Wednesday, 27 April 2016

Why Nifty Futures...!


Why Nifty Futures...!


BENEFITS OF NIFTY FUTURES TRADING

  • Nifty futures is the largest traded instrument/ Product on the National Stock Exchange tracks the most popular broad-based stock index benchmarks in the Indian financial world.

  • Nifty futures contracts are traded electronically via electronic order management software on a PC or through a registered broker over the telephone.

  • Nifty futures gives moves of both sides i.e. UP and DOWN which gives you consistent income.

  • You will get higher exposure in lesser deposit.

  • Nifty Futures have very high liquidity i.e. there are huge amount of contracts traded every day. This ensures that market orders can be placed very quickly as there are always buyers and sellers.

  • Because of High liquidity and large number of participants it is impossible to manipulate the movement of Nifty which is done in many other stocks.

Saturday, 9 January 2016

9 personal finance mistakes to avoid

All of us have made these mistakes, so let's begin by seeing how many of them we can avoid/minimise...




I am normally a person who likes to say 'be careful' rather than say 'do not break it'. The mind always sticks to the most important word -- so the 'break' sticks in our head. However there are a few mistakes that I have been seeing and hearing from IFAs, websites, etc. and think it is necessary to summarise them in one place.
1. Optimism
This is a lovely thing to have, except when it comes to investing. When people invest in equities they have some outlandish expectation -- say 28 per cent CAGR (compounded annual growth rate) or 17 per cent CAGR. No clue who gives them such 'lofty' expectations. Yes, some of us have got it in the past, but hey we have perhaps just been lucky.
A Rakesh Jhunjhunwala or a Vallabh Bhansali have got much higher returns, but you have no clue about the efforts and team work that has gone behind all this. A Naren Sankaran (Of ICICI) or a Motilal Oswal is perhaps capable of getting far better returns, but their risk taking capacity and sheer size of funds managed puts a huge limitation to the returns.
So please temper your expectations.
Just because you expect less it does not mean you will not get it. Keep your expectations at a far more realistic 20-25 per cent OVER PPF returns -- so if you get 8 per cent in PPF, expect to earn about 10-11 per cent over a long period of time, tax free. It can do magic to your portfolio over say 50 years like it has done for some of us early starters.
2. Risk and return


The fact that you take more risks DOES NOT MEAN YOU HAVE TO GET greater returns. It is not your RIGHT; it is just that the odds favour you. If it were so certain, there would be no risk at all. Long term can mean really long term -- say 13 years and you may have just lost patience after 12 years and 5 months.
Be very clear that for goals that are 7-8 years away equity is a good investment, but you will need a back up plan just in case it backfires.
3. Consumerism
Buying every shiny thing on the store shelf or on Amazon and Flipkart are not the way to create wealth. When you feel like buying something, wait. Think of the last 5 items that you bought and what you did with that. Clearly the manufacturer and the shop keeper want you to buy all that is made and displayed. It is up to you not to do so.

Investing more and for a longer period is the only route to a great portfolio.
4. Complications
Planners love to complicate things, ignore complex plans. Simpler plans are far superior.
5. Inertia
Good and noble intentions will not protect your family or create wealth for you. So get off your backside and get that term insurance, medical insurance, provident fund nomination form, ...NOW and start your investing programme, NOW.
If you do not believe this, see the amount of money lying in bank deposits, savings banks, post offices around the country!
Even better see your own savings bank account and see how much of interest has been credited. Kickass start.
6. Impulsive actions...
...while in spending, investing, saving, eating and health issues only lead to pain later on. Learn some meditation and act in leisure. Relax, do not get bullied by bankers, contractors, salesmen, cousins, friends, television experts -- by anybody.
Collect all the data, and then sleep over it for a day. Take a decision after a few hours, preferably 24 hours. Do not believe the agent who says "this scheme is closing..." Some agents have been using it for the past X number of years and doing it very successfully. When you have the money, a new scheme is born every day. Usually in a better form.
7. Ask
Ask the people who know before you invest. Parachutes are to be on your back BEFORE you eject from the plane, it cannot be sent to you mid air...
8. Greed
If you have invested in 50,000 shares of a company at Rs 30 a share and the price goes up to Rs 50 in two weeks time, great. Partial booking -- of say 1000 shares every time a share jumps an X per cent is not a bad idea at all.
It is only the owners who can ride a share from its start to eternity -- like a Premji or a Narayana Moorthy can/ will do. Yes there are many theories here, but hey, greed kills more than it makes you go. Be careful.
9. Mess
Do you have 40 items in a portfolio worth Rs 1 crore? You are a mess. You need to have no more than five. Okay make it 8, but not more. So please prune the mess, and clean it up.


Monday, 28 December 2015

Why 2015 has been unhappy for investors

Market experts believe investors won't be disappointed if they stick around for another 18-24 months


"Our main challenge is to hold on to our investors for at least 18-24 months.
"We feel things would be much better by then and investors would not be disappointed in equities," says the chief investment officer of a leading fund house -- a stark difference from what fund managers said a year ago.
Fund managers weren't too worried in 2014, as it was a year of positive surprises.
For the first time in half a decade, real returns from both debt and equity had turned positive.
Only hoarders of the yellow metal were seeing red.
The euphoria continued till the first quarter of the calendar year. And then, the mood changed.
Whether it was fear of a Federal Reserve rate increase, which finally happened on December 16 or delay in passage of key bills in Parliament, slowdown in China or overall weak sentiment, the stock market wasn't able to go anywhere.
Of course, most fund managers would say one year is too short for gauging the stock market or a mutual fund's performance.
Says Prashant Jain, chief information officer, HDFC Mutual Fund: "While the majority focus on a near-term and on one-year outlook for equities, it is actually far more profitable to focus on the long term."
Shankaran Naren, CIO, ICICI Prudential, quoting value investor James Montier, explains the difficulty in building a portfolio in such market conditions: "There are many times you don't know what to do.
But, you create a portfolio as though you know what to do.
Nearly 18 months ago, crude oil was at around $100 per barrel. Last year, (it was) around $55.
No one said then that crude would will fall so sharply."
Though the Reserve Bank of India did its bit by cutting the repo rate, at which it lends to banks, by 125 basis points, bond yields did not react accordingly.
Therefore, prices of bonds did not rise as sharply as expected.
The numbers reflect the depressed sentiment.
After rising about three per cent in the first quarter, both the Sensex and the Nifty fell between one per cent and five per cent in the next three quarters.
Consumer Price Index-based inflation was at 4.28 per cent in December 2014, compared with 5.41 per cent in November this year, bringing down real returns on bank deposits (State Bank of India's one-year bank deposit rate) from 4.22 per cent to 1.84 per cent.
So, even debt investors wouldn't be overtly happy. Gold, in which investors find refuge when equities are not doing so well, continued its bad run. The yellow metal is down almost Rs 1,500 per 10 gm in the past year.
Of course, there were some bright spots but they were far and few.
For example, pharmaceutical funds, which have returned 23 per cent in the past year.
The next best were the category average returns of small-cap funds at 13 per cent. And debt funds returned between seven and 8.5 per cent.

houses haven't really seen loss of folios despite a slow 2015. Says Sunil Singhania, CIO (equities), Reliance Mutual Fund: "2015 was a flattish year in terms of absolute returns.
"Investors have matured and become smart. They have been investing in Indian equities systematically and consistently - the best strategy. They should continue with it."
Adds Naren: "One of the lessons for the investors is to continue building a portfolio through proper asset allocation in all circumstances.
"When you follow asset allocation, you will automatically allocate more to equities when these are inexpensive, and that's what you always have to do, buy more when equities at bargain prices. It's why we have been recommending equity hybrid/dynamic asset allocation funds for some time now."

            What is keeping fund managers positive is that despite a slowing, Indian markets have outperformed most emerging markets.
"Our view is 2016 should be much better, as we head into a scenario where the full benefits of low crude oil prices and excellent macros play out," adds Singhania. Most believe the early part of 2016 will continue to be painful and expects muted market returns because of the lower crude prices and US rate increase.
"But, as domestic investors, we are easily among the best economies globally. The rupee is well-behaved."
The domestic economic is seeing gradual recovery. One factor I would monitor closely is signs of revival in capital expenditures through rising spending on cement, capital goods, and so on. Once this begins, we may begin to see more favourable market conditions," says Naren.
Agrees Jain: "The outlook for the economy is improving steadily with each passing day. Several initiatives of the past and those that are underway are likely to show good results in 2016.
"The outlook for Indian equities is good- given the reasonable valuations and the improvement likely in profit growth after several years of weak growth, driven by one factor or the other."
So, where do these fund managers see value? While Singhania sees value in smaller companies because he thinks that in a growing economy, smaller companies tend to do better, Naren is seeking value in large caps.
His reason: Over recent months, as there has been some selling by foreign investors in large-caps, we have seen prices correct significantly here. At the moment, mid-caps valuations have gone up considerably. The valuation gap between mid- and large-caps is at its highest level in the past year.
Relatively, there is good value in the large-cap space.

Investment experts believe that it is a good time to build a portfolio, as these are good times to buy for the longer run. "I would say, by building a good portfolio now, investors will have a very good experience over the longer term," sums up Naren.
Technology reforms that eased your Life this year
Aadhaar for filing income-tax returns
The income-tax department is making life easier for taxpayers willing to link their Aadhaar while filing returns. The Central Board of Direct Taxes, apex body of the department, introduced a column in the I-T return for 2015-16, where an e-filer can provide his Aadhaar number that will have to be authenticated on the official website of the department via a One Time Password. Earlier, despite filing a return online, taxpayers had to take printouts of the acknowledgement and send it by post to the department in Bengaluru.
Provident fund repayments linked to Aadhaar
With the Supreme Court allowing linking of provident fund with Aadhaar, the Employees' Provident Fund Organisation can go totally online. For example, settlement of accounts, an offline process, can now be done through the usage of Aadhaar. In addition, since the card has been allowed for pension schemes, the money can be deposited directly to a pensioner's account. Even if the pensioner dies, things can move rapidly if his/her nominee's details are with the department. At present, it takes three to six months for transfer of such details.
Digitisation of insurance policies
Holders wanting a digitised policy can ask the insurance company to give them one. The basic requirement is an e-insurance account with a depository or insurer. While the Insurance Regulatory and Development Authority of India has still not made it mandatory for insurance companies, there are talks that they could do so for large-ticket policies in the future. In a pilot project that was conducted in August, insurers were asked to tie-up with all the five repositories, thereby, crossing a major hurdle to facilitate digitised policies.

Tuesday, 1 December 2015

7 lessons I learned from failure

After almost two years of operations, I recently decided to shut down my first start-up.
What went wrong and what mistakes were made are important to understand, but equally important is to take forth those lessons into future ventures.
Here is a short summary of the lessons I have learnt:
1. Focus on the product(IT HAS TAKEN A EXAMPLE AND CONCLUSION ALSO)
My role in the organisation was that of a sales and finance champion.
Though it was a technology-intensive start-up, I figured that I would be able to outsource to a competent vendor who would take care of everything.
I cannot stress enough the importance of having a CTO on board who not only is as competent but also as passionate about the product as you are.
This is especially relevant if you are running a tech start-up. After all, a vendor is just a vendor.
2. Set employee expectations
You may get funding and try to scale up quickly. Your initial recruits are going to be crucial at such a time.
Make sure they understand the risks and rewards of working in a start-up environment.
If they think they are working in a large corporate and expect the same levels of job security, they are more likely to be disappointed in case of failure, and less likely to put in the extra effort usually required in a start-up environment.

3. Don't spend too much time behind funding
No doubt, funding is important at some point. But the endeavour to get funding should not distract you to the point that you forget to focus on the product.
I spent so much time behind funding that when I did see investor interest, I realised that my product was way behind schedule, which eventually resulted in the investor losing interest.

4. Fit people in the organisation, not the other way round.
There is always a temptation to build a core team of people who are friends, or who you know from your previous company.
Doing so may result in the recruitment of someone who isn't a good fit for the role.
The fact that you trust that person subconsciously becomes more important than his or her skill set.
5. Continue bootstrapping even after getting funding
I have seen many start-ups spend money very freely after getting funding.
No doubt, the funding should facilitate better manpower, investment in technology and what not. But a nice car for the founder can still wait.
Frivolous expenses not only weaken the company, they also attract negative press in case of eventual failure.
6. Be flexible on strategy
One of the advantages of running a start-up is that it is easier to change course than it is for a large organisation.
Stay alert on the market and economic landscape and be open to doing something that wasn't part of the original plan. It may just save your company.
7. Know when to call it quits
Founders routinely become emotionally attached to their start-ups, especially if it is their first one.
Be practical. If you see that things are becoming unsustainable, or that customer interest isn't shaping up as expected, take that difficult call and shut down the business.
You may be able to prevent greater damage.

Thursday, 26 November 2015

Shekhar's Tech: 3 common investing mistakes

Don't panic and sell when the markets fall or get into the market only when it is on a run. By doing that you defeat yourself.
Mistakes cost investors dearly. Here are three common mistakes explained by renowned investors from across the globe.
Having a short time horizon

Almost a decade ago, James Montier penned Seven Sins of Fund Management, a behavioural critique. One of the observations he makes is with regards to a short time horizon which results in overtrading.
Many investors seem to end up trying to perform on very short time horizons and overtrade as a consequence. Because so many investors end up confusing noise with news, and trying to out-smart each other, they end up with ridiculously short time horizons.
The average holding period for a stock on the New York Stock Exchange is 11 months! Over 11 months your return is just a function of price changes. It has nothing to do with intrinsic value or discounted cash flow. It is just people punting on stocks, speculating not investing.
Recent evidence suggests that the average holding period of mutual fund investors has fallen from over 10 years in the 1950s to around a few years currently.
ADHD (Attention Deficit Hyperactivity Disorder) seems to plague financial markets at all levels. Performance is measured on increasingly short time horizons. Such myopia is often self-fulfilling, the more an investment is checked the more likely you are to find a loss.
The way out
Extend your time horizon. And when trying to assess the validity of an investment thesis or making a buy or sell call, avoid distraction and the noise. If you are likely to be distracted then either wait until later, when you can give the assessment the time and effort it requires.
Investors seem to frame their worlds in terms of stories rather than facts. All too often they are sucked into plausible sounding stories. Indeed, underlying some of the most noted bubbles in history are kernels of truth.
For instance, the story that the internet would alter the way the world did business is probably true, but it doesn't necessarily translate into profits for investors.
Not being mindful of risk
Seth Klarman is one of the world's most astute investors at the helm of one of the largest hedge funds in the world.
He believes that risk is not inherent in an investment; it is always relative to the price paid. Uncertainty is not the same as risk. Indeed, when great uncertainty -- such as in the fall of 2008 -- drives securities prices to especially low levels, they often become less risky investments.
The latest trade of a security creates a dangerous illusion that its market price approximates its true value. This mirage is especially dangerous during periods of market exuberance.
You must buy on the way down. There is far more volume on the way down than on the way back up, and far less competition among buyers.
Price is perhaps the single most important criterion in sound investment decision making. Every security or asset is a "buy" at one price, a "hold" at a higher price, and a "sell" at some still higher price. Yet most investors prefer what is performing well to what has recently lagged, often regardless of price.


Letting your emotions get the better of you
Investment guru Howard Marks, in one of his memos, explains to readers why they can invest in the best of companies (or a great mutual fund) and have a bad experience, or invest in the worst and have a good experience.
He believes that most of the risk in investing comes from the behaviour of investors.
Consider this...
Economies rise and fall quite moderately. Companies see their profits fluctuate much more because of operating and financial leverage. But market gyrations make the former look mild.
Why do the prices of stocks rise and fall much more than profits? The answer lies in the dramatic ups and downs in investor psychology.
There are no checks on the swings of investor psychology. Investors get crazily bullish and imagine no limits on prosperity, growth and appreciation. At other times, they get despondent and conclude that the "worst case" scenario they prepared for isn't negative enough.
A too-high price can make something risky. A too-low price can make it safe. Naturally, it's naive to assume that price is the only factor at play. Deterioration of an asset can cause a loss, as can its failure to produce expected profits. But, all other things being equal, the price of an asset is the principal determinant of its riskiness.
The bottom line on this is simple: No asset is so good that it can't be bid up to the point where it's overpriced and thus dangerous. And few assets are so bad that they can't become underpriced and thus safe. Since humans set security prices, it's their behaviour that creates most of the risk in investing.
Even if you are not a stock picker but invest in funds, you would do well to heed his advice. Don't panic and sell when the markets fall or get into the market only when it is on a run. By doing that you defeat yourself.
When investor Jean Marie Eveillard was asked to describe the characteristics of a good analyst at a presentation, his response was "the capacity to suffer". Money manager Thomas Russo picked it up and popularised it.
A smart investor must have the ability to suffer though periods of bad performance. If your fund manager is sticking to his investment style, there would be periods when his portfolio is terribly out of favour relative to the forces that are driving the market at the time. You will be able to stay the course if you have the ability to suffer. You can do that if you invest for the long haul and have a strong thesis as to why you have invested in that fund in the first place.
Don't lose focus.

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