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1The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
Volume: 3 - Number 4 Sep 2015 - Nov 2015
* ThisjournalispublishedinassociationwithShree Aniruddha Upasana Foundation.* Theviewsexpressedinthisjournalarethoseoftheauthorsandtheeditormaynotnec essarilyagreewiththesame.* Copyright©2012.Allrightsreserved.Nopartofthispublicationmaybereproduced ordistributedinanyformorbyanymeanswithoutthepriorwrittenpermissionofthe publisher.* AlldisputesaresubjecttoMumbaiJurisdictiononly.* Allcorrespondencemaybeaddressedto:-
EditorsDesk,ExponentGroupofJournalsEmail:[email protected],[email protected]
The Dean & Editor-in-chief
Samir Dattopadhye
Editorial Board :
Dr. Shivanand Nichanaki
Girindra Vasudeo
Sanjay Thakkar
Sushil Mulye
Sanket Pradhan
Dharmesh Trivedi
Prashant Talpade
Assistant EditorVaibhav Karnik
Contents
TheRecentStockMarket SanjaySadarangani 4collapseoftheChinesestockmarketwhyithappenedanditsimpactontherestoftheworldandIndia
ChinaYuanDevaluation RohanTakalkar 6InvestorandaGambler
Interestrates-Part1 Prof.ShitalDurgawale 8 RohanTakalkar
GovernmentSecurities AshutoshVaidya 10MarketinIndia
GoldMonetizationScheme DharmeshTrivedi 14
ThroughtheMindof GirindraVasudeo 18aPrudentInvestor
The Exponent Group of Journals
for Shares And Stock Market is an
E-journalpublishedQuarterly.
TheExponentGroupofJournalsFor
Shares And Stock MarketInAssociationwith
ShreeAniruddhaUpasanaFoundation
3The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
Editorial
- Sanket PradhanEmail: [email protected]
DearAll,
It gives us a great pleasure to present to you onemore edition of the E-Magazine of the Shares andSecurities.Wehope thiswould give you an insightintothemostofthecurrentissuesthatareprevailingintheworldtoday.
Ifonelooksatthelast3monthseventsoftheworldone can conclude that everything has happenedfromthepositiveeventstothenegativeevents.IfweweretonameafewoftheeventsthesamearetheGreeceCrisisandthefalloutofthebailoutpackage,theterrorismatitspeakintheformofISIS,therefugecrisisofSyria,theDeficientrainfallinmajorpartsofIndia and the floods in some of the countries, theChineseeconomyslowdownandthedevaluationoftheChinesecurrency,theDevaluationoftheRupeesand the world caught in the sudden currency warandmayotherimportantevents,thelockjamintheIndianparliament leadingtonon-passingofseveralimportantlegislations.
Wellnotall ison thenegativeside therearesomepositive developments in India with the NDA
governmenttakingcrucialandharshdecisionsatthecabinetlevelandtryingtopushthebillsthruboththehouses of parliaments, the Reserve Bank reducingtherateofinterest,theinflation(abiganimal)underabitcontrolandtheeconomytryingtokeepafloatwithsomeofthekeyinitiativestakenbytheCentralGovernments
Inthisissuewearecoveringthefollowingarticles
1 ChineseEquityMarkets2 ChineseYuanDevaluations3 InterestRates–Part14 GoldMonetizationScheme5 GovernmentSecuritiesMarketinIndia6 ThroughthemindofthePrudentInvestor
Alltheabovetopicsarecurrentandareverylucidlywrittenandyouwillgetagoodinsight.Wishingyouallaveryhappyexperienceinthisissue.
To endwe can only say that “let Sanity and peacePrevail intheMindsetofthepeople inthisdifficulttimes.”
4 The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
On June 12th 2015, the Shanghai Composite StockIndex (CSI 300), an index of China’s biggest listedcompanies, collapsed. Between then and now,shares listed on the index have lost 30% of theirvalue,ieapprox.USD3trillion.Toputthatnumberinperspective,thatismorethantheeconomicoutputofBraziloritisasthougheverystockontheLondonStockExchangefallingtozero!
ButisthiscollapselikelytoleadtoanotherfinancialcrisisfortherestoftheworldandIndia?
Why did the market fall?
Earlierthisyear,themarketwasdisplayingallthesignsof a bubble, with college students, grandmothers,cabdrivers,allmakingmoneyinafrenzyof‘chaogu’orstirfryingstocks–Chineseslangfortrading.Therallycameatatimewhentherestoftheeconomywas slowing,puzzlingmanyeconomists andas thesaying‘whatgoesup,mustcomedown’andsoitdid.
A key factor for the rallywas thehuge increase inmarginfinancing,puttingitverysimply,borrowingtobuyshares.Itisestimatedthatthetotalquantumofmarginfinancingisapprox.RMB3.7trillion,US500bn, ieabout40%of the totalmarket capitalizationbeforethecrash.Asthevalueofthesharespurchasedagainstmarginfalls,lenderssellsharestomakegoodthedifference, thiscausesshareprices to fallevenmore.
Why did the average investor take such risks?
ThereopeningoftheShanghaimarket,whichdatesto
the1860sandhasbeenclosedsincetheCommunisttake over in1949, was seen as a major symboleconomicreformsledbyDengXiapong.Nonetheless,thegovernmentmaintainedheavycontroloverthemarkets.Investorsbasedtheirbuyandselldecisionsonwhat they thoughtBeijingwoulddonext. Thisisalsobecausethegovernmentisbyfarthebiggestinvestor,maintaining controlling stakes in defense,energyandotherkeysectorscompaniesfromwhicharelistedontheexchanges.
InthetwoyearsafterChinaopeneditsstockmarketsinDecember1990sharessoared1,200%,aperfectexampleofthisriseisthatofShanghaiSpecialSteelTubing Company, when the company was firstlistedontheShanghaiStockExchangeonMay25th1992,employeeswerestunnedtohearthatsharestheyownedhadincreased471%onthefirstdayoftrading!
To take advantage of the sentiment, severalcompaniesfiledforlistingtheirshares.InAugustof1992,hundredsofthousandsofpeople lineduptoget applications to invest in initial public offerings,which theybelievedwouldsoarbecauseevery IPOhad tobeapprovedby thegovernment.Whentheapplicationsranouttheinvestorsaccusedofficialsofhoardingthemfortheirfriendsandfamilyortosellataprofit.Thisledtoariot,withprotesterssettingcarsonfireandbreakingwindows,whilethepolicestepped in,firingshots in theair.TheGovernmentalso stepped in and fired several governmentauthoritiesandputanewregulatorybodyinchargeofthestockexchanges.Thiswasaparticularlytenseperiod for China, as it was just 3 years after theTiananmenSquarecrackdown.
The Recent Stock Market collapse of the Chinese stock market why it happened and its impact on the rest of the world and India
- Sanjay SadaranganiE-mail: [email protected]
5The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
The response since then
The authorities have unleashed a combinationof measures to prop up stocks, letting hundredsof shares halt their trading, around 1,400 firmsrepresenting about 45% of the market valuesuspendedtradingintheirstocks.Regulatorslimitedshortselling(iesellingastockbeforeyouownit,inanticipation thatwhen theprice falls, you canbuyitbackcheaperthanwhatyousolditfor)underthethreatofarrest.TheGovernmenthasalsosincecutinterest rates and introduced measures to allowtheuseofpropertyascollateral formargintradingandencouragingbrokeragefirmstobuyshareswithmoney borrowed from the People’s Bank of China(theCentralBank).Whilethemarkethasrespondedpositivelysincethen,itcontinuestoremainvolatile.
TherearevaryingviewsontheimpactoftheChineseequity collapse and both of these are presentedbelow
Limited Impact
Notwithstanding its size, the stock market isrelatively unimportant within the Chinese system,with bank (both, formal and informal / shadow)lendingcontributing toabulkof thecapital raisingbycompaniesandthestockmarketcontributingtoaround10%.
Retailexposuretothemarket isalso lowwithonly10 – 20% of household wealth being in the formof shares, much lower than the developed world.ThecompositionoftheSCI isalsovaried,withonly30%madeupof large,governmentownedentitiesand the balance comprising of small and mediumcapitalizationstocks.Therecentrallywasmostly inthesesmallandmediumcapstocks,someofwhichincreased almost 400%, with the large cap stockscomparativelyincreasingonlyabout20–30%.
Assuchtheimpactontheglobaleconomyisexpectedtobelimitedasforeignersownjust1.5%ofChinese
shares
Some Impact
The reason the Government is taking suchextraordinary measures is because it is trying totransition the economy from an export driventowardsaservicesandconsumptiondriveneconomy.The large number of retail investors (in absolutenumbersitisstilllargeataround200millionpeople)thatenteredthemarkets,combinedwiththesteepselloff,couldnegativelyimpactconsumersentimentandthushamperandalreadydifficulttransition.
More importantly, the government is concernedabout social unrest, given the large number ofretail investors that have an exposure to equities,equivalenttoaboutthesizeoftheentirepopulationoftheUS.
Conclusion
Further, the government has also allowed thecurrency toweakenbyabout2%recently, thiswillmake China’s exports more competitive and itsimportsmoreexpensive.
While the direct impact on the world and India’seconomywillbelimited,therewillbesomeimpact,as companies that have an exposure on China,have seen a fall in their share price, as consumersentimentweakens.ThisincludescompaniessuchasTataMotorswhich through Jaguar Land Rover hasan exposure toChina,which is its largest overseasmarket and also global companies such as RemyCointreau and Burberry, all of which have seentheirsharepricefall.CommoditycompaniessuchasVedanta andHindalco have also been impacted asChinaisoneofthebiggestbuyerofcommodities.
Source:Wall Street Journal (various articles in JulyandAugust2015),SatyajitDas(MarketWatch,July2015),
6 The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
China Yuan Devaluation
- Rohan TakalkarE-mail: [email protected]
OnMondayAugust10PBoC(PeoplesBankofChina)setitsreferencerate1.9%lowerwhichcausedripplesinmarketsallover theworld. Itwas followedbyanotherdevaluationof1.6%onnextday.This suddendevaluationshookglobalmarkets.China’sExchangerateissetbycentralbankanditispeggedbybasketofcurrenciesmainlydominatedbyUSDollar$.EachdayPBoCsetsitsreferenceratebypreviousdaydataanditisallowedtotrade2%aboveorbelowthetarget.RecentDevaluationhasbeenthebiggestfallsince20years.China’sexchangeratepolicyhastransformedfromcentrallyplannedtomarketoriented.Chinabeganwithopenmarketpolicysince1978fromthentheofficialYuanratewasdevaluedincorrectionwithmarketfundamentals.In1981dualtracksystemofexchangeratewasintroducedincludingofficialexchangerate& internalassessmentrate for foreigntrade.Chinese foreignexchangeratesystemwasunderexcessivecontrolofgovernment.Itwaspurelyfixedregimefrom1994to2005.Againfrom2005PBoCpeggedYuantobasketofcurrencies.Fromjuly2005tofeb2010Yuanappreciated17.5%againstUSD$.Manymarketstrategistsandanalystsareworriedbythedecisionofchina.ButPBoChasclarifiedthatthedevaluationorfallisnotincourseitisfortemporaryadjustmenttomakeeconomystronger.
What Caused Devaluation.?
July exportdataof china showed8.3%decline in its exportsbecauseofweakglobal demandwith sloweconomicgrowthsincelastfourmonthshasforcedgovernmenttotaketoughmeasurestorevivegrowth.GrowthprojectionsbyIMFarenearto7%whichhassentdiscouragingmessageineconomy.DepreciatingYuanwillmakeChineseexportcheap&competitiveintheworldandhelpexportmore.Nextmainreason
7The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
behindthedevaluationistogiveYuanastrongplacein global currencies .China has been pushing itselftomakeYuanfifth currency recognizedby IMF forspecial drawing rights (SDR),which is internationalcurrency reserve .To push china for SDR status ithastoshowthattheircurrencyisfreelyusable.theresultscould includeconvincingmorebanksacrossworldtokeepYuanasreservecurrency.
Impact of Devaluation
Primafaciethepositiveeffectofthedevaluationwillbe seen on Chinese exports .many analysts arguethatchinapurposefullydevalueditscurrencyduetoweekexportdata.IMFprojectsChina’sGDPgrowthat7%,exportswillhelpinregainingthepaceofgrowthandeconomicactivityinthecountry.Manymarketstumbled down with Yuan devaluation. ImmediateeffectwasseenonmanyEuropean&othermarketequity index.Someof theworsthitwereGermanyDAX(-5.34%),FrancePX(-4.42),UnitedKingdomUKX(-2.51) United States of America DJI(- 0.94) , IndiaSENSEX(-0.007).ItwillaffectIndianRupeebutitwontbe as significant as compared to other emergingmarketeconomies. India’smacrofundamentalsareingoodposition.Thereisfearamongstanalystsandeconomists about currency war which may eruptdue to Yuan devaluation. Many economies maydevaluetheircurrencytoo,thismaycreateturmoilinglobaleconomy.LowerYuanmeanshigherDollarwhichmeansUSexportswillbelesscompetitive.Itwouldalsoaffectemergingmarketcurrencies suchasMalaysian Ringgit and Indonesian RupiahwhichhavealreadydepreciatedagainstU.Sdollar.
Current devaluation has got many critics from all
over the world. Chinese authorities mentioneddevaluationasonetimechangeandtomakemarketin china competitive .Devaluation has made U.Srethink about their rate hike ahead this year. YetIMFwelcomesthisdevaluationaschinawasalwaysreluctant about lifting controls over currency. Thisdevaluation is made Yuan more market decisiveanddependant.China’scurrenteconomicsituationis also low with wage rate hike and week globaldemandforChineseproductshassloweddowntheirGDPgrowth.NowalleconomistsarelookingforFeddecision of rate hike, further devaluation and ratehike by U.S will definitely affect emerging marketadversely.
References
1.Worldeconomicforum–Agendas.h t t p s : / / a g e n d a .w e f o r um . o r g / 2 0 1 5 / 0 8 /why-has-china-devalued-its-currency/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+world-economic-forum-blog+(Forum%3ABlog)
2. The economic times. http://economictimes.indiatimes.com/markets/forex/chinas-yuan-devaluation-fires-cannon-in-global-currency-war/articleshow/48441596.cms.
3.ChinadevaluesYuan,shakesglobalmarkets–Mintnewspaperdate12August2015.
4. Foreign Policy- http://foreignpolicy.com/2015/08/13/this-map-shows-the-global-impact-of-chinas-currency-devaluation-renminbi/.
8 The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
Interest rates - Part 1- Prof. Shital Durgawale
E-mail: [email protected] Rohan Takalkar
E-mail: [email protected]
Interest rates play an important role in Indianeconomy. In India, interest rate decisions aretaken by the RBI’s (Reserve Bank of India) CentralBoard of Directors. The RBI’s most important aimistomaintainmonetarystabilitythroughmonetarypolicy. Monetary policy is concerned with moneysupply, credit creationbybanks& rateof interest.Itisformulated&implementedbytheCentralbank.Rates which the Indian Central bank uses for thisare the Bank rate, CRR (Cash Reserve Ratio), SLR(StatutoryLiquidityRatio),Reporate,Reversereporate. Monetary policies have a significant impacton changes in real growth & the rate of inflation.Thus the goal of monetary policy may be broadlystated as to keep output & inflation as stable aspossible. Monetary policy can be contractionaryor expansionary. It is expansionary when it seeksto increase theavailabilityofmoneyor reduce thecostofmoney.Itiscontractionarywhenitseekstoreducetheavailabilityofmoneyorincreasesthecostofmoney.Theofficialinterestrateisthebenchmarkrepurchaserate.Ifyouareborroweritisimportantforyoutounderstandthesignificanceofchangesininterestrate.Therearetwoconceptsofinterestratewhichareinterrelatedtoeachother.
1.Theterminterestisusedtoexpressarateofreturnearnedoncapitalasafactorofproduction.
2. Interest rate refers to thepricewhich ispaidbytheborrowerstolendersfortheuseoftheirsavingfund.
Some views related to interest rate are, Accordingto,Classicaleconomists,
a.Interestisapriceforabstinenceorwaiting
b.Interestispaidbecauseoftimepreference
According to Keynes, “Interest is the reward forpartingwithliquidityforaspecifiedperiod.Liquiditypreferencemeans the demand for money to holdcash. Individual’s liquidity arises because of threemotives:-
1)Transactionmotive2)Precautionarymotive3)Speculativemotive
Wecanwriteliquiditypreferenceinfunctionalformasfollows:-
M1=L1(Y)
Y-incomeL1-liquiditypreferencefunctionM1-MoneyheldundertheTransactionmotive&Precautionarymotive
M2=L2(r)
r-interestL2-liquiditypreferenceM2-Moneydemandforspeculativemotive.SincetotalsupplyofmoneyM=M1+M2thenweget
M=L1(Y)+L2(r)
ThebenchmarkinterestrateinIndiawaslastrecorded
9The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
at7.25percent.InterestRateinIndiaaveraged6.71percent from2000until2015, reachinganalltimehighof14.50percentinAugustof2000andarecordlowof4.25percentinAprilof2009.InterestRateinIndiaisreportedbytheReserveBankofIndia.
Importanceofinterestrateinaneconomy:-
Importance of Interest Rate
The economy is living, breathing & deeplyinterconnectedsystem.Whencentralbankchangesrates it directly passed or affects to the economy.If the central bank reduces interest rates, thencommercial banks lending capacity increases. Inturntheycanlendtotheborrowersatlowrate.Thiswill attract individuals and firms and increase thecompetitiveness.
Withlowerinterestratesindividualwhowaswillingtobuyhomeorcarmaydecide tobuy it. Somorethe consumer spends, more the economy growswith increasedaggregatedemand. Investors spendmoreoncapitalgoodsandservicesthencompanieswill increase the production. Lower interest rates
are good for stockmarket because itmakes otherinvestments less attractive. If bond rates are tiedwith interest ratesandbank lowers the rate itwillmake other investments attractive and influx ofinvestor’smoney in the stockmarketwill increasethestockprices.Higherinterestrateswillcostmoreto the consumer and less hewill bewilling to buyoncredit.Thisishowiteffectsinflationwithsluggishdemand reduced consumer spending supply willalso be lowered and priceswon’t increase rapidly.All rates are important but Repo rate is the ratewhichinfluencesmostthegivenmoneysupplyintheeconomy.TheRepoorrepurchaseagreementrefersto agreement for a transaction between Reservebank of India & commercial banks through whichRBIsuppliesfundsimmediatelyagainstgovernmentsecurities. If the central bank rises its repo rate, itbecomes costly for banks to borrow money fromRBI so theywill increase the loan interest rates atwhich customers borrow money from commercialbanks.Highertheinterestrate,higheristhecostofcapital andcontributes to slowdown investment intheeconomy.Mainlyhighrateofinteresthavehighinfluenceonbothgrowth&inflation.
10 The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
Government Securities Market in India
- Ashutosh VaidyaEmail: [email protected]
The Government securities market has witnessedsignificant changes during the past decade.Introduction of an electronic screen based tradingsystem, dematerialized holding, straight throughprocessing,establishmentoftheClearingCorporationofIndiaLtd.(CCIL)asthecentralcounterparty(CCP)for guaranteed settlement, new instruments, andchanges in the legal environment are some of themajor aspects that have contributed to the rapiddevelopmentofthegovernmentsecurities(popularlyknownasG-Sec)market.
Major participants in the Government securitiesmarket historically have been large institutionalinvestors. With the various measures fordevelopment, the market has also witnessed theentryofsmallerentitiessuchasco-operativebanks,small pension and other funds etc. These entitiesare mandated to invest in Government securitiesthroughrespectiveregulations.
Let us understand few examples of governmentsecuritiestradedinIndia:
What is a Government Security?
A Government security is a tradable instrumentissued by the Central Government or the StateGovernments. It acknowledges the Government’sdebt obligation. Such securities are short term(usuallycalledtreasurybills,withoriginalmaturitiesof less than one year) or long term (usually calledGovernmentbondsordatedsecuritieswithoriginalmaturityofoneyearormore).InIndia,theCentralGovernmentissuesboth,treasurybillsandbondsor
datedsecuritieswhiletheStateGovernments issueonly bonds or dated securities, which are calledthe StateDevelopment Loans (SDLs). Governmentsecurities carry practically no risk of default and,hence, are called risk-free gilt-edged instruments.GovernmentofIndiaalsoissuessavingsinstruments(SavingsBonds,National SavingCertificates (NSCs),etc.)orspecialsecurities(oilbonds,FoodCorporationofIndiabonds,fertiliserbonds,powerbonds,etc.).
a. Treasury Bills (T-bills)Treasury bills or T-bills, which are money marketinstruments,areshorttermdebtinstrumentsissuedbytheGovernmentofIndiaandarepresentlyissuedin three tenors, namely, 91 day, 182 day and 364day. Treasury bills are zero coupon securities andpay no interest. They are issued at a discount andredeemedatthefacevalueatmaturity.Forexample,a91dayTreasurybillofRs.100/-(facevalue)maybeissuedatsayRs.98.20,thatis,atadiscountofsay,Rs.1.80andwouldberedeemedatthefacevalueofRs.100/-.Thereturntotheinvestorsisthedifferencebetweenthematurityvalueorthefacevalue(thatis Rs.100) and the issueprice TheReserveBankofIndiaconductsauctionsusuallyeveryWednesdaytoissue T-bills. The Reserve Bank of India announcesthe issue details of T-bills through a press releaseeveryweek.
b. Cash Management Bills (CMBs)Government of India, in consultation with theReserveBank of India, has decided to issue a newshort-terminstrument,knownasCashManagementBills (CMBs),tomeetthetemporarymismatches inthe cash flow of the Government. The CMBs havethe generic character of T-bills but are issued for
11The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
maturitieslessthan91days.LikeT-bills,theyarealsoissuedatadiscountandredeemedatfacevalueatmaturity. The tenure, notified amount and date ofissueoftheCMBsdependsuponthetemporarycashrequirementoftheGovernment.Theannouncementof their auction is made by Reserve Bank of IndiathroughaPressReleasewhichwillbeissuedonedayprior to thedateofauction.The settlementof theauctionisonT+1basis.
c. Dated Government SecuritiesDatedGovernmentsecuritiesarelongtermsecuritiesandcarryafixedorfloatingcoupon(interestrate)which is paid on the face value, payable at fixedtimeperiods(usuallyhalf-yearly).Thetenorofdatedsecuritiescanbeupto30years.
ThePublicDebtOffice(PDO)oftheReserveBankofIndiaactsastheregistry/depositoryofGovernmentsecuritiesanddealswiththeissue,interestpaymentandrepaymentofprincipalatmaturity.Mostofthedatedsecuritiesarefixedcouponsecurities.
The nomenclature of a typical dated fixed couponGovernmentsecuritycontainsthefollowingfeatures- coupon, name of the issuer, maturity and facevalue.Forexample,7.49%GS2017wouldmean:
Coupon:7.49%paidonfacevalueNameofIssuer:GovernmentofIndiaDateofIssue:April16,2007Maturity:April16,2017CouponPaymentDates:Half-yearly(October16andApril16)everyyearMinimumAmountofissue/sale:Rs.10,000
d. State Development Loans (SDLs)StateGovernmentsalsoraiseloansfromthemarket.SDLsaredatedsecuritiesissuedthroughanauctionsimilartotheauctionsconductedfordatedsecuritiesissued by the Central Government. Interest isservicedathalf-yearly intervalsand theprincipal isrepaidonthematuritydate.TheSDLsdonotcarryany credit risk. In this regard, they are similar tosecuritiesissuedbytheGovernmentofIndia(GoI).
Why should one invest in Government securities?
Holdingofcashinexcessoftheday-to-dayneedsofabankdoesnotgiveanyreturntoit.Investmentingoldhasattendantproblemsinregardtoappraisingits purity, valuation, safe custody, etc. Investing inGovernmentsecuritieshasthefollowingadvantages:
a) Besides providing a return in the form ofcoupons (interest), Government securities offerthemaximumsafetyastheycarrytheSovereign’scommitment for payment of interest andrepaymentofprincipal.
b) They can be held in book entry, i.e.,dematerialized/ scripless form, thus, obviatingtheneedforsafekeeping.
c)Governmentsecuritiesareavailable inawiderangeofmaturitiesfrom91daystoaslongas30yearstosuitthedurationofabank’sliabilities.
d)Governmentsecuritiescanbesoldeasilyinthesecondarymarkettomeetcashrequirements.
e) Government securities can also be used ascollateraltoborrowfundsintherepomarket.
f) The settlement system for trading inGovernment securities, which is based onDeliveryversusPayment (DvP), is a very simple,safeandefficientsystemofsettlement.TheDvPmechanismensures transferof securitiesby theseller of securities simultaneously with transferoffundsfromthebuyerofthesecurities,therebymitigatingthesettlementrisk.
g)Governmentsecuritypricesarereadilyavailableduetoaliquidandactivesecondarymarketandatransparentpricedisseminationmechanism.
h)Besidesbanks,insurancecompaniesandotherlargeinvestors,smallerinvestorslikeCo-operativebanks,RegionalRuralBanks,ProvidentFundsarealsorequiredtoholdGovernmentsecurities.
12 The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
How are the Government Securities issued?
Government securitiesare issued throughauctionsconducted by the RBI. Auctions are conducted onthe electronic platform called the NDS – Auctionplatform. Commercial banks, scheduled urbanco-operative banks, Primary Dealers Insurancecompanies and provident funds, who maintainfunds account (current account) and securitiesaccounts (SGL account) with RBI, are membersof this electronic platform. All members of PDO-NDS can place their bids in the auction throughthis electronic platform. All non-NDS membersincluding non-scheduled urban co-operative bankscan participate in the primary auction throughscheduled commercial banks or Primary Dealers.Forthispurpose,theurbanco-operativebanksneedtoopenasecuritiesaccountwithabank/PrimaryDealer–suchanaccountiscalledaGiltAccount.AGiltAccountisadematerializedaccountmaintainedbyascheduledcommercialbankorPrimaryDealerfor its constituent (e.g., a non-scheduled urbanco-operative bank). RBI, in consultation with theGovernmentofIndia,issuesanindicativehalf-yearlyauctioncalendarwhichcontains informationabouttheamountofborrowing,thetenorofsecurityandthelikelyperiodduringwhichauctionswillbeheld.ANotificationandaPressCommuniquegivingexactparticulars of the securities, viz., name, amount,type of issue and procedure of auction are issuedby theGovernmentof India aboutaweekprior totheactualdateofauction.RBIplacesthenotificationandaPressReleaseonitswebsite(www.rbi.org.in)andalso issuesanadvertisement in leadingEnglishandHindinewspapers.InformationaboutauctionsisalsoavailablewiththeselectbranchesofpublicandprivatesectorbanksandthePrimaryDealers.
How does the trading in Government securities take place?
ThereisanactivesecondarymarketinGovernmentsecurities. The securities can be bought / sold inthe secondary market either (i) Over the Counter(OTC)or(ii)throughtheNegotiatedDealingSystem(NDS) or (iii) the Negotiated Dealing System-Order
Matching(NDS-OM).
Why does the price of Government security change?
The price of a Government security, like otherfinancial instruments, keeps fluctuating in thesecondary market. The price is determined bydemand and supply of the securities. Specifically,thepricesofGovernment securities are influencedby the level and changes in interest rates in theeconomy and other macro-economic factors, suchas,expectedrateofinflation,liquidityinthemarket,etc. Developments in other markets like money,foreign exchange, credit and capital markets alsoaffect the price of the Government securities.Further, developments in international bondmarkets,specifically theUSTreasuriesaffectpricesof Government securities in India. Policy actionsby RBI (e.g., announcements regarding changes inpolicy interest rates like Repo Rate, Cash ReserveRatio,OpenMarketOperations,etc.)canalsoaffectthepricesofGovernmentsecurities.
Conclusion
TherearemanyplayersintheGovernmentsecuritiesmarket including commercial banks and primarydealersbesidesinstitutionalinvestorslikeinsurancecompanies. Primary Dealers play an importantrole as market makers in Government securitiesmarket. Other participants include co-operativebanks,regionalruralbanks,mutualfunds,providentand pension funds. Foreign Institutional Investors(FIIs)areallowedtoparticipate in theGovernmentsecurities market within the quantitative limitsprescribedfromtimetotime.Corporatesalsobuy/sell the government securities to manage theiroverallportfoliorisk.Thusfromtheaboveitcanbeobservedthat,investmentingovernmentsecuritiesby individuals and their associations is prohibitedduetovariousreasonssuchasminimumthresholdlimit, use of technology, back-up or operationalfunctionalities, and most importantly as a generalprinciple,thepolicy-makersdonotwantto include
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Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
citizens of this country to invest in the complex financialproducts/marketsforsome-timenow.
14 The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
Gold Monetization Scheme
- Dharmesh TrivediE-mail: [email protected]
Objective of Gold Monetization Scheme
TheGovernmenthascomeoutwiththeGoldmonetizationschemewiththefollowingobjectivesinmind.Thescheme’sobjectivesare
Tomobilizetheidlegoldlyinginthehouseholdsinthecountry.• TogivefilliptotheGemsandjewelleryindustrybyreleasinggoldforthemonloanbasisfromthebanks• Toreducerelianceongoldimportstomeetthedomesticdemands.• Theobjectives listedaboveareverynobleandwillgoa longway inhelping india reducetheGold
imports.
Why this scheme
Whatmadethegovernmenttointroducesuchaschemeforthiscountry.Tounderstanditinmorebetterperspective,onewillhavetounderstandwhereindiastandsintermsofthegolddemandsandintermsofthegoldholdingascomparedtoothercountries.
Hereisafewchartswhichdepictsthesame.
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a.GoldHoldingofIndiavis-à-visothercountriesanditsshareintheforexreserves
b.DemandforGoldsectorwise
Table : Historical data for gold demand – last 10 yearsTonnes
Jewellery Total bar and coin invest.
ETFs and similar Technology C e n t r a l banks
Total
2005 2,721.0 418.1 211.1 440.4 -663.4 3,127.22006 2,301.4 429.8 258.5 471.7 -365.4 3,096.02007 2,424.9 437.5 258.8 477.7 -483.8 3,115.12008 2,306.2 917.9 324.0 464.7 -235.4 3,777.32009 1,816.3 832.3 644.2 414.4 -33.6 3,673.72010 2,051.5 1,201.8 421.1 459.9 79.2 4,213.32011 2,090.5 1,493.4 236.4 427.0 480.8 4,728.12012 2,135.6 1,299.9 306.3 379.1 569.3 4,690.32013 2,670.7 1,702.0 -916.0 354.1 625.5 4,436.32014 2,457.2 1,004.4 -183.8 346.5 588.0 4,212.4
Source:MetalsFocus,ICEBenchmarkAdministration,WorldGoldCouncil
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c.DemandinTonnes–Countrywisein2014andinthe1stquarterof2015.Table : Consumer demand in selected countries (tonnes)
2014 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q1’14 vs Q1’15, % change
India 811.1 167.1 204.9 237.3 201.7 191.7 ↑ 15Pakistan 35.6 7.1 10.2 8.7 9.6 8.3 ↑ 16Greater China 1,051.4 316.3 242.3 227.3 265.4 290.4 ↓ -8China 973.6 293.8 224.1 212.0 243.7 272.9 ↓ -7HongKong 61.4 18.8 13.2 11.5 17.9 14.0 ↓ -26Taiwan 16.3 3.6 5.1 3.8 3.8 3.6 ↓ -2Japan 14.4 11.2 2.6 3.5 -2.9 0.4 ↓ -96Indonesia 62.9 17.6 14.7 14.7 15.9 18.3 ↑ 4Malaysia 18.7 4.8 5.0 4.8 4.1 5.0 ↑ 4Singapore 22.0 5.3 6.1 5.5 5.1 5.3 → 0SKorea 16.7 4.5 3.7 4.3 4.2 4.5 ↑ 1Thailand 106.8 27.6 19.9 27.8 31.5 22.7 ↓ -18Vietnam 66.7 19.7 15.3 15.9 15.8 18.3 ↓ -7Middle East 313.0 102.3 83.0 63.6 64.0 83.6 ↓ -18SaudiArabia 84.0 21.4 22.6 18.2 21.8 22.3 ↑ 4UAE 66.1 21.2 19.9 12.5 12.6 19.8 ↓ -7Kuwait 15.3 6.1 3.5 2.4 3.3 5.2 ↓ -15Egypt 51.1 14.7 13.0 12.5 10.9 10.0 ↓ -32Iran 75.4 30.8 18.9 14.1 11.5 18.2 ↓ -41OtherMiddleEast 21.0 8.1 5.2 3.9 3.9 8.0 ↓ 0Turkey 116.6 27.0 32.0 22.3 35.3 15.6 ↓ -42Russia 74.9 21.8 19.0 18.7 15.3 13.0 ↓ -40Americas 223.2 45.5 51.6 49.6 76.4 44.2 ↓ -3UnitedStates 164.2 32.8 36.6 36.3 58.6 32.3 ↓ -2Canada 17.4 3.6 4.0 3.2 6.6 3.2 ↓ -11Mexico 18.0 4.5 4.3 4.6 4.6 4.5 ↑ 2Brazil 23.5 4.7 6.7 5.5 6.7 4.2 ↓ -10Europe ex CIS 276.0 65.4 54.0 58.4 98.3 73.5 ↑ 12France 15.4 3.0 2.9 2.3 7.2 3.6 ↑ 20Germany 111.6 28.6 21.5 25.1 36.5 33.8 ↑ 18Italy 18.7 2.7 3.8 2.9 9.4 2.5 ↓ -7Spain 8.1 1.6 2.0 1.8 2.7 1.7 ↑ 4UnitedKingdom 33.3 6.3 5.6 6.4 14.9 5.9 ↓ -6Switzerland 47.7 12.5 9.8 10.4 15.0 13.8 ↑ 11Austria 10.8 2.7 1.9 2.3 3.8 3.0 ↑ 10OtherEurope 30.4 7.9 6.4 7.2 8.8 9.2 ↑ 16Total above 3,209.8 843.1 764.4 762.5 839.8 794.9 ↓ -6Other&stockchange 251.8 58.6 62.9 52.5 77.9 59.0 ↑ 1World total 3,461.7 901.7 827.3 815.1 917.6 853.8 ↓ -5
Source:MetalsFocus,WorldGoldCouncil
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FromtheaboveitcanbeseenthatthehighestgrowthindemandisinIndiaanditstands11thamongstthegoldholdings.
Majorityofthegoldboughtinindiaislyinginsafe,unusedandonlyforinvestmentpurposes.Sotherewasaneedtounlockthegoldwhichwaslyingidle.
The scheme prepared by the government is afterdue discussions with the banks, jewelers and therefineries.
Scheme Details and Procedure to be followed
Beforeonedepositsthegoldunderthescheme,thefollowingprocedurehastobefollowed.Step 1 – Customer to give consent for preliminarytestingofthegoldtoknowpurityStep2–customersalsohastogiveconsentforthemeltingofthegold.Step3-OnceheistoldaboutthepurityofthegoldhehaschoiceofeithertotakebackthemeltedgoldintheformofgoldbarsorhecanagreetodepositthegoldwiththebankStep4–Ifhedepositsthegoldthenhewillbegiventhecertificatebythecollectioncentreaboutthegoldpurity,amountandthedetailsofthegolddepositedbyhim
Theabovelookstobeverysimple.Butthecatchisthatpresentlyonly30gramsofgoldcanbedeposited.Goldcanbeeitherintheformofthebullionorthejewellery
Opening of gold savings account with the banks & benefits• Oncethecustomersproducesthecertificatefor
thegolddepositedwiththePurityTestingcentre,thebankwilla.openaGoldsavingAccountandb.Creditthegolddepositedwiththecentreintothecustomer’saccount.
• The Banks will pay interest to customers after
30/60daysofopeningaccount.Bankscandecidetherate.Boththeprincipalandtheinterestwillbevaluedingoldgrams
• Atthetimeofredemptionthesamewillbeeitherincashoringold.Thedecisionhastobetakenatthetimeoftheopeningofaccountastohowhewantsit.
• Maturity will be 1 years and in multiples of 1years.Breakingbeforematurityisalsoallowed
• Asregardsthetaxexemptions,thegovernmenthasyettodecideonthesame.
use of the Gold deposit with the Centers
• ThegovernmentcangiveincentivetothebankstomobilizethegoldaspartoftheCRRandSLRrequirementwithRBI
• BankscansellthegoldtogenerateFXandwhichcanbeusedforforeignpayments
• Banks can convert gold into coins for selling tocustomers
• Bankscanbuyandsellondomesticcommodity
exchangewheregoldwillbedelivered
• Bankscanlendtojewelers,howeverthejewelershavetoopenaGoldloanaccountwiththebanks.
Conclusion
It is awell thought idea andwill go a longway inreducing india’s dependenceon the imported goldandwillchannelizetheidlegoldlyinginthecountry.
On the whole it’s a win win situation for thegovernment,thebuyersandthejewellers.
Sources a.DatafromtheworldGoldcouncilb. https://mygov.in/sites/default/files/master_image/Draft_Gold_Monetization_Scheme
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Through the Mind of a Prudent Investor
- Girindra VasudeoE-mail: [email protected]
The“mind-spectrum”ofanyinvestorisalwaysticklinghisbraincellsonthequestionastowhatshouldbeone’sinvestmentstrategy.Especiallyunderthepresentsetofcircumstanceswhentherupeeisweakening,concernsabouttheGreececrisisaredeepeningandtheweathergurusarepredictingasub-normalmonsoon,thereissomeamountoftrepidation.
Each one of us is constantly striving to create a financial plan that will make ourmoney gomiles andexponentiallygrowourwealth.Itisimperativetoexhibitprudenceinunderstandingtheexternalenvironmenttoensurethatone’sinternalresources(wealth)arealignedtonotonlygrowatarapidpacebutalsostayafloatduringtheworstoftimeswhenthemarketsgointoadownwardspiral.
Aprudentinvestorstartsfromhisbaseplatformofwealth.Therefore,itisnotimportanthowmuchmoneyyoumakebutitiscriticaltoknowhowmuchmoneyyoukeep.This“savings-corpus”istherootfromwhichstemstheplantofwealthcreation.Havingsaidthis,thebaseofone’sstrategyhastobethatinvestmentincomemustexceedinflation.Ifitjustequalsinflation,thenitistantamounttoyourrunningonthespot,whereasifitislowerthantheinflationnumber,thenyouareactuallybecomingpoorer.
Therefore,whiledevelopingyourinvestmentstrategy,itisprudenttoconsiderthefollowingissues:i.Ageoftheinvestorii.Sourceofincomeiii.Propensitytospendiv.Riskappetitev.Knowledgeofinvestmentavenues.
Whilethebroadcanvasofavailableinvestmentavenuesarecapturedinthefollowingtable,itisimportanttoknowthattheequitymarkets,throughmutualfundsordirectinvestmentswithofcourseanelementofexpertadvice,canbetheelixirofbecomingaprudentandsuccessfulinvestor.
Diversify your InvestmentsInvest across asset classes for better risk-adjusted returns
Asset Class Time Horizon Returns Safety Volatility LiquiditySavings Account ShortTerm Low High Low HighBank Fixed Deposit MediumtoLong
TermLow toModerate
High Low Low
Company Fixed Deposit MediumtoLongTerm
Moderate Moderate Low Low
19The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
Exponent Group of Journals - Empowering the common man In Association with Shree Aniruddha Upasana Foundation
Post Office Schemes LongTerm Low toModerate
High Low Low
Income Funds MediumtoLongTerm
Moderate Moderate Low Low
Equity Funds LongTerm High Low High HighInsurance LongTerm High Low LowReal Estate LongTerm High Low High LowGold LongTerm Moderate High Moderate Moderate
Asyouwillobservefromtheabovetable,oneneedstodiversifyandinvestacrossassetclassesforoptimizingtheriskadjustedreturns.
ConsideringthefactthattheIndianEconomyispoisedtotakeoff,wearegoingtodivedeepintotheareaofEquityMarkets/MutualFunds.Thebasicfundamentalsthataprudentinvestorneedstolookatfrombothexternalandinternalfactstobeasuccessfulinvestorareasfollows:
Externali.GlobalEconomicscenarioii.IndianEconomyanditsintegrationwithGlobalEconomyiii.StatusofEquityMarketsiv.Sectorspecificknowledgeforgrowthopportunities
Internali.Assessone’spersonalcashflowtotrackinvestiblesurplusii.Identifyandprioritizegoalsfortheusageofmoneyiii.Maptheallocationtovariousassetclassesiv.Alllongtermgoalsmustbelinkedtoequitiesmaybethroughmutualfunds.
External Factors
i. Global Economic ScenarioWouldIndiabeimpactedbytheglobalslowdown?China’sgrowthisexpectedtofallto6.8%in2015.Greece,RussiaandUkrainehave thepotential toderail theEuroandgrowth inEurope.The IMFhas slashed itsforecastfortheUSeconomy.WorldBankhasadvisedtheUSFederalReservetokeeponholdanyinterestrateincrease.AweakglobaleconomywilladverselyimpactIndia’sexportgrowth.However,theUSrecoveryisadouble-edgedswordforIndia.Whiletheexportswillbeboosted,theforeignfundswillmoveoutfromtheemergingmarketslikeIndia,resultinginlowergrowthnumbers.
ii. Indian EconomyWhenwelookattheIndianEconomy,werealizethatIndiatodayoperatesinamoreintegratedworld.Theintegration isnotonly restricted togoodsand servicesbutalsoextends tofinancial integrationand thecorporatesector.ManyIndiancompanieshavetakenbetsabroadandthereforeanyimpactoverseashasadirectlinktothesecompanies.
Atatimewhentheworldisstrugglingtorecover,theIndianGDPnumbers(thankstonewcalculations)have
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shownanoptimistictrend.
About a year agowe built unrealistic expectationsonhowmuch thenewGovernmentcanachieve intheshortrun.Whileourdreamsmaynothavecometrue,itisnotdisappointingbutmoreaboutmatchingexpectationswithwhathasbeenachieved.TheIndiastoryisyetlookinggoodinthelongrun.WeneedtobepatienttoexperiencetherealeconomicgrowthinIndia.
iii. Status of Equity MarketsSince the Indian equity markets have corrected abit in recent times, itmay be a good time for theinvestorstoenter.AsthevaluationsofIndianmarketsareappearingtobeattractiveevenatthese levels,itappearsthatthedomesticinvestorsareabouttoembrace theequitymarketsbymovingaway fromdebt. If the investors look from the perspective ofgrowthandreforms,thenIndiascoreshighlyonthatagenda. The Indian markets are backed by strongfundamentals of a consumption led economy andtherefore it is imperative that as investorswepicktherightsectorsandtherightcompanies–maybethroughourexperts/advisors.
iv. Sector specific knowledge for growth opportunitiesIn spite of the “Modi-Sarkar”, we need to takecognizanceofthefactthatcorporateearningsinthelast quarter were disappointing. Even the globallycompetitive sectors like IT and pharma have beensluggish in growth.TheNifty isdownby11% fromthepeakofMarch2015.
A prudent investor should view this situation asthe right time to enter the market as the currentgovernmentislookingat
-Taxreform–GST,Labour,etc.-Improvedgovernance-Infrastructuredevelopment-Easeofdoingbusiness.
The fears about a sub-normal monsoon seem tohavebeenallayedbytheinitialindicationofagoodmonsoon.Consideringthesefacts,thesectorstobepreferredforinvestmentwouldbe
-Banks-ConstructionandEngineering-Auto-Industrialmachinery-Pharma-IT.
It is therefore amatter of specific study of certaincompanieswith thehelpof theadvisors tonarrowdownonthestocksthataprudentinvestorneedstobuyandkeepbuyingateverydeclineforlongtermprosperity.
Now that we have looked at the external factors,let us turn to the internal factors that impact thedecisionmakingofaprudentinvestor.
Internal Factors
i. Assess cashflow to track investible surplusOne needs to keep track of income and expensesthrough a simple budgeting exercise. The cashflowforecastingfacilitates in identifying thecriticalexpenses or repayments of loans. Once you havebeen able to forecast your cashflow and balance-sheet,thenyouneedtomakealistofyourprioritiesandgoals.
ii. Identify priorities and goalsIt is imperative that a comprehensive list of goalsis made. This list would entail goals like child’seducation,marriage,dailyexpensesand/orbuyingacar/house.Thesegoalscouldbesplitin3bucketsasfollows:
-Shorttermgoals -0–6months-Mediumtermgoals -5–10years-Longtermgoals -≥10years
Based on these goals, one has to think of aninvestment plan which will make themoneyworkandgrow.
iii. Map allocation of resources to asset classesAn investment plan should help you to deal withinflation,buildaretirementcorpusandalsoimprove
21The Exponent Group of Journals For Shares And Stock Market, Volume 3, Number 4, Sep 2015 - Nov 2015
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yourstandardofliving.
Itisimperativetoalignyourinvestmentplantoyourrisk profile and then spread across different assetclassesinordertominimizetheriskandenhancetherisk-adjustedreturns.
The mutual fund investments are preferred bythe investors because of their cost efficiency,tax efficiency and ease of execution. The addedadvantage in mutual fund investments is that themoneyismanagedbyprofessionals.
iv. All long term goals should be linked to equity marketsAs the long term goals have to beat inflation andaugmentwealthtoalevelthatrisk-adjustedreturnsareadequate,itisprudenttogetthehelpofexperts.The mutual funds are generally well managed byprofessionalswhoaredomainexpertsandmanagelargeamountsintheirportfolio.
Now that we have looked at the various factorswhichwilldriveourinvestmentstrategy,wemustbe
willingtoabidebythefollowingfundamentalrule:
“Separate emotions from objectives. Investmentdecisionshavetobemadebytheheadandnottheheart.”
You should be inclined tomake “equity” the pivotof your portfolio. This asset class has consistentlygrownaheadoftheinflationfactorandisextremelyliquidunlikeanyinvestmentinrealestate.
Basedon thehypothesis thatequitiesare thebestinstruments to beat inflation, one would say thatmutual funds score the highest in terms of costefficiency,taxefficiencyandeaseofexecution.Thereisanaddedadvantagethatthefundsaremanagedbyprofessionals.Therefore,aprudentinvestormusthaveanadequatesliceofmutualfundsinhisoverallpieofinvestments.
Infact,thelessonforsmallinvestorsissimple.Takethemutual fundroute insteadof trying tofindthenext Infosys among individual stocks. Also, do notinvest in one go. Just as you are diversifying yourinvestments across a basket of stocks, diversifyacrosstimeaswellbyusingtheSIPmode.Thatisthebestwaytocreatewealthwithoutlosingsleep.
Finally,youshouldperiodicallyreviewyourportfolioof investments to optimize the yield by getting ridofthosestocksormutual fundswhichhaveunder-performedand replace themby thosewhich showpromiseinthefuture.