Gold - Investment Strategies

Gold - Investment Strategies - Free Legal Forms

SIP is the Way to Go : By Value Research

I have come across a statement in a financial daily which says - “If you are an astute investor, consider investing small sums on every 5 per cent or more declines in the broad market. Otherwise, use the SIP route.” Does this make sense? I am not crystal clear with the term broad market.
- Jojo Jacob

It would be great if one is astute enough to consistently buy at dips and sell at highs. But it is very difficult to define a dip. Since January 2008, market has dipped and dipped further. Most professional and individual investors are unable to successfully time the market.

The way to make money from equities is to build a portfolio of good stocks and patiently hold on it. And by good stocks, we mean stocks of businesses with sound management and the potential to burgeon their earnings. But this requires an investor's time and inclination. The alternative is to buy a ready portfolio by way of a mutual fund and invest regularly. SIP ensures discipline and helps manage investment anxiety caused by dips. This is the next best way to profit from equities.

Broad market is generally referred to the direction of the leading indices.

SIP is the Way to Go : By Value Research

I have come across a statement in a financial daily which says - “If you are an astute investor, consider investing small sums on every 5 per cent or more declines in the broad market. Otherwise, use the SIP route.” Does this make sense? I am not crystal clear with the term broad market.
- Jojo Jacob

It would be great if one is astute enough to consistently buy at dips and sell at highs. But it is very difficult to define a dip. Since January 2008, market has dipped and dipped further. Most professional and individual investors are unable to successfully time the market.

The way to make money from equities is to build a portfolio of good stocks and patiently hold on it. And by good stocks, we mean stocks of businesses with sound management and the potential to burgeon their earnings. But this requires an investor's time and inclination. The alternative is to buy a ready portfolio by way of a mutual fund and invest regularly. SIP ensures discipline and helps manage investment anxiety caused by dips. This is the next best way to profit from equities.

Broad market is generally referred to the direction of the leading indices.

Tax Saving Investment Declaration

Tax Saving Investment Declaration

Health Cover Basics

Health Cover Basics

Tax Saver (ELSS) Fund

“The twin advantage of Tax Savings and Growth Potential”

Key Benefits
A. Growth Potential & Long-term Perspective
• Maximize the growth potential of your investment by investing in a scheme with an active investment strategy, which makes the most of the opportunities available in the equity markets.
• The experienced fund management team follows a disciplined approach to investment, focusing on minimizing risk by creating a well - diversified portfolio.
• Optimal asset allocation, Bottom up & Top down stock selection and systematic use of derivatives are some of the tools the team uses to effectively maximize the growth potential of your investments.
• ELSS allows you to take a minimum three years perspective for its investments enabling the Fund Manager to take a long-term call on the markets.

B. Save Tax
• Investment in this scheme would enable you to avail the benefits under clause (xiii) of Sub-section (2) of Section 80C of the Income-tax Act, 1961.
• Investment made up to Rs. 1 lakh by the eligible investor being an Individual or a Hindu Undivided Family in the scheme will qualify for income tax deduction under above mentioned Section of the Act.
• Since it will be an income deduction, an investment of Rs. 1 lakh in this fund can shave off Rs. 33,900/- from your tax payable liability (assuming you are in the highest tax bracket).
• Dividends received will be absolutely TAX FREE in the hands of investors.
• The dividend distribution tax (payable by the AMC) for equity schemes is also NIL.
• Long Term Capital Gains tax is also Nil as redemption is allowed after 3 yrs lock in period.

Tax Saver (ELSS) Fund

“The twin advantage of Tax Savings and Growth Potential”

Key Benefits
A. Growth Potential & Long-term Perspective
• Maximize the growth potential of your investment by investing in a scheme with an active investment strategy, which makes the most of the opportunities available in the equity markets.
• The experienced fund management team follows a disciplined approach to investment, focusing on minimizing risk by creating a well - diversified portfolio.
• Optimal asset allocation, Bottom up & Top down stock selection and systematic use of derivatives are some of the tools the team uses to effectively maximize the growth potential of your investments.
• ELSS allows you to take a minimum three years perspective for its investments enabling the Fund Manager to take a long-term call on the markets.

B. Save Tax
• Investment in this scheme would enable you to avail the benefits under clause (xiii) of Sub-section (2) of Section 80C of the Income-tax Act, 1961.
• Investment made up to Rs. 1 lakh by the eligible investor being an Individual or a Hindu Undivided Family in the scheme will qualify for income tax deduction under above mentioned Section of the Act.
• Since it will be an income deduction, an investment of Rs. 1 lakh in this fund can shave off Rs. 33,900/- from your tax payable liability (assuming you are in the highest tax bracket).
• Dividends received will be absolutely TAX FREE in the hands of investors.
• The dividend distribution tax (payable by the AMC) for equity schemes is also NIL.
• Long Term Capital Gains tax is also Nil as redemption is allowed after 3 yrs lock in period.

Lessons from 2008

Five mistakes that you should not repeat in the coming year.

For many investors, 2008 was a nightmare that came true. After four years of boom, when the tables turned, it wiped out lakhs of crores of investors' wealth.

Last December, there would have been a smile on everyone's face. While the US had started feeling the pinch of the sub prime crisis, many experts claimed that India was decoupled from what was happening there. Well, it took just one month to change the scenario.

On January 21, in a matter of hours the benchmark indices, Sensex and Nifty, hit the lower circuits. And in the next 11 months, there have been few moments of pleasure for the stock market investor. Both the indices are down over 50 per cent. But depending on portfolio, some investors have even lost 80-85 per cent.

As the year-end approaches, let's look at some of the mistakes that many investors made during the last year and hopefully, refrain from making them again.

OVER LEVERAGING: Buying stocks with borrowed money is leveraging. And it is a crime that many investors committed last year.

Typically, a broker either lends or allows the investor to have a larger position than the money that has been deposited. The interest rate on such lending is higher. Consider this, often an investor has Rs 1 lakh and has positions in the market four to five times of that.

When things are good and stock prices are rising to dizzying levels, everyone is happy. The return on investment outstrips the interest cost. But when the market falls, it is a complete disaster.

For instance, when Reliance Industries was trading at Rs 2,500, you bought stocks worth Rs 4 lakh on an initial capital of Rs 1 lakh. If the stock moves to Rs 2,700, it has gone up by only 8 per cent, but the return on investment (Rs 1 lakh) is 32 per cent.

Now if the stock dips to Rs 2,000, down 20 per cent, you stand to lose 80 per cent. Now if you add the interest cost to the total capital loss, then the initial capital might have been wiped out.

LESSON: Multiplier effect has both sides. Use the loan facility very responsibly and with stringent limits to it.

AVERAGING EFFECT: Whenever stock markets start falling, the initial reaction from investors is to buy more. The idea being that there would be cost averaging.

However, when a slide like this happens, this should be the last thing on your mind. It's because while you may have brought down the acquisition cost, a lot of money has gone into this process. It is almost like throwing good money after bad money.

Often, this happens when one refuses to believe that things are turning sour and the recovery would take a long, long time.

LESSON: Emotional attachment to a stock can be very damaging. If you have made the mistake of buying shares at higher price, don't multiply it by buying them at every low.

INVESTING ON TIPS OR RUMOURS: Many investors can be accused of this one. But things can go real bad sometimes. This is especially true with mid- and-small-cap stocks.

There are hundreds of examples where tips are given for penny stocks or Z category stocks. Initially, it may give you some money. In the long run, however, such investing tactics can be fatal.

LESSON: Just ignore.

DERIVATIVES PLAY: For a lay investor, this is a definite no. As investing guru Warrant Buffet had once said, derivatives are 'financial weapons of mass destruction'.

A large number of small investors used the derivatives route to invest rather than the cash segment. It was easy since futures and options allowed them to take positions on either side (long or short) with little over 20 per cent margin or little option premium.

But since they have to pay only 20 per cent, bigger risks are taken. That is, small losses are not booked. Instead, positions are rolled on in the hope that ultimately things would favour them.

No wonder, losses keep mounting and can really hurt sometimes. For example, it is better to buy futures at Rs 25 and book profits around 25.5 or 26 levels, effectively earning 10-20 per cent return on the margin amount. However, keeping the position open even while losing can be disastrous.

LESSON: Derivatives are not an investment tool but a hedging mechanism. So either don't use it or use only after you equip yourself with its pros and cons.

IPO INVESTMENT: On an average, during boom times, initial public offerings (IPOs) of companies are oversubscribed by 40-50 times. As a result, investors use the IPO route to make quick money.

That is, on the day of listing they simply book profits. For many, it is a sure shot mantra for quick money.

But when the scrip lists lower than the offer price, getting stuck is very much possible. And if someone has taken a loan and applied for the IPO then things could get real bad. Investors who invested using IPO funding facility get hurt the most. Long-term IPO investors may still make a decent return over a long run, but subscribe and sell on first day is out of sight at the moment.

LESSON: Invest in IPOs only when you believe in the company. Otherwise, just stay away.

Investors should realise that making money is a long-term process. However, in their attempt to make a quick buck, many suffer. In 2009, make sure that these mistakes will not be repeated.

Lessons from 2008

Five mistakes that you should not repeat in the coming year.

For many investors, 2008 was a nightmare that came true. After four years of boom, when the tables turned, it wiped out lakhs of crores of investors' wealth.

Last December, there would have been a smile on everyone's face. While the US had started feeling the pinch of the sub prime crisis, many experts claimed that India was decoupled from what was happening there. Well, it took just one month to change the scenario.

On January 21, in a matter of hours the benchmark indices, Sensex and Nifty, hit the lower circuits. And in the next 11 months, there have been few moments of pleasure for the stock market investor. Both the indices are down over 50 per cent. But depending on portfolio, some investors have even lost 80-85 per cent.

As the year-end approaches, let's look at some of the mistakes that many investors made during the last year and hopefully, refrain from making them again.

OVER LEVERAGING: Buying stocks with borrowed money is leveraging. And it is a crime that many investors committed last year.

Typically, a broker either lends or allows the investor to have a larger position than the money that has been deposited. The interest rate on such lending is higher. Consider this, often an investor has Rs 1 lakh and has positions in the market four to five times of that.

When things are good and stock prices are rising to dizzying levels, everyone is happy. The return on investment outstrips the interest cost. But when the market falls, it is a complete disaster.

For instance, when Reliance Industries was trading at Rs 2,500, you bought stocks worth Rs 4 lakh on an initial capital of Rs 1 lakh. If the stock moves to Rs 2,700, it has gone up by only 8 per cent, but the return on investment (Rs 1 lakh) is 32 per cent.

Now if the stock dips to Rs 2,000, down 20 per cent, you stand to lose 80 per cent. Now if you add the interest cost to the total capital loss, then the initial capital might have been wiped out.

LESSON: Multiplier effect has both sides. Use the loan facility very responsibly and with stringent limits to it.

AVERAGING EFFECT: Whenever stock markets start falling, the initial reaction from investors is to buy more. The idea being that there would be cost averaging.

However, when a slide like this happens, this should be the last thing on your mind. It's because while you may have brought down the acquisition cost, a lot of money has gone into this process. It is almost like throwing good money after bad money.

Often, this happens when one refuses to believe that things are turning sour and the recovery would take a long, long time.

LESSON: Emotional attachment to a stock can be very damaging. If you have made the mistake of buying shares at higher price, don't multiply it by buying them at every low.

INVESTING ON TIPS OR RUMOURS: Many investors can be accused of this one. But things can go real bad sometimes. This is especially true with mid- and-small-cap stocks.

There are hundreds of examples where tips are given for penny stocks or Z category stocks. Initially, it may give you some money. In the long run, however, such investing tactics can be fatal.

LESSON: Just ignore.

DERIVATIVES PLAY: For a lay investor, this is a definite no. As investing guru Warrant Buffet had once said, derivatives are 'financial weapons of mass destruction'.

A large number of small investors used the derivatives route to invest rather than the cash segment. It was easy since futures and options allowed them to take positions on either side (long or short) with little over 20 per cent margin or little option premium.

But since they have to pay only 20 per cent, bigger risks are taken. That is, small losses are not booked. Instead, positions are rolled on in the hope that ultimately things would favour them.

No wonder, losses keep mounting and can really hurt sometimes. For example, it is better to buy futures at Rs 25 and book profits around 25.5 or 26 levels, effectively earning 10-20 per cent return on the margin amount. However, keeping the position open even while losing can be disastrous.

LESSON: Derivatives are not an investment tool but a hedging mechanism. So either don't use it or use only after you equip yourself with its pros and cons.

IPO INVESTMENT: On an average, during boom times, initial public offerings (IPOs) of companies are oversubscribed by 40-50 times. As a result, investors use the IPO route to make quick money.

That is, on the day of listing they simply book profits. For many, it is a sure shot mantra for quick money.

But when the scrip lists lower than the offer price, getting stuck is very much possible. And if someone has taken a loan and applied for the IPO then things could get real bad. Investors who invested using IPO funding facility get hurt the most. Long-term IPO investors may still make a decent return over a long run, but subscribe and sell on first day is out of sight at the moment.

LESSON: Invest in IPOs only when you believe in the company. Otherwise, just stay away.

Investors should realise that making money is a long-term process. However, in their attempt to make a quick buck, many suffer. In 2009, make sure that these mistakes will not be repeated.

Age on their side

Age on their side