कैसे बनें शेयरों के शेर? जानें शॉर्ट टर्म ट्रेडिंग मंत्र

कैसे बनें शेयरों के शेर? जानें शॉर्ट टर्म ट्रेडिंग मंत्र
नवंबर-दिसंबर के दौरान अक्सर शेयरों में ज्यादा उतार-चढ़ाव रहता है। फॉरेन इंस्टिट्यूशनल इनवेस्टर (एफआईआई) इस दौरान खुलकर बाजार में हाथ आजमाते हैं। दरअसल, उनके फंड की क्लोजिंग दिसंबर तक चलती है और वे ज्यादा रिटर्न के चक्कर में रहते हैं। स्लोडाउन के बुरे दौर के बाद इस बार शेयर बाजार में कुछ ज्यादा घट-बढ़ देखने को मिल रही है। यह घटबढ़ अगले महीने भी जारी रह सकती है। ऐसे दौर में रिटेल इनवेस्टर को चाहिए कि रिस्क कम लें और समझदारी से शॉर्ट टर्म रणनीति बनाकर कारोबार करें।

1. छोटी तेजियों को पकड़ें

ऐसे दौर में जब एक दिन शेयरों में मंदी के भारी झटके लगें और दूसरे दिन शेयर नई ऊंचाइयां चढ़ जाएं, तो रिटेल इनवेस्टरों को उन शेयरों में हाथ आजमाना चाहिए, जिनमें उतार-चढ़ाव कम हुआ है। इन शेयरों को गिरने पर खरीद लेना चाहिए। जब ये शेयर चढ़ें, तो बेच दें। इन शेयरों को खरीदने का फायदा यह होगा कि इन शेयरों के ज्यादा गिरने का रिस्क आपको नहीं डराएगा। कुछ समय तक गिरने के बाद इन शेयरों का बढ़ना तय है। ऐसे में आप इन्हें बेचकर मुनाफा कमा सकते हैं। डीएसई के पूर्व अध्यक्ष बी. बी. साहनी का कहना है कि छोटी तेज वाले शेयरों में इनवेस्टमेंट ऐसे दौर में सबसे सेफ होता है।

2. प्रॉफिट मार्जिन रहे कम

रिटेल इनवेस्टर झटके तभी खाते हैं, जब वे बड़े प्रॉफिट के चक्कर में पड़ते हैं। ज्यादा बढ़ने की चाहत में वे कई बारे शेयरों को होल्ड करके रख लेते हैं। अचानक पता चलता है कि मुनाफा वसूली की वजह से शेयर बुरी तरह गिर गए। ऐसे में जरूरी है कि शॉर्ट टर्म मुनाफा वसूली करते समय प्रॉफिट माजिर्न कम करें। शेयरों को निचले स्तर पर खरीदें और 5 से 10 पसेर्ंट के प्रॉफिट पर बेच दें। विनायक इंक के सीएमडी विजय सिंह का कहना है कि खरीदने और बेचने की छोटी रैलियां चलाएं। मुनाफा कम मिलने पर अगर कारोबारी रैलियां ज्यादा संख्या में होंगी, तो प्रॉफिट कवर हो जाएगा।

3. झटकों पर रखें ध्यान

मुनाफा कमाने के लिए शेयर बाजार में होने वाले झटकों पर ध्यान रखना जरूरी है, न कि बड़े चढ़ाव पर। जब भारी झटके लगें, तो देखें कि कौन-कौन से शेयर कितने गिरे हैं। शेयरों की गिरावट की तुलना उनकी पिछली गिरावट से करें। शेयरों के निचले स्तर का पता लगाएं। जो शेयर ज्यादा गिरे हैं और पहले की तुलना में निचले स्तर पर पहुंच गए हैं, उन्हें खरीदना फायदेमंद है। ऐसे शेयर दो-तीन कारोबारी दिनों के दौरान ही फिर तेजी पकड़ लेते हैं या पुराने स्तर पर आ जाते हैं। दोनों ही स्थितियों में उन शेयरों को बेच दें। आपको शॉर्ट टर्म फायदा होगा। ऐसे शेयरों में रिस्क कम होता है।

4. पूंजी का 60 परसेंट ही इनवेस्ट करें

शेयरों में अपनी पूंजी का 60 परसेंट ही लगाएं। कई बार शेयर बाजार का मूड भांपने में इनवेस्टर धोखा खा जाते हैं। वे ज्यादा प्रॉफिट के लालच में अपनी सारी पूंजी शेयरों में लगा देते हैं। जिन शेयरों में उन्होंने अपनी पूंजी लगाई है, अगर दुर्भाग्य से वे गिर गए तो वे घबरा जाते हैं और भविष्य में भारी नुकसान की आशंका के मद्देनजर शेयरों को बेच देते हैं। बाजार एक्सपर्ट के. के. मदान का कहना है कि अपने पास 40 परसेंट पूंजी रखना इसलिए जरूरी है कि इसके जरिए आप बाजार में रिकवरी कर सकते हैं। आपने जिन शेयरों को खरीदा है, अगर वे गिर भी गए, तो आप बाकी की 40 परसेंट पूंजी दूसरे शेयरों में लगाकर प्रॉफिट कमाने की रणनीति बना सकते हैं।

5. बड़े शेयरों को सस्ते में खरीदें

शेयर बाजार में ऐसे मौके भी आते हैं, जब बड़ी कंपनियों के शेयर बुरी तरह गिरते हैं। अगर आप थोड़ा रिस्क लेकर बजट का 30 परसेंट तक शेयरों में लगा सकते हैं तो आपको बड़े शेयरों पर नजर रखनी चाहिए। जब भी 10 से 15 परसेंट की गिरावट आए, तुरंत खरीद लें। ऐसा तब होता है, जब तकनीकी करेक्शन का दौर चलता है या विदेशी इनवेस्टर भारी मुनाफे के लिए शेयरों को गिराने का खेल खेलते हैं। ऐसा नवंबर-दिसंबर में देखने को मिल सकता है। नैक्सस इंफोटेक लिमिटेड के प्रमुख सुधीर जोश का कहना है कि अगर बड़े शेयर सस्ते में मिल जाएं, तो फिर क्या कहने! ऐसी स्थिति में कुछ ज्यादा वक्त तक शेयरों को अपने पास रख सकते हैं।

6. एफआईआई पर रखें नजर

नवंबर से दिसंबर के दौरान रिटर्न ज्यादा दिखाने के लिए फॉरेन इंस्टिट्यूशनल इनवेस्टर (एफआईआई) मुनाफा वसूली का भारी खेल खेलते हैं। इस दौरान अगर रिटेल इनवेस्टर एफआईआई की रणनीति पर ध्यान दें, तो अच्छा होगा। देखें कि एफआईआई किन शेयरों को निशाना बना रहे हैं और कितना? वे जिन शेयरों को ज्यादा बढ़ाते हैं, उन्हें उतना ही गिराने की कोशिश करते हैं ताकि ज्यादा मुनाफा मिल सके। आप उन शेयरों पर दांव मत लगाइए, जिन्हें एफआईआई ज्यादा बढ़ावा दे रहे हैं। इनवेस्टरों को कई बार लगता है कि एफआईआई इन शेयरों पर खासे मेहरबान हैं। ये नई ऊंचाइयां छुएंगे, जबकि इसका उल्टा होने में देरी नहीं होती।
-जोसफ बर्नाड

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8 key ratios while buying stocks

8 key ratios while buying stocks
LOOKING to buy stocks but you are not sure how to select them? Don't fret. We have, here, eight ratios that would make your life easier, and of course, enable you to make the best possible stock selection.

1. Ploughback or Reserves
Every year, the company divides its net profit (profits in hand after subtracting various expenses including taxes) in two portions: ploughback and dividends.

While dividends are handed out to the shareholders, ploughback is kept by the company for its future use and is included in its reserves. Ploughback is essential because, besides boosting the company’s reserves, it is a source of funds for the company’s expansion plans. Hence, if you are looking for a company with good growth prospects, check its ploughback figures. Reserves are also known as shareholders’ funds, since they belong to the shareholders. If a company’s reserves are twice its equity capital, the company can reward its shareholders with a generous bonus. Also any increase in reserves will push the share price of your share.

2. Book value per share
This ratio shows the worth of each share of a company as per the company's accounting books. It is calculated as:
Shareholders' funds
------------------------------------------------ = Book Value per share
Total quantity of equity shares issued

Shareholders' funds can be computed as such:
Total assets (equity capital to the company's reserves) less total liabilities (money owed to creditors).

Book value is an old record that uses the original purchase prices of the assets.

However, it doesn't show the present market price of the company’s assets. As a result, this ratio has a restricted use when it comes to estimating the market price of the shares, but can give you an estimate of the minimum price of the company’s shares. It will also help you judge if the share price is overpriced or under-priced.

Also read: 4 golden rules of equity investing

3. Earnings per share (EPS)
One of the most popular investment ratios, it can be computed as:
Profit Post Tax
------------------------------------------------ = EPS
Total quantity of equity shares issued

This ratio computes the company's earnings on a per share basis. Say, you own 100 shares of ABC Co., each having a face value of Rs 10. Assume the earnings per share is Rs 10 and the dividend declared is 30 per cent, or Rs 3 per share. This implies that on every share of ABC Co., you earn Rs 6 each year, but you actually get Rs 3 via dividend. The balance of Rs 4 per share goes into the ploughback (retained earnings). Had you purchased these shares at par, it implies a return of 60 per cent.

This example shows that instead of looking at the dividends received from to company as the base of investment returns, always look at earnings per share, as it is the actual indicator of the returns earned by your shares.

4. Price Earnings Ratio (P/E)
This ratio highlights the connection between the market price of a share and its EPS.
Price of the share
------------------------ = P/E
Earnings per share

It shows the degree to which earnings of a share are protected by its price. Say, the P/E is 40, it means the share price is 40 times its earnings. So if the company's EPS is constant, it will need about 40 years to make up for the purchase price of the share, after taking into account the dividends and the capital appreciation. Hence, low P/E means you will recover your money quickly.

P/E ratio shows what the market thinks about the earnings potential and future business forecast of a company. Companies with high P/E ratios are the darlings of the investors and thus enjoy a higher market rating. In order to use the P/E ratio properly, take into account the future earnings and growth projections of the company. If the current P/E ratio is low, as against the future prospects of a company, then the shares make an attractive investment option. But if the company is saddled with losses and falling sales, stay away from it, despite the low P/E ratio.

5. Dividend and yield
Dividend is the portion of the profit that is distributed amongst shareholders. Companies offering high dividends, normally don’t have much of growth to talk about. This is because the ploughback required to finance future development is insufficient. Similarly, those companies in high growth sector don’t give any dividend. Instead here they give sharp capital appreciation, which ultimately will lead to higher dividends.

So it makes much more sense to invest for capital appreciation instead of dividends. Rather it makes more sense to invest for yield, which is nothing but the association between the dividends and the market price of the shares. Yield (dividend yield) can be calculated as:

Dividend per share
----------------------------- x 100 = Yield
Market price of a share

Yield shows the returns in percentage that you can expect via dividends earned by your investment at the current market price. It is more useful than simply focusing on the dividends.

Also read: Will dividend yield stock make you rich?

6. Return of capital employed (ROCE)
ROCE is the ratio that is calculated as:
Operating profit
----------------------------------------
Capital employed (net value + debt)

To get operating profit, add old taxes paid, depreciation, special one-off expenses, and special one-off income and miscellaneous income to get the net profit. The operating profit is a far better indicator of the profits earned by the company instead of the net profit. Hence this ratio is the better indicator of the general performance of the company and the company’s operational efficiency. It is one of the most useful ratio that lets you compare amongst the companies.

7. Return on net worth (RONW)
RONW is calculated as
Net Profit
-----------------
Net Worth

This ratio gives you an idea of the returns generated by investing in the company. While ROCE is an effective measure to get a general overview of the profitability of the company’s business operations, RONW lets you gauge the returns you can earn on your investment. When used along with ROCE, you get an overview of the company’s competence, financial standing and its capacity to generate returns on shareholders’ finances and capital employed.

8. PEG ratio
PEG is an essential and extensively used ratio for calculating the inbuilt worth of a share. It helps you decide whether the share is under-priced, totally priced or overpriced. To derive the ratio, you have to associate the P/E ratio with the expected growth rate of the company. It assumes that higher the growth rate of the company, higher the P/E ratio of the company’s shares. Vice versa also holds true.

P/E
----------------------------------
Expected growth rate of the EPS of the company

In general, a PEG lesser than 0.5 is a lucrative investment opportunity. However if the PEG exceeds 1.5, it is time to sell.

These are some of the most critical ratios that must be considered when purchasing a share. Extensive reading of the financial performance of the company in newspapers and magazines will help you get all the relevant information to arrive at the correct decision.

Investing is NOT a game with only one winner

In October-November 2008, there was excessive pessimism around. In fact that period could take the cake for being one of the most challenging periods for most investors. It was a period when not just equity markets but also bank accounts were no longer considered safe. Everyday you heard noises of FMPs, liquid funds and even banks going bust and how the financial world would end soon. In fact the only safe way was to hoard cash. One currency expert even went on air saying that he was closing all his accounts at private banks and stashing his dough at State Bank of India, SBI. Suddenly people queued outside SBI branches and SBI started collecting several thousand crore of deposits every day. It was outright foolish to do so but the herd mentality was at work and the headlines and experts were screaming doom.

One smart investment banker redeemed his FMP midway falling prey to such rumors and at a discount. The FMP is up 11% today. He regretfully now says “Sometimes it’s dangerous to know many things. I would have been better off not knowing many things.”I told him that I disagree as it is all about your ability to think rationally during such times and not following all the bull thrown at you. I told him that I know of smart people who know things as well as people who do not know much about investing who have made amazing gains because of their ability to filter the noise.


On the other hand in October 2009, one is witnessing euphoria all around with the stock markets having crossed several milestones.

There are 3 key lessons or principles that equity markets have once again taught us over the last one year and they can surely come in handy when we face a similar situation sometime later in our investing life.

1st Principle

Besides investing regularly in equities (as the SIPs during these periods have given the best gains), invest a lot more confidently when no one wants to even listen to the word equity. The whole world was full of insights, research, inputs and so on about the death of equity as an asset class. There were media reports on the poor data coming from every possible front and to top it there was the Satyam scandal which made a lot of foreign and local investors doubt the integrity of Indian managements. Everyday you read about the next set of companies who could be in trouble. A friend who wanted to invest in equities just could not because all around he read that we were headed for doom. By the way he is still waiting.

There is no way to know that the stock market has bottomed out but it’s during such times of excessive pessimism that the market turn around and this was demonstrated well even during the recent turnaround on March 9, 2009.

Do not obsess over earnings and wait endlessly for clear data points. Stock markets always try to anticipate the future and are actually well ahead of significant changes in earnings and other data points. It is quite possible that earnings are lousy or take a lot of time to catch up. However a lot of people obsess over this and miss out on huge up moves. We are currently witnessing the second quarter results which seem to be quite encouraging. The recent IIP data of a 10.4% spurt advance tax collections and a host of other factors point out at GDP upgrades in the near term.

Yes there sure could be pain as the western world is still not out of woods and higher commodity prices and inflation will have interest rates inching up next year onwards. As always there will be a lot of negative factors that could pull down markets such as interest rate hikes, oil prices rising in very high inflation, sell off by hedge funds because of poor economic data coming from western countries , geo political risks (China & other threats) and others.

However there is no way to know when a correction will happen. There is no point in meaninglessly waiting for corrections. In strong bull markets, corrections are often elusive and generally do not happen, till the market has rallied significantly. From March 9, 2009, the markets are up by 100% whereas you saw only a couple of minor corrections with one caused during the budget week. In a market that has run up sharply by 100% a correction of 15-20% is quite normal but the key question is will the correction happen now or after the market crosses the previous high. I am sure no one knows the answer to this one. If a correction were to happen, don’t just say “See I knew it , I was right. I am smart.”

Continue to invest in a staggered manner.

3rd Principle

Do not underestimate the power of policymakers to effect a change. Starting late last year one saw a spate of interest rate cuts by central banks around the world injecting liquidity in the system. Besides this there were many bailout packages and policy changes that were quickly implemented. All such actions have the potential to turn things around and before actual change is visible, stock markets change direction. We have witnessed this happen.

This is one of the biggest bubbles waiting to be burst. I have explained this with a few examples and anecdotes.

35 year old Deven Desai is a frustrated man today. He has been waiting patiently to buy his dream house in Juhu for the last 3 years. He has seen many flats so far and is thoroughly disappointed at the overall transaction and deal that he is getting. He is earning Rs. 40 lakh post tax per year and is looking at buying a 3 BHK flat. He saw one where the halls and rooms were pretty small. The builder’s sales person told him “Sir, this is the last flat left. All are sold. The price also is very reasonable at Rs 15000.”Though he was not very pleased hearing the amount he still decided to go ahead considering the area and his long wait.

He asked the sales person about the size of the apartment and the net cost to him. The sales person told him that it is a 1980 sq.ft flat super built up. “What about carpet area?”, Deven enquired. “It is 1188 sq.ft. There is a 40% loading.” Deven was annoyed and said “How is loading just 40%? It is 65% minimum as the loading must be done on the carpet area and not in the reverse manner that you are calculating. If you add 65% to 1188, then it comes close to the super built up figure that you are talking about. Why do you guys calculate loading on the super built up figure? This means that my carpet area cost is Rs. 24750 which is ridiculous.”The salesperson who had a lot of attitude said “Sir .This is a common practice and everybody calculates it this way. You take it or there are many people waiting in the queue.”

Deven decided to let this go as it just did not make sense to him.

Ashok Ganesan , a sales professional faced a similar situation in Malad. He was made to believe that the price was low and that he should buy it before prices move northwards. However the loading on the carpet area was way beyond 55%. Many people are simply unaware about this computation and often ignore this. Additionally, how many people have actually measured the super built area that they have been charged for? The absence of a regulator makes real estate a perfect recipe for abuse.

There is no correct loading figure but I can’t see why it should be more than 35%. 35% is too high a number but must be calculated on the base carpet area. There is no regulatory help or any other available but you can negotiate hard on this front as there is still a lot of inventory that has to be sold. For e.g in Andheri, Mumbai, a couple of buildings in a premium 2.5-3 BHK flat complex are completely vacant for the last 12-18 months. Investors have put in money but end users have not bought in as they still cannot afford and banks are unwilling to lend as they were back in 2006 and 2007.

There is no point in paying any price because someone else will buy before you. Prices are still not low enough to spur genuine demand in the real estate market so don’t worry, you won’t be left out. The patient ones will be amply rewarded.

Finally the key take home is “Investing is not a game where there is only one winner. Everyone can win in the investing process provided one develops the ability to filter the financial noise and take prudent economic calls rather than emotional ones.”

-- Amar Pandit

17 ways to cut costs

THE basic needs of man are food, clothing, shelter and entertainment. Today, most of us have graduated from needs to luxuries. When the newspaper headlines were screaming inflation at 11.9 per cent, it became a topic of worry. Today, the challenges are not just high standard of living, high commodity prices, it's job loss too. How do you deal with meeting your basic requirements with less means to buy them?
While eating just one meal a day is good for Yogis and is a nice way to cut down costs, that is not what I'm suggesting. Instead, Try something simpler.

1. Eat at home

Eating out can be expensive. If you are spending Rs 200 on eating out compared to Rs 50 at home, you would be surprised to know the kind of amount you are spending. A systematic investment plan of Rs 150 (200-50) a day saved for 30 years can give you returns in excess of Rs 5 crore!MUST READ:

2. Know what you are buying

Plan your shopping. If you fill your cart with everything that catches your eye, chances are you will be spending a lot more. Instead, plan your meals for the week ahead and make careful note of what you need to buy. Purchase only the items on the list, avoid the rest.

3. Wear your blinkers

Stores are designed to make you go through a long walk to reach for your most basic items. Reason -- you can tricked into buying what you don't really need. Most basic commodities are found towards the end of the store. So, the next time you go shopping, you could skip the other outlets and move towards your destination.
4. Shop on a full stomach

When you're hungry and shopping, you may end up buying lot of things that look like food! You might also pick up what you don't really need. On the other hand, you can easily avoid unnecessary shopping when you're a full stomach.

5. Do you really need bottled water?

You can take a bottle of water when leaving home rather than buying when you're out.
6. Shop sans the kids

Hungry, tired, cranky kids increase the amount of time it takes to get your shopping done. Kids can really bug you into buying things which are bad for your health and for your purse. Leave them at home when you go out shopping.

7. Buy in bulk

You can save a significant amount of money if buying in bulk. Pay attention to the prices and pick up the family size package if the per unit cost is lower. However, you need to realise that bulk buying has a dark side too! If you are not a big user of any particular product, it could mean wastage.
8. Use store reward cards

If you visit a particular store often, you can sign up for their reward card. In some cases, stores raise their prices when they offer reward cards, and without the card your bill will certainly be higher. If the card offers other benefits, such as a preferred (or free) parking, free schemes, etc., be sure to maximize your benefits before they expire.

9. Buy local products

For instance fruits. Whenever I step into a big branded store, I was pushed into buying 'American grapes'. I fell for it once, and realized only on billing that it was Rs 400 a kg! The Indian variety is normally available for Rs 40. Locally grown or produced food is often available at a cheaper price because you don't pay for long transportation costs. Stick to them.
10. Choose unbranded goods

There is a huge cost difference between a branded product and an unbranded one. Even in case of 'expensive' items like dry-fruits, if you buy it from a wholesale-retail shop you will find a 20 per cent price difference. Some branded foods like cornflakes, are more expensive than dry fruits on a per kilogram basis. If you thought potatoes were selling at Rs 12 a kg, you are correct, but when it gets converted to branded chips, it becomes a little expensive, about Rs 300 a kg!

11. Men are bad shoppers

It is not so much of a gender issue. But the truth is men do not have much patience and that shows while shopping. So, if you are a man, realize that shops know and understand this. So things are arranged in such a way that when you are in a hurry you will end up buying the most expensive items. Look around to find cheaper items.

12. Compare prices and stores

I personally do not compare prices and stores but my wife has a degree in this! She knows which shop is good to buy vegetables, branded goods, unbranded goods. And she plans her shopping accordingly.

13. Shop in sales offers

In India, September to December months are considered as 'festive season'. This is the time when most of the shopping happens. Surprisingly, Hindus, Muslims and Christians have some festivals for which they buy new clothes during this period. So, stores generally keep a pre-festive sale in July-August and a post-festive offer in January. Use these sales to build your wardrobe. You can even get good deals!
14. Shop less frequently

The lesser the number of trips to the shop, the lesser you will buy! So, if you are making more trips to the store, it is time you reduced them.

15. Pay in cash

When you buy your day-to-day requirements with your credit card, you run the risk of paying your credit card dues late. So, for all the saving you have been doing, you may give it away in the form of interest. Cash is a good option. Besides, you tend to be more careful when making cash payments.
16. Check your bill

You should check all the statements which have a financial implication be it your credit card statement, mutual fund statement or your groceries bill. Scanners are fine, but there are possibilities of mistakes. So, you must see the bill before you pay.
17. Buy leather goods in monsoon and umbrellas in winter!Buying goods in off season will cost you less. If it's monsoon, check out for sale on leather goods and umbrellas in winter.

10 simple steps to get off the “expensive” train

Here are 10 simple steps to get off the “expensive” train

1. Plan for your goals and invest your money in the correct assets. Take professional help, if needed. Put the investments on auto pilot like a SIP, RD etc. That is what works best for most people. This will ensure that you can spend only the rest.

2. Understand how much you are spending by tracking the expenses. You will be surprised how much you’re spending on the “misc” head

3. Don’t borrow to spend. Credit card spends ensures that you do precisely that. Use a debit card instead.

4. Buy most provisions for a month at one go. You’ll end up spending less time, effort and money.

5. Do focused shopping. Write out what you want buy, buy that and head for the exit. Don’t take children with you on these occasions. They fill the shopping cart with unwanted fluff.

6. Don’t buy unwanted items or in huge quantity, just because there is some offer.

7. Don’t buy a toy due to your guilt that you are unable to spend enough time with your child. Try and find the time instead. You child wants you, not another toy.

8. Stop spending on that item, once you reach the limit in that month. For instance, if your entertainment allowance for the month is Rs 3,000 and that is spent by the middle of the month, then it needs to be dal-chawal and TV for the rest of the month.

9. Same goes for fuel. Long drives and excursions on weekends are out, once the fuel limit for the month is breached.

10. Don’t switch on the AC by force of habit. Use AC as required. Switch off fans/ lights and other appliances, when no one is around. In many households, TV is on, irrespective of whether someone is watching or otherwise.

Top Ten Investor Fantasies!

Top Ten Investor Fantasies!
In the past few months if reports are to believed, lakhs of new investors have jumped into the stock market. Especially after they saw a small minority of experienced investors getting extra ordinary returns. Anyone who has invested in value buys would easily have made over 100%. With a little bit of more research and knowledge companies like LIC Housing Finance and Jindal Steel have given returns between 300%-500%. These have rewarded investors all on basis of value and not ‘hot tips’ that are manipulated.

Unfortunately many new investors don’t realize this and have a lot of fantasies and myths in their mind when they enter. I had them too when I started out! Here are a few of them:


1. I will spend time trading every day and won’t do anything else. Isn’t that how hot shot multi-millionaires make money in the movies?

2. My uncle has been investing for several years. I will get tips from him. Of course it doesn’t matter that my uncle is on the verge of bankruptcy for the fourth time and has turned into a alcoholic.

3. I have magical powers and any company I invest in will give me returns in excess of 100% within a week.

4. The first company I invested in gave me 10% in a single day. This isn’t just co-incidence and luck, but because I am investment genius.

5. Everything I hear on the business news channel and everything I read in the newspaper actually needs to be followed.

6. Rich investors watch every single move of the Sensex and know exactly where it is headed.

7. I need to get tips from everybody - specially my broker. I don't care about knowledge, it won't make me rich.

8. My broker exists only to make me rich and wealthy. He loves me a lot.

9. I need to sell all my assets and remove all my money from the bank and pour it into a single share that can rise by 1000%. I read about it on an online forum - it must be true.

10. No need to study the business model, research reports, read or study financial statements. Losers do that!

I had many of the above fantasies when I started. They lead to losses - luckily I started investing with very small amounts. Following any of the above will most certainly lead to losses. You can be smarter than me and learn from my fantasies!

Keep smiling, laughing and happy investing!

Yogesh Chabria

Investors have two faces: Fear & Greed

MUMBAI: Everyone knows that fear and greed are the two key factors that drive the stock market. If you talk to any seasoned investors in the market, they would regale you with stories of how people got carried away by greed and lost all their money in the process. Stories about people spooked by ‘fear factor’ also do the rounds of Dalal Street at regular intervals. According to a study by SMC Capitals, “the elements of fear and greed are clearly visible in the trends of allocation of assets by the investors in terms of cash and stocks.’’

The trend, says the study, can be seen at the levels of market cap and bank deposits in the economy. When there is fear among the investing community, the bank deposits go up. And, when there is widespread optimism , the market cap levels go up. “If you look at investor behaviour in the last three years, the pattern is very clear: the first year was of over-optimism, the second was of over-pessimism and now it’s the recovery period. This trend is clearly visible if you look at the market cap and bank deposits (or the real wealth),’’ says Jagannadham Thunuguntla, equity head of New Delhi-based SMC Capitals.

In the study, SMC has compared the BSE market cap from the period starting January 2007, with the aggregate bank deposits in the banking system. The relative measure of the entire market capitalisation of BSE as a percentage of aggregate bank deposits in the entire banking system demonstrates the mindset of the investor community.

For example, in January 2007, the BSE market cap as a percentage of aggregate bank deposits was 152%, which means BSE market cap is 1.52 times more than the entire bank deposits. The figure kept on racing ahead during 2007 as the bull market gathered further momentum. By the time the bull market peaked in December 2007, the figure has reached 235%.

This means that with the deposits available, the banks couldn’t even buy half of the BSE stocks. At that time, the aggregate bank deposits were to the tune of Rs 30.47 lakh crore, whereas the BSE market cap was at Rs 71.69 lakh crore, probably signalling the exuberance in the capital market. By the time the bear market commenced in 2008, the BSE market cap as a percent of aggregate bank deposits kept falling. When the markets touched the bottom in February 2009, it had slid to 74%.

This means the entire listed stocks on BSE could be bought with aggregate bank deposits available with the banking system and it will still be left with 26% of the deposits. By this time, the total BSE market cap was to the tune of Rs 28.62 lakh crore, whereas the aggregate bank deposits were to the tune of Rs 38.48 lakh crore. Now, as the markets have started recovering since March 2009, again this level of BSE market cap as a percentage of aggregate bank deposits has crossed 100% levels and currently it stood at around 129% in August.

IDBI Bank’s executive director and head of personal banking C S Jain said, “Whenever there is fear among investors, they tend to go for bank deposits. Though there has been a rise in bank deposits during the last three years, the trend has been of people going in for short-term deposits that had a tenure of less than a year as they expect markets to bounce back and route their money to stocks,’’ he added.

-Madhu T & Reeba Zachariah, ET Bureau

ADVISORY SERVICE CHARGES MATRIX

Regulators should quit reckless backseat driving says Indian Industry

Quit reckless back seat driving was the message to the chairman of India’s Securities and Exchange Board of India (SEBI) by the mutual Fund AMC’s in a meeting last week. the SEBI Chairman has been demading that AMC’s should not pay upfront fee to the distributors from their own expenses. The SEBI Chairman C B Bhave was told that the AMC’s are not into charities and have business considerations.
It is not just the AMC’s, even the share broking community, distributor and common customers are of the same opinion. While the industry is scared of talking in public because of the alleged high handedness of the authorities, the anger and frustration is clearly showing.Similar outburst can be heard from the insurance industry against the Pension Fund Regulatory Development Authority’s (PFRDA) Chairman D Swarup. D Swarup has failed promoting his New pension scheme (NPS) to the retail customers as there are no intermediaries in between. Industry is scoffing at D Swarup for running Pension Scheme under the impression that it is a public distribution scheme (PDS) (India’s ration distribution to poor below the poverty line) and he expects that people apply in hordes. Industry is also pointing out that D Swarup is asking the government subsidies in terms of lower demat charges and other benefit. They say, D Swarup can be running a charity, but, industry is not. Even the PDS system usses intermediearies who are compensated with built in price by the government. The AMC’s chosen to distribute NPS hope that better sense will prevain on PFRDA.
The entire problem, is that these two government servants are basing the success of their drive to cut intermediary commissions, on a failed attempt to cut stock brokers commissions by SEBI. Since the stock broker community now reaches out to the high net worth investors (HNI) and block deals, the people in small villages and towns remain out of the stock investments. This has led to inequitable distribution of wealth between cities and villages. Stock broking community says that the FII’s drive the stock markets and domestic investments can hardly influence the market as there is no sufficient money in their hands. The SEBI initiative is a total failure. Smaller investors complain that SEBI is more interested in HNI’s. SEBI touts it as a success. Based on SEBI’s self declared success, it has taken off the entry loads in mutual fund, which is metting the same fate of the earlier share broker example. It has been just two months of this ill conceived mutual fund move and D Swarup is now using the Mutual Fund example to be employed on the insurance industry. Worse, D Swarup even quotes his own example of NPS scheme, which he claims is a good example. Other than the mandatory and statutory requirements, the retail version of pension scheme is a failure. Financial industry is not supporting the moves, all they are saying is that if the illconcieved idea has been implemeted in mutual funds, then implement it throughout financial sector for party.
The consultation paper titled “Minimum common Standards for Financial Advisors and Financial Education,” floated by D Swarup is also object of ridicule. Industry says that mind is already made up. The report ignores two fundamental facts. It ignores the fact that people do not invest on their own and they have to be persistently persuaded to invest. Instead the report takes a view that a customer asks for an advice on their own. Tell that to a Insurance or financial adviser and he will end up laughing belly up. Then D Swarup scores a self goal in the report saying that “over 70 per cent of investors buying mutual funds relied on the agent at the time of their most recent investment and almost 90 per cent are buying insurance policies from agents.” Industry points out that the investor need not go to a financial adviser, so why can’t they can investment it themselves.
The second premise is that he says the advice is chargeable. Well, this is the fundamental flaw with the SEBI initiatives too. Industry points out that since this report is more a copy and paste of reports from US, UK and Australian, the authors have not used their grey matters. They point out that India lags in major indicators vis a vis people living in advanced countries. These parameters are mainly education, infrastructure, transport etc when it comes to investing. Blindly copying others standards is not desirable. An advice cannot be sold to people who are reluctant to buy anything. It has to be pushed for their own good.
The customers and the distributors are also complaining. Even a willing customer finds it difficult to buy shares. He simply does not has the time and energy to do it. An agent is fine who gives a breadth of services and the fee is built in the product itself. Sonam (35 years), a house wife feels that these regulations are meant for bigger investors. She stays in Dombivli, a small city near Mumbai. She also says that she has never heard of SEBI or PFRDA. She and her husband have heard of the New pension scheme, but, she has no idea where to get information. She says she is well versed with insurance and has necessary policies. She also asks that who in the right mind will stop commissions?
Mr. Kumar (65 yrs) from Andheri says that if he has been cheated by an agent, there have been other agents who have bailed him out. He says that he is more frustrated by the government offices than agents.
Distributors feel that the government is using customer service plank as the smoke screen. They feel that government is pitching agents against their clients.
Even statistically the two government servants from SEBI and PFRDA are at handicap. The very basis that financial services are being miss sold is not provable statistically. Take example of insurance. To quote SB Mathur, Secretary General, Life Insurance Council (from Business standard, September 9) “Rs 14,500 crore as commission in 2008-09 against a premium of over Rs 220,000 crores collected. That makes average commission of 6.6 per cent. Premium-to-commission ratio fell from 12.1 per cent at the time of opening up of the (insurance sector) sector. It is alleged that high commissions drive agents to do lot of mis-selling. The industry has around 30 crore policies in force (this is the highest in the world according to the IRDA annual report) and has accumulated an asset base of Rs 930,000 crore. The report has some numbers on policies lapsing but it does not look at the high growth in renewal premium income. Renewal premium income has increased from Rs 26,250 crore at the time of liberalising the sector to Rs 156,000 crore in 2007-08 and Rs 220,000 crore in 2008-09. The much criticized unit-linked business has jumped from Rs 8,825 crore in 2006-07 to Rs 22,380 crore in 2007-08 and to over Rs 46,000 crore in 2008-09. All this suggests that selective data which supported the preconceived notions of the authors have found place in the report.”
Mr. Mankame (79 yrs) got his US 64 bonds redeemed by an agent free of cost. He converted his US 64 bonts to a UTI MF scheme and has earned a neat 65% profit since January. He says that the agent had explained all options and he himself opted for the equity option. At the same time, the agent received 2.25% commission from the AMC, but, he says that he could have settled for nothing had Mr. Mankame decided not to invest.
Deep’s mother is a recent widow. An agent found her in tears in a bank and took courage to ask her what was her problem. She showed him a file with policies and funds that she does not understand. The agent volunteered to help her, but, she said that she has no money to pay him. Agents said that he wants nothing, she will definitely require it later. The agent says that he already makes money on products and he need not take fees from the widow just for advice and running around.
Mr. Gupte asks who will help him with mediclaim when he is in the hospital? Neither he will be able to move, his wife does not understand, his kids are too small and his relatives don’t have time. He asks “how will I pay fees to an agent when I have been to hospital and not earned salaries. Besides I would have spent a lot of money and I will not get entire money back.” Mr. Gupte is the sole bread earner in the family.
No sensible person in the Industry, distributors and customers have said that betterment is not good. Neither the industry / distributors, nor the client wants change to existing set up except required refinement. Then what is the change the two government servants are talking about? Is the change a smokescreen for failure or there is vested interests?

India's Financial DON

India's Financial DON

With India’s New pension Scheme as a non starter with common man and the Mutual Fund industry falling back to institutional investors, D Swarup panel in the name of alleged financial reforms has recommended scraping agent fees on financial products. D Swaroop needs no introduction, he is the failed Chairman of the Pension Fund Regulatory Development Authority (PFRDA) which runs the New pension Scheme. Meanwhile the other Civil Servant, C B Bhave, chairman of the Securities and Exchange Board of India (SEBI) has removed the entry fee for investors, a move that has nearly killed the retail Mutual Fund sales in India. C B Bhave already holds the dubious distinction of killing retail (for small investor) Share market activity in India.

The politician and present Union Minister of Home Affairs P Chidambaram is busy coding Tax reforms which is not his job. He now wishes to tax all insurance and investments. His last tenure as finance minister, P Chidambaram ensured the fall of otherwise healthy economy which he inherited by from competent financial ministers before his term. Chidambaram spent all his energies taxing the ripe economy. He was found issuing empty threats to Indian Industry, after the world economic problems set in, while sitting in other world capitals and negotiation non financial deals.

The idea of moving to thin capitalization may not be bad. ‘Thin capitalization’ means a situation an entity has a high proportion of debt than equity. The method of achieving thin capitalization by the Indian government is wrong. Thin capitalization actually goes against the very grain of customer empowerment, the platform C B Bhave and D Swarup are using for their advantage. P Chidambaram’s penchant to tax is not understandable if you see his dismal performance as finance minister. He imposed education cess and the money has not been spent in education. Worst example of P Chidambaram’s tax fetish was taxing the ATM withdrawal. It is alleged that P Chidambaram was eased out of Finance ministers post because of his incompetence.

If these bureaucrats keep their ego out, they might see the damage to the New Pension Scheme and Mutual Fund. Instead they are set to destroy the most successful financial advisory model, the insurance. It was the insurance agents who have built up the retail financial industry in India. The mutual funds was also pushed by the insurance agents in majority of the case. Mutual Fund industry failed to cultivate the individual agents and chased the High net Investments and Institutional investments.

Let us take the example of C B Bhave’s stock market reforms. Today a small investor is left out of the stock markets. How does a small investor buy stocks? Since he has small money the big brokers and sub brokers shun him. He is not so capable of using an internet. Even if, he dose not understand the financial ratios. Now, since the Mutual Fund came to C B Bhaves attention, the small investor will be further left out. Misselling should be dealt with necessary regulation tackling that particular problem. But C B bhave has a history of chopping the head for a tooth ache. No head no problems seems to be his motto.

A small investor can be served only by a individual financial adviser. Had NPS been rewarding, D Swaroop would have been scripting success stories than the self face saving committee recommendations he is making. A small investor cannot pay fees as he barely has money to invest and a individual advisor needs higher commission to survive. The current Insurance model was very sustainable. Even now, the cut in the commission of the Development Officers of the LIC has a telling affect.

The premise that agents should negotiate for commissions with customers is an unworkable idea for which India is not ready yet. Finance ministry (or the Home minister), the SEBI and the PFRDA have not taken any initiative to educate the customer. The entire education of customers was done by the insurance agents and is a continuous process. Let us think of a situation where SEBI, PFRDA, Income tax employees and the Home minister should be paid salaries based on the services they render and should be negotiated with their customers, viz, the mutual fund and insurance distributors. And to truly empower the customers of these entities, there should be minus salaries of these employees are found cheating or not working optimally. Should the Home minister should be paid over time for doing finance jobs or not paid for not going behind the terrorists. And should the Finance minister be paid at all?

If there are reforms required it should be in the bureaucracy, tax departments and the the reforms of the regulatory bodies themselves. These entities have allegedly become the hubs of corruption.


Now, let us ask if these above mentioned departments are truly customer centric? Is the Customer empowerment is limited to the agents? Has the customer won or lost? Is the customer being serviced at all? Is the 2% - 35% percent commissions to agents costly to the customers than the corruption and the unrewarding taxation? By forcing the investor to investing in low yield debt and taxing their returns truly an investment empowerment?

Direct Investments can be injurious to your Wealth

Direct Investments can be injurious to your Wealth
It is a time of specializations. You will find specialists, super specialists in almost all fields, but the question here is, how many of us actually avail their services. To quote an instance, let us consider the case of medicines in India, in most part of our great nation, you will find majority of Indians relying on self treatment, thus self medication. To worsen the situation further, pharmacists supply these required medicines on demand in order to boost their sales and even prescribe more to clinch furhter sales. And in the presence of relaxing pharma law agencies, this practice is going on. No doubt, most of the patients are getting timely relief as well, without realizing that this timely relief may turn out to be a night mare for the days to come.

Here, read an old joke. One young lad was driving a Hero Honda motorbike on one highway on high speed. He crossed one passing truck twice and asked the truck driver with a pastering smile, "Have your ever driven Hero Honda". Later the truck driver found the young lad lying crashed on Highway. He stopped his Truck and came near asking the boy, you were asking me about my driving, now what happened. The poor boy replied that I was seeking your guidance about how to apply the breaks.
This piece of humor is enough to illustrate the fact, if you do not know applying breaks, do not drive. So refrain from self medication and do not seek advice from quack doctors.

When, we fall sick, we refer the Doctors. When, our vehicle break down, we go to mechanics. For pursuing education, we go to schools and colleges. And the list never ends. So on. Then, why to experiment with your hard earned money?

The First reason to invest in Mutual Funds is to benefit from the expertise of Fund Managers. Capable and trust worthy fund managers are engaged by the Asset Management Companies and so your investments will be managed under experienced hands. And if this is not enough; do not neglect the role of advisors, good advisors are like your neighborhood family doctors, who will keep you informed about fund managers as per your requirements, various investment avenues, type of fund, time horizons, asset allocation and other factors, crucial for your investments. Your advisor knows you, your family, your earning, your risk tolerance, emphasizing in a sense he cares for you.

Believing in fund house or fund is secondary; first believe in your Advisors. Avail his services in selecting funds, servicing of your investments, continuous updates about status of your funds and so on. For a mere of 2-3 % charge you pay him as a fee, you can capitalize on his suggestions which in turn would be worth fortunes.

It is imperative to understand, there is no free lunch. Benefit from the services of your distributors/advisors to secure your investment for the sake of your investments. Directly choosing funds and investing without a thought can be fatal for your investments. Mind this. Act before its too late.

Visit our India Mart Web Link

For Any Product Requirement Please Visit our India Mart Weblink or contact on below details:

http://www.indiamart.com/company/1692173/

Contact Details
Company Name:
Riddhi-Siddhis Fast Tracker Financial Investment & Consultancies
Contact Person:
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Telephone:
+(91)-(294)-2471358
Mobile:
+(91)-9829353219
Address:
Riddhi-Siddhis Estate, 1, Gokul Nagar Commercial, Near Bohra Ganesh Ji Temple,Udaipur, Udaipur, Rajasthan - 313001 (India)
Website:
http://mutualfundadvisor-jinendraporwal.blogspot.com

Reliance Money Complaints - Money missing from the account

Reliance Money
Posted: 2008-10-12 by Pavan Send email


Money missing from the account
Hi All,

I am using Reliance Trading account from last one year.It has hell lot of problem I think no other broker service in India has that many problems.

But the biggest problem is money will be missing from the account.The customer care people not at all bothereed atlease they are unable to understand what we are saying.

I have transferred around 15, 000/- Rs from my HDFC saving account to Reliance money. Couple of days I have bought some share of around 12, 000 at the end if I calculate the total money 652/- Rs are missing.

No body knows where that money went.I tired of calling to customer card they are really use less people.
I have faced this problem lot of times.After the calling the customer care around one week they will deposit my money back.

From my experience I have observed that these people are doing all these thing intentionally.If the services are poor we can understand but their intension itself wrong.

Friends, Please be careful with reliance money...They are real corporate cheaters.

Any one has the idea how to register the case against these people ?

Thanks

Pavan

Beware of RelianceMoney

I have been using Reliancemoney for the last 4-5 months and the experience is less than satisfactory. I have been using indiabulls prior to switching over to Reliancemoney for access to BSE & IPOs aswell and now i would rate indiabulls much much better than RelianceMoney,specially in terms of the website functions & user friendliness,transperant & simplified billing methods.
Among the issues which are to be noted in RelianceMoney are - (a) Charging Rs 12 + taxes on each scrip ordered on phone or thru e-kiosks.(b)Charging of Rs 12 + taxes on each scrip sold on any single day thru net.If the order is placed thru phone, the transaction charge is Rs 12 + 12 + taxes for each scrip ordered to be sold thru phone.This clause was not mentioned anywhere before (other than an incomplete/unclear explanation in welcome kit).The first time i got to know it is when i got the statement at the end of the month.Even if you sell a single small value share of say Rs 9/-,instead of getting money,you would end up paying money of Rs 9-12-12 - taxes i.e. -27 rupees for selling that share on phone.(c)The helpline number has never been picked up till date while i tried during trading hours...must have tried atleast 15 days till date. (d) The "My Portfolio" option in the site never opens and even if it opens ,it displays all baseless values,like a stock costing Rs 30 in market is displayed at Rs 90. (e)The "Inbox" function has never operated till date.(f)The amount debited from my trading amount dont match with the balance i should be having after paying all the transaction charges, brokerages,etc, as mentioned in the statements.(g)Disappearing of account balance details at the end of each trading session to reappear in the next trading session.....and than find difference in amount balance between the previous day and the next day (After considering brokerages/transaction fees/taxes).
I may be switching over back to indiabulls soon.....as the experience in last 4-5months is not good enough.

- Chetan Joshi (Surat)

Reliance Money Complaints - Unethical rs 15 / each trade brokerage charges by reliance money

Reliance Money
Posted: 2009-07-29 by Ashish Bordiya

Unethical rs 15 / each trade brokerage charges by reliance money
Unethical rs 15 / each trade brokerage charges by reliance money

I my self Ashish Bordiya do on line share trade by Reliance Money Plat form.


My point is that if online share trade generates thousands of crores turn over in a single day then it has to be clear & secure by Online operators (Brokers) other wise its just like an online gamble which is worst then a casino gamble because in casino gamble you know why you have lost the money. But in online trade you won’t know why you have lost the money when broker creates some thing unusual by showing their un usual legal boundaries & suck the crores (Very Huge) of amount of money in 2 / 3 days times form consumers pocket & SEBI or else were sleeping to wait for an another events like “Sataym”.

(a) What BSE Says for online trades

"The Bombay Stock Exchange Limited is not in any manner answerable, responsible or liable to any person or persons for any acts of omission or commission, errors, mistakes and/or violation, actual or perceived, by us or our partners, agents, associates etc., of any of the Rules, Regulations, Bye-Laws of The Bombay Stock Exchange Limited, SEBI Act or any other laws in force from time to time. The Bombay Stock Exchange Limited is not answerable, responsible or liable for any information on this website or for any services rendered by us, our employees and our servants."

(b) What Reliance Money Says for online trades

Although Reliance Securities Limited tries to ensure that all information and materials, whether in relation to the products, services, facilities, offerings or otherwise (hereinafter "Information") provided as part of this website is correct at the time of inclusion on the web site, it does not guarantee the accuracy of the Information. Reliance Securities makes no representations or warranties as to the completeness or adequacy or accuracy of Information and expressly disclaims liability for any errors or omissions or delays in updating this information.

According to them they can launch products for trading like limit cards(1 moth to 1 year limit) & collect crores of amount then before expiry of these product with ought giving any advance information’s they introduce another brokerage plan & and make limit card plan use less by charging rs 15 per executive trade, they stars to charge rs 15 per executive 20/07/09 and announcing about this on 23/07/09 on their web site that moment they sucked crores (very huge) of amount from customers pockets by the name of rs 15/- each trade & limit card

And clients are calling, mailing again & aging but they are not giving any response.

Means they can make any rules & regulations by their own any time they feel that they need money “example” -: 200 crore they can change the plan or else quite normally to gain the same.

Sebi or Indian judicial system sleeps to see all these kinds of bluff with their consumers
If any responsible person of sebi or Indian judicial system will just search over the internet they can find thousands of complain against online brokers.

Is it a chit fund organization or an organization of mr. jadeja which is declaring they are no liable for anything

I want to know what consumer protection act does for above mentions situations

(a) Is that they can revert back the amount to the consumers from the faulty company?

(b) How may days it will take?

(c) Is there any online plat form to get back the money?

(d)How much penalty it can provide to consumer (10 times or 20 times or more then of actual amount) why huge penalty is needed? answer if penalty will be on actual basis then no body can control these kinds of situations company appointed is legal adviser who is getting salary for these issues then actual basis solution will be the write choice for them. And 100 out of 2 persons will get hedge to get back their money and problem wont be solved


(e)If same case of a person solved then this will be applied on every suffering consumer?


If sebi, Indian Judicial System, Consumer Protection Act won’t stop these kinds of unethical
Practices permanently then stop online trading

7 reasons why wife must know about finances

7 reasons why wife must know about finances

BankBazaar.com

Are you the person in the family with the sole responsibility of maintaining the household finances? Is your spouse completely oblivious of what's happening?

God forbid, but what if for some reason you can no longer manage the budget? Or what if you're just tired of managing everything yourself, and want your partner to become more involved in your household's finances? How do you teach her everything you know?

This is the time to sit down and stress on the importance of your partner needing to be aware of all important financial information. This may not be the most entertaining of activities, but it is the key to taking the best possible care of one of the most important people in your life.

1. Make a list of everything and where they are located

While you may be an open book for each other, don't assume your other half possesses the intuition to know where you keep sensitive information.

While you may think your filing system is the most organized one that one can ever come across, and that your financial records are in a pretty obvious location, your partner may not think so.

So what is the first thing you should do? Present your partner with a list of logins, passwords of all of your accounts making it easy to see everything that needs to be addressed. Keep it of course in a safe and secure location.

2. Discuss transparency regarding investment info, emergency funds and bank accounts

Your partner may be under the false impression that not knowing the details of your family finances will reduce stress.

That's not the case. Explain to him/her that sharing knowledge and responsibility for your financial life reduces stress as it makes you ready for any situation that may arise when one is unable to operate.

In times of emergency like a long absence or medical emergency or death - this info then becomes the most important thing.

3. Awareness of all financial dealings is a must

Your partner should know all your financial dealings so that there are no rude surprises. So sit down and review your financial situation together - cash in the bank, investments, equity in your home, mortgages, credit card debt, and any other liabilities you may have. Review your budget together.

Being aware of all financial dealings has a couple of benefits. First, you make better decisions when you collaborate.

Second, you share responsibility for the outcomes -- good and bad -- which means that he/she is never in the dark about where you stand. And this eliminates a lot of the tension that inevitably results when one party knows a lot less than the other.

4. Have your partner watch you handle the finances

Educate your partner on how to handle finances. Let him or her watch and learn.

Explaining things is helpful, and written instructions/checklists/spreadsheets are even better, but nothing beats sitting down with your partner and talking through actually managing the finances.

Let your partner observe the process while you explain it, and then have him or her practice it with your help and guidance.

5. Gradually give your partner some financial responsibility

If your partner hasn't handled the money at all, start off with a small, manageable task - preferably one with low stakes. As he or she becomes more adept, give additional tasks to manage.

Eventually, have your partner handle all the finances for one month (with your supervision, of course). Then, try switching off months, with your partner handling the finances every other month until you both feel completely comfortable.

6. Discuss contingency plans

Make sure your partner knows what you would do in an emergency or unplanned financial event. Don't keep it conceptual - discuss actual, concrete strategies to handle unplanned events.

If there is a sudden loss of income, which bills would need to be prioritized, and which expenses could be reduced or dropped altogether? What are your savings priorities? If there is an accident which account do you access before you get benefits from your insurance? Is there any charity to which you would donate a significant sum?

On a lighter note, if you win a lottery (the ticket of which you have just bought with his/ her consent) which debts do you clear?

7. Maintain a household budget

You may not be the type who needs to write everything down to successfully manage your money, but a budget is an excellent way to give your partner a big-picture idea of all the money in play - the income, the debts, the recurring expenses, the investments and so on.

It can also help your partner pick up where you left off in managing the household's finances if you die or become incapacitated.

So, start encouraging him/her to start making a budget plan. Soon you will find that both of you are enjoying it and life is becoming a real partnership.

A game of patience

By Udayan Mukherjee, Managing Editor of CNBC TV18

Hope is a dangerous thing, as investors found out yesterday. If the Finance Minister was guilty of presenting an insipid budget that was low on the detail that the market wanted, investors too were perhaps guilty of expecting too much, too soon. That doesn't absolve the Finance Minister of a budget that is low on ambition, boldness and vision but at least it teaches investors to not hope for the moon going into a policy event.

The real damage was done when the FM spelt out the 6.8% deficit number implying a large market borrowing programme with little detail on how he "would get back on the FRBM path". Global rating agencies will pass their judgement in the next few days but the bond market didn't wait that long. The benchmark bond yield shot past 7% raising fears of interest rate spikes and triggering off a collapse in stock prices. At a macro level, that perhaps was the undoing of the market. At a more micro level, a lot of sectors had run up expecting substantial boosts from the budget. Education, real estate, textile and fertiliser stocks which had meaningful rallies leading up to the event collapsed completely . The surprise was Infrastructure, where stocks sold off as well, as apart from an increased outlay for the NHAI the budget was a bit low on bold moves.

Then there was disinvestment, which the market had pinned some hopes on. The pitiful Rs 1100 crore figure which the FM unveiled dashed those hopes. That number is truly inexplicable.

Not that this budget had nothing postive for the stock market and corporate India. The scrapping of FBT, extension of 10A/10B for IT companies, removal of CTT and no rollback of excise cuts were all positives, partly offset by the hike in MAT. The scrapping of the surcharge on personal income taxes may even be a limited consumption trigger. Tobacco companies were spared the axe this time and ITC was one of the few stocks that ended in the green, contrary to investor fears.

Yet what the market wanted was a green signal, that finally the drought on reforms is over. That a government, shorn of the Left, will press ahead with bold policy moves. The charitable view is to accord the FM the benefit of doubt : he didn't have enough time to unveil a big bang budget and the best is yet to come, over the next few months and in the next February budget. The cynical view is that the market is running ahead of itself; despite the electoral surprise, things will improve only incrementally and over a much longer duration than investors want. The truth, as often, perhaps lies somewhere in the middle. While investing in India, the virtue of patience cannot be overstated.

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Indians are wise savers but poor investors: Survey

Indians are wise savers but poor investors: Survey
By Surojit Chatterjee
Posted 11 February 2008 @ 06:27 pm EST
A recent nationwide survey of over 60,000 households by National Council of Applied Economic Research (NCAER), New Delhi and Max New York Life has revealed that people in India do not plan for long-term future and keep away from investing in long-term instruments though they save for long-term goals such as emergencies, education and old age. The book, ’How India Earns, Spends and Saves’ launched by Deputy Chairman, Planning Commission, Government of India, Montek Singh Ahluwalia, Feb. 6, which contains the findings of the survey, reveals that this phenomena is not just confined to just poor or middle-class households, but is prevalent in rich households too.

The survey reveals that most Indians prefer keeping 65 percent of their savings in liquid assets like bank or post office deposits and cash at home, while investing 23 percent in physical investments like real estate and gold and only 12 percent in financial instruments.

For getting secure return on their earning, 51 percent of Indians put their savings in the banks while 36 percent of households still prefer to keep cash at home. The investment in post offices and other guaranteed return schemes and plans gets minor part of total savings. Only 5 percent of family put their money in post offices, while 2 percent buy insurance policies and 0.5 percent invests in equities.

Interestingly, though life insurance is among the most popular financial instruments (about 78 percent of the households are aware of life insurance), yet only 24 percent of households have a life insurance policy. The ownership is 38 percent among urban households but a low 19 percent among rural households.

The survey, which covered 342 towns and almost 2,000 villages across 250 districts and 2,255 wards, suggests that Indian households have a strong saving habit. While income level is an important factor in influencing the saving patterns of households, variations in savings behavior are equally decided by education level and occupation, said Dr. Rajesh Shukla, principal author of the report and Senior Fellow at NCAER. According to the study, 83 percent of the households surveyed saved for emergency, while children’s education (81 percent) was the other key priority. While only 69 percent households saved for old-age financial security, 63 percent households said they kept aside money to meet future expenses like marriage, births and other social ceremonies.

The study also notes that nearly 47 percent households saved to buy or build a house and a similar percentage saved to improve or enlarge their business. Only 22 percent households saved to buy consumer durable and 18 percent for meeting expenses towards gifts, donation or pilgrimage.

The survey findings confirm the wide disparity between urban and rural people. On an
average, the urban Indian earns 85 percent higher than his or her rural counterpart, spends 71 percent more and saves nearly double - Rs.26,762 compared with Rs.11,613 - every year.
According to the survey, a person’s occupation, education, age, location and landholding directly influence his or her income. Households with graduates earn 3.5 times more than those with illiterate ones, and incomes nearly double between the ages of 25 and 66 While salaried class households, which constitute only 18 percent of the total households in the country "accounted for greatest proportion of savings" and are the cream of urban India, agriculturists with land are the richest in rural areas. Wage laborers are the poorest anywhere, comprising 62 percent of the lowest-income households.

"The highest savings (in terms of per household) are in the 56-65 age group where savings are Rs.21,196 per household, or 25 percent of the annual income," the study notes. The two main factors responsible for higher savings with growing age, according to the survey, are motivation to save and the need to meet old-age requirements.

The survey also suggests a direct link between the education and savings by pointing out that households headed by graduates had highest level of savings in both absolute terms and as a percentage of income. The survey notes that households managed by persons in 56-65 age group, kept bulk (57percent) of their savings in liquid assets, though they also invested the surplus funds in shares and debentures.

Interestingly, the survey reveals that the households headed by persons in the age group of 26-35 years, paid more insurance premium than their senior counterparts. Households headed by graduates spent more on buying insurance around 10.2 percent, while merely 3.5 percent preferred investing in shares or debentures, the survey says. "Indians prefer to save money in ’in-house savings’ rather than ’in banks or investment.’ They save money for emergency and any mis happening," the study notes. The reason behind this is because unlike in the western and developed countries, which have the system of social security that prevents the poor households from starvation and ill-social society by giving social protection and economic support, "there is no social security in the country (India) for the citizens of the nation, "the study explained.

The sample size included 63,016 households, equally divided between rural and urban areas.

"The habit of savings is good, but the way of savings are not good enough as only a meager part of total savings come under the government account that is not enough to conduct various plans properly," said Ahluwalia, commenting on the survey results. The survey also reveals that 96 percent of the households cannot survive beyond a year on their current savings in case of loss of income due to some eventuality such as death or disability of the chief earner. However, a majority of those surveyed expressed confidence in their financial well-being. Lack of awareness of their financial preparedness for income loss predicated their ignorance of the more viable channels for long-term investment. "It is high time we must encourage savings among the people. We must encourage contractual savings in the form of provident funds or any other such modes," Ahluwalia said.

"Insurance is the vehicle of savings," he added. However, experts claim that government’s policy of providing incentives for long-term savings is inadequate and hence, Indians lack appetite for long-term investment. "The current tax incentives do not encourage individuals to keep saving for 15-20 years as the tax benefits they get from a more flexible 1-2 years (investment in tax-saving mutual funds or bank fixed deposits) are just as attractive. Hence, we see millions investing for horizons of a few months or at best a few years, but rarely for their own golden years. Those who save more than the Rs.1 lakh limit are effectively taxed at both the entry and exit stages," explained Shikha Sharma, managing director and CEO, ICICI Prudential Life, the largest private-sector player in the Indian insurance market.
According to Sharma, a separate and additional ring-fenced limit of Rs.1 lakh for long-term savings, particularly pensions, should be introduced. Her views are shared by Aviva India’s managing director, Bert Paterson. "We recommend a separate limit for deductions under Section 80C for long-term saving instruments like life insurance. The government should look at encouraging people to save for the long term," Paterson said. According to Paterson, tax benefits on pensions and long-term savings need to be increased. The world over, he said, the development of long term saving instruments has been supported by tax exemptions.
"In India if the government does not offer a separate tax benefit for pension investments of up to Rs.1 lakh, the salaried sections will be hit badly as the corpus on retirement will be insufficient," Paterson said. "Financial security is an essential element of inclusive growth. In a more dynamic labor market and in the absence of established state-provided mechanisms of social security, households in India increasingly need to look to financial instruments to meet their asset accumulation and
old-age goals," said Suman Bery, Director-General, NCAER. "Yet the pattern of financial asset accumulation is relatively primitive indicating a need for much greater awareness of the role that specific financial instruments can play in reducing financial vulnerability and enhancing financial security." "There is an urgent need for a financial literacy program to make people understand their options and financial needs at different life stages," said Analjit Singh, Chairman, Max India Ltd, commenting on the solutions for financial protection to meet both long-term financial needs and loss of main source of income. "Life insurance is one of the most important financial instruments for financial security. In the rapidly changing Indian economic and social environment, life insurance products sold appropriately to the consumers not only create awareness of the changing reality but also help reduce their vulnerability and overall improve the long-term financial security of the individual, the family and there by the nation."
"Understanding household saving is of importance for several reasons. At the national level, household savings provide the main source of investment financing both for government and for the corporate sector. Rapid GDP growth leads to rising household income and higher saving rates. This is true for India as it has been elsewhere in Asia," a press release stated."But for the individual household, saving is done in order to achieve specific short-term and long-term goals, notably financial security. Accordingly, the main goal of the Max New York Life-NCAER survey is to gain deeper insight into the motives for financial saving, the degree of financial security (or vulnerability) of Indian households, and the degree of sophistication that households bring to bear in their saving and investment decisions," it said.(Rs.1 lakh = Rs.100,000)
Read the full aticle of:
http://www.ibtimes.com/articles/20080211/indian-investment.htm
This article is copyrighted by International Business Times.

Story illustrates SIP strength

Mutual Fund Protest against SEBI decision

We oppose the decision taken by Securities and Exchange Board of India (SEBI) said that entry loads will be discontinued. As SEBI said that the investor availing the services of the advisor will pay the charges directly to him rather than the AMC paying to the distributor. However, in their zeal to copy-paste the practice, SEBI did not take ground realities into consideration. Investment advisory is not yet considered a profession in India and that’s why advisors are not being treated as professionals like doctors, lawyers etc.

Moreover, the practice of investor paying the advisor directly is practically impossible. For example, how would the advisor recover his charges in case of a monthly SIP? Should he charge the investor for the entire period of SIP? Or should he charge the investor after the debit has happened? There are bound to be defaults in payment of advisory charges!

SEBI in its effort to stop the system of pass-back of commission, has only legalized it and has in turn helped the big and corporate distributors rather then the marginal distributors who run their homes on such commissions!

SEBI's action will be only help bigger distributors consolidate their hold over the industry.

SEBI should not kill an industry and livelihood of millions of people in its effort to stop a malpractice.

We do not think that this is at all a good step from SEBI. In any business 2 per cent margin cannot be considered as very high. There are products like insurance where the margin for distributor is anyway in the range of 20-40 per cent. Why SEBI does not want to be a well-wisher for the insurance investor the way it is trying to be for MF investors? Whatever growth has happened in the mutual fund industry is because of distributors. we agree to the fact that there are advisors who do not guide the clients properly. But that cannot create the base for this step. Given the priority this should first happen with the insurance sector.

SEBI’s move is not only bad for investors, but also for the future growth of MF industry. We expect a similar type of action from IRDA, particularly for ULIPs, to protect investor from mis-selling.

we personally feel coming days are crucial for MF industry.

AMCs might come up with new packages to attract distributors.

Majority of IFAs, who sell only for brokerage structure, may run away from MF industry to ULIPs, from where they can earn a lot.

Most of the distribution channel including banks and NBFCs might lose their interest in selling MFs.

MF industry will stabilize mostly for them, who actually provided services and sold only worthy schemes to investors as per their requirements, and only for those who updated their knowledge and way of doing business.

But the problem also lies with Indian investors and their mindset. Most of them will not be ready to pay even small amounts directly from their pocket, although they had paid more in past. Follow up would be an add-on job for distributor.

"Instead of finding the remedy for the disease SEBI is trying to kill the patient"

NO ENTRY LOAD decision assumes:
1] The whole Indian population is highly educated , fully aware of financial markets and has an in-depth knowledge of MFs;
2] Mutual fund (MFs) industry has reached to every corner of the country, just like post offices;
3] MF. has country wide network in every city & smallest of the town as the banks in India have
4] MF offices are is easily accessible in every part of the country;
5] Almost 60 years since independence, insurance penetration in India is one of the lowest in the world, but the same population is highly intelligent and fully aware when it comes to MFs;
6] Because of high penetration of MFs, there is no need to pay even 2 per cent to distributor;
7] Investors can approach MF offices, there they get very IMPARTIAL advise -- that their funds’ performance is not so good, so kindly approach ‘XYZ’ AMC and invest in their products;

Because of all these reasons there is no need of any DISTRIBUTOR to work.

In my opinion no entry load decision will help only 3-to-5 per cent of investor community which is well educated, well informed and lives in big cities, but totally KILLS the product and the DISTRIBUTOR too in small cities and towns.

This decision is like a sword given to investors. Only 5 per cent of the financially aware investors’ community will use it properly, while rest 95 per cent of the people, who are totally financially illiterate will misuse it and harm the distributors.

On one side SEBI says that small investors should be the focus of MF industry, but on other side it is trying eliminate individual distributors who are their only representatives in small cities and towns where there is no MF office.
Just by opening offices in selected big cities, you cannot reach out to the common people. MFs have zero presence in most part of the country. The only representative they have there are individual distributors working against all odds. If you are not ready to pay even 2 per cent commission, then this tiny presence will also vanish.

No entry load decision is taken only for the benefit of high networth individuals (HNI) and corporate clients. It will benefit high profile investors but it is against the small investors because no individual distributor will work aggressively as there is no proper commission and future prospects are bleak.

If SEBI has a problem that funds are not sold with transparency and distributors unnecessarily churn the funds, then it can start investor education programmes/seminars or give advertisement in media to avoid mis-selling by distributors. Lock-in periods can be made more stringent and exit loads can be made more restrictive to avoid early redemptions.

Instead of finding the remedy for the disease SEBI is trying to kill the patient.

Everybody knows that MFs have the least expenses, still small investors are opting for ULIPS to invest in, which carries expenses/allocation charges up to 80 per cent in some cases. If that small investor is still not aware/caring/bothered about the vast difference between 30-to-80 per cent load in ULIPs and just 2.25 per cent in MFs, then what is going to change even if there no entry load.

In last 5-to-7 years, private insurance companies have reached into every district and tehsil, but AMCs are limited only to certain cities. Distributors from small cities have to face huge problems in processing the purchases, redemptions, or any transactions. They have to bear courier charges for every transaction to send the documents to AMCs. Every transaction gets delayed by 2 – 3 days because of this.

If you want to grow the mutual fund industry, the focus should be on investor awareness, expansion and penetration of the industry in small cities, which can not be done without the help of distributor.

"Investors and distributors are two legs and there is no use removing one of them"

Why work when one is not going to gain anything from it? Securities and Exchange Board of India (SEBI) is asking the Mutual Fund (MF) industry to increase penetration among retail investors but has taken out the reason. One should take steps which helps one work honestly. It was a good decision to remove the necessity of furnishing a PAN card for SIPs up to Rs 50, 000, and the board should also consider taking other such steps like reducing the minimum SIP amount, facility of a daily SIP and depositing through cash instead of cheque. Investors and distributors are two legs of the MF industry and there is no use removing one of them.

"AMFI and AMCs should also take a stand"
It seems that the present SEBI dispensation has a grudge against the distributor community. The present decision is an act of arrogance on part of the board. It is very clear that the authorities did not think properly while formulating the policy of abolishing commission to MF distributors. No Indian investor will pay a second cheque for commission. Instead they will go to the AMC directly after consultations.

Or did the board buckle under the pressure of the powerful insurance lobby. Because IFAs were advising investors to invest money in MFs rather than ULIPs which charges a heavy amount on various heads. But IRDA is well aware that only insurance advisors can bring in business. SEBI's stand is quite opposite. It wants to eliminate IFAs and promote corporate brokerages and banks. Banks only promote schemes which suits them the most.

Some time back there was an opinion that FIIs should also be charged entry loads as they were entering and exiting MF schemes at will at the cost of retail and small investors.At the time of the financial turmoil when FIIs and corporate investors pulled back their money, it was the retail investors who stayed with the AMCs due to their belief in their advisors. The advisors job includes educating the new investors.

We always told my clients about the commission paid by AMCs and they were comfortable with the load till they were getting good returns from their investments. A few months ago a very senior official of a leading AMC opined that SEBI is worried only about the 2.25% of the investment rather than the major part of 97.75%. If an IFA brings in for example 50 new investors who for a start only invest a minimum of Rs. 5000/- and pays 1% commission, the IFA will be have a bundle of cheques of Rs.50/- each. A single cheque would have served the purpose if the AMCs were to collect the commission and then disburse it to the distributor.

If a small investor who has an SIP of Rs.1000/-pm, and agrees to pay 1% commission, is it practical for him to issue a cheque every month. we don't think the investor will be willing to pay in advance for the entire period opted for SIP. The AMFI and most of the AMCs believe they can bring in business without the help of IFAs. Another suggestion was shifting the business to insurance ULIPs. It would be unjust to our investors who has reposed their faith in us. The best way is to stop selling for some time. Let AMFI and AMCs take a stand instead of simply watching from the sidelines.

"Regulation to adversely affect distributors, sub-brokers and employees connected to it"

SEBI is perhaps bringing in new rules every time to finish all distributors. We are not eating up all the money that is invested. It is the insurance companies which is doing it. SEBI is only concerned about 2.25% entry load in MF whereas in insurance even up to 100% is charged in some policies and SEBI is not bothered about it. The only culprit in front of SEBI are we distributors. I agree that in all sectors, cost of each product should be disclosed and then margin of profit should be bargained. Instead of writing MRP on each product they should write cost price of that product.

On one hand SEBI is implementing KYC to prevent black money and on the other hand they are encouraging others to create black money. Firstly, none gives cheque for commission and even if one has, then they will deal in cash instead of cheque. This will not only create more black money but also there will be huge loss of revenue in form of Income Tax and Service Tax.

The next steps would perhaps be writing to the finance ministry telling them about the huge revenue loss in form of compulsory Service Tax deducted and also Income Tax that is paid on same amount. MF companies are least concerned with our interest and are working closely with the board it seems. More than One lakh distributors and several lakh sub-brokers and employees connected to them will be affected indirectly.

" SEBI’s regulation invites many questions"
There are certain potent questions which we as financial advisors distributing Mutual Funds, would like to ask SEBI before they implement the no entry load on MF rule. Have they genuinely thought about it or wilted under the ‘pressure’of lobbying from a separate regulatory body?

1) What investor benefit are we talking about? Does an average investor know the appropriate fund selection process according to his risk profile or the path to achieve his goals for the long term? Does he know the capital risks attached to his mutual fund investments? If a genuine financial advisor imparts his advice to the investor, is he not entitled to his professional fees by the regulatory authorities? Is imparting financial education or creating awareness a professional job or a crime?

2) Why does SEBI always create roadblocks and crack the whip for the Mutual Fund industry at precisely the time when there is a genuine requirement of retail participation in the capital markets? In February 2008, when the markets were sliding, KYC requirement came into action and now when the Indian investor is recovering from the gloomy scenario and is ready to participate, there comes the final nail in the coffin – de-linking the distributor/ advisor/AMC from the retail investor.

3) Why is an ambiguous product like ULIP promoted and rewarded by the authorities to its agents selling it to the unaware investors? If we are talking about Investor benefit here, every qualified financial professional will understand the difference between investing in a ULIP and a Mutual Fund. Why this hypocrisy? If you genuinely want uniformity then let's have common commission structure (2.25%) for an agent selling a ULIP and an equity mutual fund. If the distributor/ agent have basic financial knowledge and investor benefit in his mind, ULIP as a product will completely fade out.

4) Does SEBI envisage a situation when an AMC would appoint executives to make direct calls to the retail investors or for that matter send their personnel to get business from NRI's / HNI's based outside India. Who would be responsible for bringing investments to the AMC's? It is us distributors who have taken this onus.

This move sincerely defies logic and has come as a very rude shock for all of us. We as financial advisors feel back stabbed not by any outsider, but by our own.

“All in all, the decision is bad for everyone it is supposed to help”
I feel the effects will be:
1. No service will be given to small clients as they cannot afford a service charge of say even Rs 500,which will be 10 per cent of Rs 5,000;
2. Brokers will push ULIPs more, which are harmful to the investors;
3. Brokers will shift to other lines of business;
4. Neither do the AMCs have the capacity to directly entertain so many investors, nor they have the reach;
5. Small investors will have to leave their work and spend time in queues, unlike HNIs who can send their staff or drivers; All in all, the decision is bad for everyone it is supposed to help.

“The mutual fund industry has become the soft target for so-called reforms”

Although SEBI has implemented lot of good changes in the financial industry, off late we find a lot of inconsistency in terms of its implementation, particularly in the mutual fund industry segment.

The mutual fund industry has become the soft target for all the so called reforms. SEBI has been trying to say on one hand that they want to penetrate the Indian market in a big way by bringing in more retail participation in the mutual funds. But on the ground the agenda seems to be different.

The recent move on the part of SEBI to implement No Entry Load thereby abolishing the Upfront Distributors Fee may bring in an illusion that it is a blessing in disguise for the investors. Such a model may suit the so called knowledgeable investors but for those who are in the process of accumulating wealth for long term the 2 per cent fee is not a great deal. They not only get advisory services, but also get a relationship which otherwise no other segment can ever match.

In India it is practically impossible to get the right fee for an advice. Such a concept can prevail in a country where the financial literacy is quite high. Even in such a so called financially literate country there are mutual funds which charge as high as 8 per cent entry load.

SEBI has a decent corpus in the form of Investor Education Fund, but we don’t find adequate investor education being imparted by them. They should start concentrating on macro issues rather than on micro issues.

SEBI talks about openness, free and fare treatment in all its dealings. But when it comes to its own decisions everything is forgotten.

The latest being a drama conducted by SEBI in the form of inviting views on the implementation of Variable Load in mutual fund schemes.

There were lot of opinions and the majority favoured either no change in the existing system or implementation of Variable Load in phases. But everyone had outright rejected the two-cheque model. But finally when the curtains went up we saw that only the one which was rejected by one and all has found its way.
Everyone knows that the distributors are paid by the AMCs. The investors are aware about the entry load charged and they clearly understand that full or part of this is being paid to the distributors for the services rendered. No one is unhappy if the AMCs pays more to the distributor than the amount of load it carries. Why should anyone bother as long as they are not charged more than the percentage stated in the offer documents?

There are several financial instruments available in the country be it Govt of India Bonds, small savings, insurance or any other and the applicable brokerage are all paid by the institutions and no one asks to collect the remuneration from the investors. It is strange that MF distributors are asked to collect the commission from the investors. Already there is no entry load for applications received directly from the parties but the response is very poor as most investors are dependant on the services of advisors.

'Investors Are Not Self-Motivated'

We have found a unique way to protest against SEBI’s way of thinking. Mr Bhave thinks that, after abolishing entry loads, investors will invest more because of cheap products that offer no deductions. But we want to tell him that there are no self-motivated investors (because MF doesn't guarantee returns and most Indian investors want capital protection). Who will voluntarily want to invest in MFs? Brokers are the ones who mobilise investors funds towards risky assets like mutual funds.

In any case, all the self-motivated investors are already investing directly with AMCs.

Now, distributors can adopt a new strategy and they can start boycott MF industry and also start mobilising funds from mutual funds to other investment products like life insurance and post office schemes.

“Nothing is free in this world”
We just wanted to say there was an action taken by SEBI a few month back where anyone can go to AMCs for investments and without giving any entry load.

But if someone wants to come through a broker and needs guidance and help to chose fund according to his risk tolerance, he should be charged, like any doctor or CA does.

But my dear friend, in India no one is ready to give any money for any service they receive.

Nothing is free in this world, we think the best things in this world are free i.e. nature, but it too takes something from us in return i.e. years of ours lives.

If an investor has an option of investment made in mutual fund to chose from direct method of applying or from broker, that is fine if he goes directly he/she won’t be charges any entry load, and if he/she chooses to come to a broker he has to pay an entry load of 2.25 per cent, that is fine and transparent enough.

That is where the case should be closed.

'SEBI Wants to Remove Retail Investors'
“One senseless decision has crushed the efforts and hard work of thousands of financial advisors like me”

We indeed are in big trouble now. I do not understand what made Mr Bhave take such a drastic decision.
He has ruined the lives of thousands of distributors whose main source of livelihood was MF distribution.

Initially I was told by some AMC people that this move has been taken to improve the standard of Indian mutual fund market and take them to the quality standards applicable in America. It makes no sense comparing America with India. In America they put you behind the bars if they catch you with pirated software whereas in India about 90 percent of the literate population who own a computer have pirated software. It is senseless comparing India with America.

It looks like people sitting at the top level in the regulatory body do not have any idea about the ground level reality. If Mr Bhave is so much bothered about the transparency then what did he do to those 3 AMCs who had done shabby deals with the promoters of some mid-sized companies somewhere in the month of Jan-Feb 2009?

Why didn’t the SEBI inform the investors about such deals and publicly announced the names of the AMCs -- the Economic Times mentioning the shabby deal without mentioning the AMCs name.

In India we have to go to the investors and convince them to investing in mutual fund.
No investor would be ready to give a separate cheque as fees for our advice and services. In India we are living in a society where advice is considered free.

Ever since I started mutual fund consultancy I have been slogging day and night to build strong relations with my clients. Never cared for the scorching heat of the summers or the heavy rains. I just kept working because I thought I can make a wonderful career in this business. I started dreaming again. My sincerity and hard work had started paying off when one announcement of Mr. Bhave ruined everything. I have no words to express how helpless I am feeling now. One senseless decision has crushed the efforts and hard work of thousands of financial advisors like me.

I do not see any career in this business now.
I pray to god now to give us courage, enthusiasm and will-power to start some new business which can give us the financial freedom which mutual fund industry gave. I also pray to god to give Mr Bhave some wisdom so that next time he doesn’t take any such senseless decision who spoils the lives of thousands of people.

“If investors approach AMCs directly they will receive biased advice”

It will be suicidal for the mutual funds in India as the industry is at a nascent stage at the moment. If IFAs/ Distributors would not get upfront brokerage, most of them have to change their preferences and there would be hardly anybody to advise retail investors. If investors approach AMCs directly they will receive biased advice and in this way, MF share out of total savings would be decreasing instead of increasing, which is just opposite of what our government wants.


Investment Instruments Pay Structure of Commission available in the India Market.

S.No Investment Instrument Name Commission in %
1. Life Insurance 12-50%
2. Post Office RD 4%
3. General Insurance 15-30%
4. FD 1-3%
5. PPF 1%

• All commission paid by the service provider not by client by other cheque

We request AMFI, all AMC and SEBI to reconsider on the decision .