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Investment ke kuch funde

February 17, 2011 1 comment



Warning

If you’re working in a night shift, have a ‘good-day sleep’ in the morning and dare you switch on that business channel and get logged in to your trading account!

D-Street ka Don might flush your paihe down the gutter 🙂

Insurance

Calculate your insurance cover and it better not be some rounded off multiple of your CTC. Find it out of real. Purchase a pure Term plan (NO ULIPs, NO endowment/money back plans) . The premium will be bloody cheap compared to ULIPs. And it will help you in your tax planning.

Of course you (rather your family) will get the money only if you die, but then thats called true life insurance.

Savings

Ensure that you have sufficient Kharcha Paani cum Masti funds in your bank account for for the next 4-5 months (known as contingency fund).

Mutual funds – ELSS (Equity Linked Saving Scheme)

Register for perpetual SIP in 2-3 ELSS funds for lifetime. Review your fund’s performance every 3-4 months and feel good or bad about it. If something’s wrong don’t worry – it will “Fade to Black“. Over a long term, equity is always awesome.

Lets says you ‘SIP’ 1000 bucks per fund per month (in ELSS), that totals to 24000 – 36000 bucks in a year (which you can claim under sec 80 C while filing your returns). And this is systematic tax planning, unlike the February-March rush that we are normally used to.

Investing in Equity

Set aside some funds (you decide how much, but do invest substantially) per year for “investing in good quality stocks”. Normally stock prices come down during the budget so it’s a good time to enter the markets. But before entering, do some basic research.

Ratios such as:

  • P/BV (price to book value)
  • P/E (price to earnings)
  • D/E (debt to equity) – see that this must have a value less than 1, the lesser – the better
  • Interest Cover
  • Dividend Yields (very important – a company that cares to share its profits regularly is a NICE company)

… are some valuable parameters you can use for filtering stocks (Benjamin baba ko saashtaang pranam/Warren baba ki jai ho).

(For data you can visit NSE )

Screen the stocks based on the above params, filter them out in iterations, run an LPP (linear programming problem) on the final candidates to find the most efficient way of allocating your limited funds across these finally selected stocks. (Excel’s Solver tool can help you with this)

(You can skip the LPP part if you don’t like it, just allocate the funds randomly 🙂 )

Trading in Equity

Yes, Investing and Trading are two different activities.

Set aside some funds for ‘flirting with the market’ (also known as technical trading).

You must find a lot of free time for short term trading. Doing intraday trading during your office hours (unless you are a full time trader) could be disastrous.

Useful charting toolsChartNexus (downloadable tool), iCharts (online charts)

IMPORTANT: First of all educate yourself and be comfortable with technical analysis, OTHERWISE BETTER STAY AWAY.

Sona Sona

Every quarter, put some money into a gold ETF (note that NSE:GOLDBEES can be purchased like a stock). Or you could go for a quarterly SIP in a gold ETF Mutual fund.

You know that gold is already trading at a very high value from its historic values and we Indians love this yellow metal a lot. Some people foresee gold prices crashing soon. But all this is speculation; no one knows for sure where the gold prices are headed.

Index Fund (MF)

Register for a monthly SIP of say 500-1000 bucks in an Index fund. (This will be your retirement fund )

Debt Fund (MF)

Register for a monthly SIP of say 500 bucks in a Debt fund.

Equity is not everything, debt is important as well (beautifully illustrated here). And debt funds are more preferable over FDs.

Postal MIP

If you are sure you can lock in some funds for 6 years and want to invest in a safe/secure place, go for post office monthly income schemes. Note however that there are no tax benefits on this. Best would be to put the monthly interest earned, into a Recurring Deposit (RD) and stay invested for 6 years (which makes you eligible for an additional 5% bonus as well)

And most importantly, keep track of  all these investments and earnings at one place.

Jindagi Maut Na Ban Jaye, Sambhalo yaaron

Don’t get addicted to stock markets, you might end up losing all your money. Take care of your health as well. Following are some recommendations:

  • Ghanshyam baba ka Akhada – For strength training
  • Dabur lal mugli ghutti – Helps in choosing multibagger stocks
  • Baba Ramdev ka ashram – For strengthening your nerves.

Just kidding 🙂 . But on a serious note this time – do take good care of your health.

Bas itni si tumse Guzaarish hai…

Please start investing in share markets (whether though MFs or directly). We want more retail investors (i.e. us) to participate in the market and make the best use of our population (the segment that’s above the BPL)

 

Statutory Warning:

Cigarette Smoking IS injurious to your health

AND

This is just a template which could help you take decisions. Follow them at your own risk :).  Investing in equities depends on your age and “Money Losing” ability (euphemistically called “Risk taking” ability). Tread cautiously!!

Notes:

1. These are just pointers – don’t take it as free advice (this absurd note is purely meant for maintaining the political correctness of my first blog)

2. Perpetual SIPs can be stopped whenever you want (just in case you are worried).

3. MoneyControl or ValueResearchOnline are good places to start looking for Mutual funds Compare, Check (their performance over different periods) and Choose.

4. I have not mentioned derivatives at all (still illiterate/un-experienced in that domain :(, but learning 🙂 )

Keep Investing!

CS

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