee, marketing and distribution fee, audit fee and custodian fee) are deducted from total value of assets while calculating the NAV. This is not considered in the above example for the sake of simplicity.

Rs 1L = 72 L in next 5 years

It's not easy to strike gold in stocks. But it's quite common to miss out on opportunities. 

Multibagger stocks are a rare breed on Dalal Street, but they remind you of the power that equities wield. 

"There is a higher possibility that a steady investor would receive positive payoffs over time. If history is any indicator, the possibility of negative returns on stocks is almost zero with a 15-year investment horizon," 

 

Five years ago, had you to invested Rs 1 lakh on Indo CountBSE -1.02 %, it would have made you Rs 72 lakh today. Avanti FeedsBSE -1.34 % could have generated about Rs 62 lakh on that investment and 8K MilesBSE -2.52 % Software Rs 47 lakh. 

These are very real wealth creation stories, and not just talk without substance. 

Indo Count reported a 15 per cent volume growth in the March quarter of FY16, which helped its revenue grow 15 per cent. Brokerage firm Systematix expects it to post 29 per cent annualised profit growth in FY16-18 and has a buy rating with target price of Rs 1,373. 

Sandeep Raina, Deputy Vice President, Edelweiss, believes Indo Count can still be a multibagger despite the huge returns it has generated so far. "The growth is there, the Market is there. Financials are very strong. I think the company can be a multibagger over the next two-three years," he said 

8K Miles Software, a multibagger with 4,700 per cent returns over five years, reported 109 per cent profit growth in March quarter as the company built on its recent strong performances. 

"8K Miles has got a solid product pipeline. So there is merit in looking at the stock on a fundamental basis. But the valuations have already reached a level from where incremental appreciation will be difficult," Sudip Bandyopadhyay, an independent market expert, . 

These are among the least talked about names on the Street, a place where the TCSs, Infosys and RILs of the world hog the limelight while smaller stocks like these silently churn out big returns for their investors 

Source(ET)

 

Microsoft - Linkedln $26.2 bn Deal

Microsoft said that it will acquire LinkedIn for an agreed deal sum of $26.2 billion, inclusive of LinkedIn's net cash. After the acquisition, LinkedIn will retain its distinct brand, culture and independence, according to a joint statement.

 

The statement said that Jeff Weiner will remain CEO of LinkedIn, reporting to Satya Nadella, CEO of Microsoft. Reid Hoffman, chairman of the board, co-founder and controlling shareholder of LinkedIn, and Weiner both fully support this transaction. The deal is an all-cash transaction at $196 per share at a premium of 49.5% from Friday's close. 

Microsoft said that the transaction has been unanimously approved by the Boards of Directors of both LinkedIn and Microsoft. The deal is expected to close this calendar year and is subject to approval by LinkedIn's shareholders, the satisfaction of certain regulatory approvals and other customary closing conditions. 

The transaction is expected to close this calendar year. 

The LinkedIn team has grown a fantastic business centered on connecting the world's professionals. Together we can accelerate the growth of LinkedIn, as well as Microsoft Office 365 and Dynamics as we seek to empower every person and organization on the planet. 

"Just as we have changed the way the world connects to opportunity, this relationship with Microsoft, and the combination of their cloud and LinkedIn's network, now gives us a chance to also change the way the world works. For the last 13 years, we've been uniquely positioned to connect professionals to make them more productive and successful, and I'm looking forward to leading our team through the next chapter of our story.

 

Source (Economic Times)

INFLATION AND INTEREST RATE

Interest rates are always a source of conflict. Borrowers demand low rates. Fixed Depositors desire high rates.

In such a scenario, what should RBI do? 

This was beautifully explained by the RBI Governor Dr.Raghuram Rajan with the example of Dosas.

The basic premise of Dr. Rajan's argument is quite simple - one should NOT look at the interest rates in isolation. This will give the wrong picture.

Instead, to assess whether we are better off with high interest rates or low rates, we have to consider the "inflation" factor.

Let us look at Dr. Rajan's example of Dosas to understand this link between interest rate, inflation and our well-being.

Situation on Day 1

Bank balance - Rs.1,00,000

Price of Dosa - Rs.50

No. of dosas you can buy - 2,000

Situation after 1 year

(a) Case 1 (Interest - 10%, Inflation - 10%)

Interest earned - Rs.10,000

New Price of Dosa - Rs.55

No. of dosas you can buy with interest income - 182

(b) Case 2 (Interest - 8%, Inflation - 5.50%)

Interest earned - Rs.8,000

New Price of Dosa - Rs.52.75

No. of dosas you can buy with interest income - 152

Most people look at this picture, and declare themselves as worse off with lower rates. Due to reduced interest income, they can buy less number of dosas. Hence, they always cry and crib for the higher interest rates on their fixed deposits.

This, however, is a mistake:

They fail to account for the impact of inflation on the principal amount.

Is inflation 'rapidly' squeezing the purchasing power of your money?

Situation after 1 year (with principal included)

(a) Case 1 (Interest - 10%, Inflation - 10%)

Interest earned - Rs.10,000

Total savings - Rs.1,10,000

New Price of Dosa - Rs.55

No. of dosas you can buy with interest income - 182

No. of dosas you can buy with principal - 1818

Total number of dosas you can buy - 2000

(b) Case 2 (Interest - 8%, Inflation - 5.50%)

Interest earned - Rs.8,000

Total savings - Rs.1,08,000

New Price of Dosa - Rs.52.75

No. of dosas you can buy with interest income - 152

No. of dosas you can buy with principal - 1896

Total number of dosas you can buy - 2048

Clearly, the interest rate on your fixed deposits - in absolute terms - is not relevant at all for your good financial health.

Instead, the positive difference between interest rate and inflation, is far more critical number to focus your attention on.

In Case 1, the difference between interest rate and inflation is NIL. Whereas, in Case 2 the interest income is 2.50% more than the inflation.

This is the real earning:

Since in Case 1, the real earning is nil, you can buy the same number of dosas after one year.

Whereas in Case 2, where the real earning is 2.50%, you can buy 48 "more" dosas after one year (despite earning lower interest).

Learn: Inflation Demystified

Therefore, fixed depositors should not be fixated on the interest rates alone. They should appreciate that the real value of their principal is depleting day-by-day due to inflation. 

As you can see, because of this inflation, your principal of Rs.1 lakh can buy you only 1818 or 1896 dosas after one year, as compared to 2000 on Day 1. 

This erosion in the value of your principal is a serious threat. Therefore, it should form an integral part of all your financial planning. This would enable you to live comfortably, without significantly downgrading your standard of living.

Beware : Blind Faith In Fixed Deposits Is Destroying Wealth

In fact, I often get mails from my readers that they want to quickly become a crorepati, so that they can retire and live happily ever after.

And I send them a detailed calculation, as to how they would become beggars within 10-15 years. This seemingly huge amount of Rs.1 crore would surely and steadily shrink to ZERO.

Hence, it is imperative that you must consider the (negative) impact of inflation, in your retirement corpus calculations. If not, you will be in for some serious financial trouble, in the later years of your life.

This is precisely why the central banks world over target a moderate inflation. Since inflation hurts the aam aadmi the most, RBI too focuses all it efforts and endeavours on keeping the inflation low.

Solution: How To Earn Tax-Free Risk-Free Income

You have now been forewarned about the disastrous effect of the silent killer inflation. Therefore, you must ensure that your investments earn real positive income and not just high notional interest.