My Personal Financial Resolution for 2015

My Personal Financial Resolution for 2015


Investigate before you invest and not vice-versa.

Buy companies doing business that you understand.

In times of panic, be greedy and buy good companies.

Control your emotions - greed and fear.

Be honest with yourself - book a loss if you think you have gone wrong.

Avoid momentum buying/investing. Do not fall prey to herd mentality and take tips with a pinch of salt.

Buy more of a stock if it falls, provided you have confidence in the company.

Don't gamble - no day trading, no leveraged deals and no loan against shares.

Follow your stocks periodically and see that all conditions like entry barriers and basic investment ingredients, continue to be in place.

Hold a company or stock investment for 3-5 years.

Always look for bargains.

Look for businesses that are in potential growth areas.

Avoid companies that are in dying business segment, even if they offer value.

Invest in businesses which have sustainable competitive advantage.

5 Investing Resolutions for 2015

5 Investing Resolutions for 2015

With the holiday season upon us, we should make time to reflect on the past year and think about our financial goals, milestones we hope to reach in 2015 and how we can better prepare for retirement.

It's also important to remember tax season is around the corner. Therefore, now is also a great time to review your investments and your saving and spending behaviors. Next, you can determine resolutions that may be right for your financial situation.
As you plan your 2015 resolutions, here are five tips to consider that may help you enhance your investing and retirement planning strategies.
1. Give your portfolio a tuneup. Now is a great time to review portfolio holdings and performance, and to determine how to maintain an investing strategy to help reach your goals. Take a look at your investments. Does your portfolio align with your risk tolerance? You can find online tools through brokerages to help you understand your portfolio's gains and losses. Investors can create a diversified portfolio, with up to eight exchange-traded funds, or ETFs, for example. Using dollar-based investing, you can streamline the asset allocation process.
2. Maximize retirement contributions. According to PortfolioBuilder's Financial Freedom Survey, released in March, which conducted 1,008 interviews of adults 18 and older from Feb. 13 to Feb. 16., 57 percent of working Americans are concerned they won't save enough money in time for retirement. By taking advantage of your employer's retirement plan, you can work toward growing your retirement nest egg.
Beginning in 2015, employees will be able to contribute up to $18,000 annually to their 401(k) plans. Determine how much you can comfortably contribute. If possible, you may want to max out your 401(k) contributions and your employer match if you have one. If you can swing it, setting aside the full amount can be a great way to maximize your long-term investments.
3. Think about putting that holiday bonus to work. Examine your personal financial situation, and determine how you can best use the additional funds from a work bonus or holiday gifts. You may want to consider starting an investment portfolio, building an emergency fund or using that money to help a reach milestone like a down payment for a car or home.
Once your account is established, you could continue to grow it through automatic contributions. Programs, including ShareBuilder's automatic investing plan, enable you to invest a set dollar amount on a regular basis and at a low cost. Becoming accustomed to putting away money on a regular basis is a critical first step -- and it may build over time.
4. Set attainable goals that may help you feel good about your progress. Committing to a budget and making regular investments is similar to establishing other habits, such as working out or eating right. The more you do it, the easier it may become. Most people receive quarterly statements that update them on their retirement accounts, making it easy to check in on their progress a few times a year.
Consider using these check-ins to set quarterly goals, such as increasing your weekly or monthly contribution to your individual retirement account, or your automatic investing plan, or increasing your 401(k) contribution by a certain percentage. To stay motivated, it's important to have clear goals and think about your timelines. Make sure to balance your short-term goals (a car or vacation, for example) with long-term goals, such as retirement or a down payment for a home.
5. Consider exploring international markets. When determining if international exposure is right for you, make sure you have a well-rounded portfolio with investments that match your financial needs and goals. Various apps and online tools may help investors educate themselves about international investing and offer insight on everything from broad country exchanges to stock-specific data.
When thinking about international investing, it's important to keep in the risks in mind as well. International investing can provide your portfolio needed diversification, but remember, this will not guarantee a profit or protect against market losses, and fluctuations in currency and changes in political or economic conditions could impact your investments.

These steps may help you make headway toward reaching your investing goals in 2015. Remember, it is never too early or too late to get started planning for your financial future. And although those first steps may seem daunting, there are many quality tools and resources that may help you along the way.

Source : YahooFinance

50 Ways to Improve Your Finances in 2015

50 Ways to Improve Your Finances in 2015

Give your money a makeover.

The new year is the perfect time to hit "refresh" on your finances. Whether you need to update your insurance, revamp your budget or scale back some shopping habits, take some time to consider these 50 action steps. They can help you improve your finances over the next 12 months.

1. Decide on financial goals.
For some people, there's nothing more appealing than saving for a three-bedroom house with a white picket fence. Others dream of taking a trip around the world or a sabbatical from work. Choosing your money goals makes it easier to work toward them.
2. Create a spending plan.
Most people spend about two-thirds of their income on three essentials: food, housing and transportation. Then there are debt payments, savings, household costs and optional items such as entertainment to consider. Create an annual budget by allocating spending goals for each category.
3. Resist retailers' enticements.
Stores are in the business of getting us to spend money, but if we know their tricks, we can better resist the temptation. Rewards cards, enticing smells (like cinnamon around the holidays) and short-term flash sales are a few of the techniques retailers use; being aware of them can make it easier to just say "no."
4. Track your spending.
Keeping track of every expenditure over a two-week period can offer insight into unnecessary wastes, from restaurant meals to cab rides. You can use a pen and pencil or take advantage of free online tools, such as Mint.com or those offered by your financial institution.
5. Don't accept posted prices.
Prices are often a lot more negotiable than you think, even in big-box department stores. If you've seen a lower price listed elsewhere, don't hesitate to ask the store clerk if they can match it. The worst-case scenario is they'll say "no."
6. Research products online before visiting stores.
Product review sites, coupon code sites and online discount warehouses often provide information and insight into how (and where) to find the best deals. With the proliferation of free shipping codes, the lowest price is often online.
7. Earn money from more than one source.
The lack of job security in today's market means anyone could lose their job or face a salary cut. To create a second source of income, consider turning to one of the fast-growing online marketplaces, such as Fiverr or Etsy, for ideas on how to earn more money.
8. Launch your own business.
The recession inspired many Americans to explore entrepreneurship, partly as a way to take back control of their financial lives. Even relatively small businesses, such as a blog that earns money through advertisements or a garden that produces marketable flowers, can turn into a source of financial security.
9. Negotiate your salary.
While many workers feel lucky to simply have a job, sometimes asking for a raise can be a smart move. If you've recently changed jobs, received a promotion or realized you are underpaid compared to your peers, it might be time to sit down with your supervisor and request a raise.
10. Track any additional income carefully.
Earning money outside of a full-time job can complicate matters at tax time; be sure to keep a careful record of all income earned, as well as copies of receipts related to expenses. When it comes to writing off the home office as a tax deduction, be sure to study the IRS rules, which specify that the space can't be used for other purposes.
11. Don't shy away from all debt.
While debt has earned a bad reputation in the wake of the subprime mortgage crisis, managing credit and even taking on some debt can be useful. Mortgages allow people to buy homes, and student loans enable people to go to school. Evaluate your debt decisions by considering the pros and cons carefully.
12. Pay off high-interest rate debt quickly.
Credit cards have among the highest interest rates around, averaging approximately 15 percent. Retail credit cards are even higher, with the average APR at 23 percent, according to CreditCards.com. Paying off credit cards as soon as possible can help reduce fees and interest-rate charges that balloon over time.
13. Build a solid credit history.
Lenders base their decisions on whether or not to loan consumers money, and at what rate, partially on their credit histories. That means someone with a limited credit history (because they have few or no financial accounts) can have trouble taking on a mortgage. Pay bills on time, and be sure to have some accounts in your name.
14. Check your credit report.
Everyone is entitled to a free credit report once a year; you can get yours at AnnualCreditReport.com. Reviewing it gives you the chance to fix any mistakes that could be dinging your credit score.
15. Track and review account statements.
An unfamiliar charge on a credit card is often the first sign of identity theft. Review all mail from financial institutions carefully to make sure your accounts aren't being misused. If you see an erroneous charge, contact your financial institution immediately.
16. Take advantage of rewards cards.
If you're among the roughly half of credit card users who pay off their balance each month, you're well-positioned to enjoy the benefits of credit card use. That includes earning rewards points, automatic fraud protection and, in some cases, certain types of warranties and liability protection.
17. Choose the best credit card for you.
Credit card benefits vary widely. If you tend to carry a balance, it pays to find the card with the lowest interest rate possible. If you're a frequent traveler, you might want an airline card or a card that comes with travel insurance. Comparison websites such as NerdWallet.com or CreditCards.com can help you find the best card for you.
18. Motivate yourself to pay off debt.
If you're trying to unload credit card debt or student loans, remind yourself of your bigger goals with photos of places you want to visit or the home you want to buy one day. Staying focused on those targets can make it easier to say "no" to new purchases.
19. Adopt a hands-off approach to investing.
Unless you love studying annual reports and quarterly earnings statements (and even if you do), you'll probably be better off investing in index funds and other types of securities that reflect the market broadly, instead of one or two companies.
20. Minimize your investment fees.
Fees on mutual funds and other investment products can take a big chunk out of your earnings over time. Minimize fees by avoiding expensive products, such as actively managed funds, and opting for index funds instead.
21. Remember the risk-versus-reward rule.
Along with the importance of diversity, the risk-versus-reward tradeoff is one of the classic rules of investing: If you want higher rewards, you have to take on greater risk. Assess your risk profile and invest accordingly. If you like to know your money is safe, you probably want to keep it in more conservative investments.
22. Start early, invest often.
The power of compounding means saving early will lead to a much bigger nest egg at retirement time than waiting to save until midcareer. If your company offers a matching-contribution program for your retirement plan, taking advantage of it will only add to your saving efforts.
23. Don't try to time the market.
Since it's impossible to predict the market's fluctuations, investing at a slow and steady pace, like through automatic deductions from a biweekly paycheck, can be a better strategy than dropping money into the market whenever it looks promising.
24. Consider your time horizon.
As retirement gets closer, you'll want to shift into more conservative accounts. A general rule of thumb is to subtract your age from 100 or 110. Put that percent in stocks and the rest in more conservative investing vehicles, like bonds.
25. Don't follow the market every day.
The market goes up and down, and if you're investing for the long term, there's no need to stress over every dip. Instead, check in with your portfolio once a quarter to rebalance it, and make any other necessary adjustments.
26. Consider working with a professional.
If handling your own money makes you nervous, there's nothing wrong with seeking professional advice. Consider a fee-only advisor to avoid conflicts of interest. Your employer might also offer free retirement investing assistance.
27. Calculate your retirement number.
Retirement calculators, which are readily available online, make it easy to estimate how much money you should save before retirement. Since $1 million would provide around $50,000 worth of income over 20 years, you probably want to aim for more than that, depending on your lifestyle costs.
28. Take baby steps.
Putting 10 percent or more of your income toward retirement can be overwhelming. Savers often have more success by starting small and putting just 2 or 3 percent of their income away, and then slowly increasing that rate over time.
29. Check your Social Security statement online.
The Social Security Administration used to mail out statements explaining estimated benefits to workers each year. Now, for most Americans, paper statements come only once every five years. Workers can visit SocialSecurity.gov to create their account and check their estimated future benefits online anytime.
30. Save even when you're not earning.
The plethora of retirement account options make it possible to continue saving even when you're not employed in a full-time job. Roth IRAs and spousal IRAs are among the options; check your eligibility and then consider contributing.
31. Live with family members.
The vast majority of college graduates now move back in with their parents, at least briefly, upon graduation. Doing so can make it easier to find one's financial footing, especially while job hunting or starting to make student loan payments.
32. Look for nonfinancial ways to help family members.
Career advice, networking suggestions and home-cooked meals can be just as helpful to new college graduates as cash. Young adults can also help out their parents with household chores or technology lessons, especially if they're living at home for free.
33. Just say no.
Sometimes you have to look out for your own financial security before helping others. If giving assistance to struggling family members is forcing you to take on debt or tap into savings, consider politely explaining that you can help in other ways, but not by giving cash.
34. Prepare to help aging parents.
Many 20-, 30- and 40-somethings will need to help their parents as they get older; that might mean providing money, sharing homes or helping with money management. Also increasingly common is sharing a roof with multiple generations, which can help both parents and adult children save.
35. Avoid sharing credit accounts.
While family members often co-sign for loans or credit cards to help each other out, doing so can have complicated financial ramifications. If one person runs up debt on the account, the other person's credit can be ruined as well. That's why it's best to avoid sharing credit accounts.
36. Talk about it.
If you're not sure whether parents, adult children or other family members are expecting assistance from you, consider broaching the topic. An honest discussion about needs, expectations and limits can prevent misunderstandings later.
37. Live more simply.
The last recession brought frugality back into vogue; do-it-yourself crafts, home-cooking and even at-home haircuts are all cool again. Small lifestyle changes, like biking to work instead of driving, can significantly reduce monthly expenditures.
38. Find cheaper hobbies.
Visiting public gardens and museums, attending community events or going on hikes are among the free or inexpensive activities that can replace more costly ones. Meetup.com groups and local blogs and websites make it easy to explore options.
39. Plan weekly meals.
Food is one of those categories that can suddenly balloon with take-out meals or restaurant costs. To avoid that trap, try planning meals a week in advance, which also makes it easier to repurpose ingredients. One night's roast chicken can turn into the next night's pizza topping.
40. Set joint money goals.
If you're married or living with a significant other, financial planning can't be done in a vacuum. Setting joint spending goals can help minimize conflicts over daily or weekly spending, even if you decide to maintain separate bank accounts.
41. Insure yourself.
Most young adults lack renters insurance, and even many older Americans are underinsured when it comes to protecting their homes and properties. Renters and home insurance can be lifesavers in the case of weather disasters, theft and other unexpected events.
42. Make sure you're ready for baby.
Children cost their parents close to a quarter of a million dollars before age 18, and that figure excludes college tuition. Soon-to-be parents can prepare for some of those costs by saving up in advance, skipping unnecessary nursery purchases and looking for creative child care solutions that allow them to blend work and family.
43. Buy life insurance.
No one likes discussing death, but once you're responsible for children or other dependents, taking out life insurance (as well as writing a will), becomes necessary. Young, healthy adults can usually find affordable term policies with little trouble; a $1 million policy for a healthy 30-year-old might cost around $800 a year.
44. Use fewer products.
Cutting back on pricey cleaning products as well as personal care products such as perfumes and lotions can keep your money in the bank while also benefiting the environment. If you're crafty, you might even consider making your own body scrubs and lotions with do-it-yourself recipes online.
45. Cancel catalog subscriptions.
Not only do catalogs tempt us into buying things we don't need, but they also use up a lot of paper, much of which goes straight into the trash (or recycling bin). Tell retailers you no longer want to receive their mail, or use a website like 41pounds.org to do the job for you.
46. Make your toilet more efficient.
Dropping a soda bottle filled with water or sand into the back of your toilet can automatically transform it into a low-flow commode. You'll lower your water bill while also feeling good about using less water each month.
47. Give companies public feedback.
As consumers increasingly turn to blogging and social media to lodge complaints, companies are paying attention. If you've tried going through traditional customer service routes to no avail, consider using your online voice on Twitter or Facebook to get the company's attention.
48. Unplug devices.
Many electronic devices, such as cable boxes and television sets, suck power even when they're turned off. To reduce your electricity bill, unplug them or consider using a smart power strip that automatically cuts power when devices aren't in use.
49. Create a giving circle.

If you want to donate to charity, but feel like your budget is too small to make a difference, a giving circle might be for you. Similar to a book club, it involves a group of friends getting together to jointly donate to a single charity, and often volunteer their time together as well.

50. Consider nonfinancial donations, too.
Giving away used clothes, toys, DVDs or even blood can be as useful to charities as cash donations. You can also use the opportunity to clear clutter out of your home.


Source : YahooFinance

65% of retirement investors feel they should have planned earlier!

A journey of a thousand miles begins with a single step.






65% of retirement investors feel they should have planned earlier! Plan early to ensure a financially independent retired life


We all have financial responsibilities towards our family and being financially secure even after retirement is of utmost priority.
But do you have a comprehensive plan that would provide adequately for retirement? You may wonder – why do I need to invest in a retirement plan right now?

Financial freedom leading to financial confidence can be the biggest achievement in life.

More to come

Happy Investing

Sensex jumps 100 times every 30 years: 7 things to know

Sensex jumps 100 times every 30 years: 7 things to know
Experts always say that the equity market is one of the most profitable investments. Yet, the slowdown in the last few years and the 2008 US crisis made retail investors wary of the stock market. Despite that, Indian markets have given a handsome return.

The Sensex value, for example, jumps 100-fold every 30 years, according to a study by Motilal Oswal, a brokerage firm. As many as 47 stocks jumped to 100 times their values in the last two decades alone, the report added. They are called 100x stocks. This itself shows the profitability of equity investments.

Here are 7 interesting things to know:

1) BSE Sensex is based on the value of 100 from the year 1979. It took 27 years to jump 100 times to 10,000 in February 2006. On an average, it takes the Sensex 30 years to rise to 100 times the value. “As of March 2014, the Sensex stood at 22,400 levels. It was at 224-levels in 1984 i.e. 100x in 30 years,” the MOSL report said. This amounts to an average annual growth rate of 17% per year.

2) There were many stocks which rose 100-fold between 1994 and 2014. However, some fizzled out for different reasons. Only 47 stocks managed to hold on to their over 100-fold gains in the past twenty years. Leading the pack is Infosys. Its stock price multiplied 2,902 times in the past two decades. Its competitor in the IT space Wipro, meanwhile, jumped to 875 times its original 1994 value over the same 20-year period. Some stocks took less than 20 years to cross the 100x mark like Lupin. The pharma company jumped 1170 times in less than 20 years – between 2002 and 2014.

3) On an average, it takes a capable stock 12 years to multiply 100 times in value. This is lower than the time it takes the Sensex to jump 100-fold. This means, stocks rise faster than the Sensex, thus taking lesser time. To rise 100 times its value in 12 years, a stock would need to give a whopping 47% return on an average per year.

4) When you invest and earn profits, your income and capacity to purchase increases. This is called purchasing power. An equity investment, which increases 100 times in value in 20 years, increases your purchasing power by 26 times if inflation grows at an average rate of 7%. In contrast, a fixed income investment gives an approximate return of 7% after deducting from taxes. If this is invested over 20 years, all the money it earns you gets eroded because of inflation. This means, there is barely any change in your purchasing power due to your fixed income investments.

5) All this is considering that the stock rises to 100 times its value. Many investors may feel that picking stocks which have the potential to grow to 100 times its value may be like finding a needle in a haystack. However, the MOSL report suggests that finding such stocks may be difficult, but not impossible. “Once sensitized to such a possibility and armed with the right framework, investors may find the challenge of unearthing the next 100-bagger more joyous than arduous,” the report said.

6) One thing that makes picking such stocks easy is that it does not need the right timing. You do not have to pick up the stocks only when they are cheaply available. If the stock has the capacity to jump 100-fold, then it will do so no matter when you buy – sooner or later. So, it is not that only the early bird gets the worm. “Most 100x stocks offer multi-year windows to buy into them, and still rise 100 times from that level,” the MOSL report said.

7) That said, the chances of succeeding are higher the sooner you pick these stocks. This period is called the opportunity period. If you buy the stock beyond this period, you may then have to wait longer for the stock to rise 100-fold. Of the 47 100x stocks, Motherson Sumi and Shree Cement had the highest opportunity period of 11 years each. This means, both these stocks could have been bought anytime from 1994 to 2004, and the stock prices would have risen 100-fold even thereafter. Infosys and Lupin had 5 and 9-year buying windows respectively.






This work is produced by Simplus Information Services Pvt Ltd. Customer engagement through content.

Banking Sector

Banking on economic revival…

Banking sector is considered to be the barometer of economy and has the highest weightage in the Sensex. Hence it generally outperforms whenever the economy is improving and the equity market is in an upturn. However, this sector has underperformed since the General Election results in May 2014 on concerns over NPAs and high interest rates. Given the confidence built by the new government and expectations of improvement in the overall economy, we believe the banking sector and in turn banking funds are bound to outperform in the next two or three years.
We, therefore, believe as the economy revives much of the impediments faced by the banking sector slower credit pick-up, deteriorating asset quality and a fall in profitability may all come to an end. In the past, the banking sector has outperformed the BSE Sensex in a growing market. I believe the same may happen over the next two to three years. Aggressive investors can, therefore, consider allocation of some part of their overall equity portfolio to banking funds.

I believe much of the impediments faced by the banking sector - slower
credit pick-up, deteriorating asset quality and fall in profitability may all
abate as the economy turns around. With the formation of a reform
oriented government at the Centre, policy logjam is getting cleared fuelling
growth. Inflation has also softened from over 9% in the previous year to
6.4% in September 2014, as a result of efforts put in by the central
government and the RBI. Inflationary expectations have also come down
on the back of a decline in global crude oil prices and reduced currency
volatility. Although markets have started to factor in an improvement in the
economy and resulting corporate profitability, there still remains significant
potential given the positive economic outlook over the next three or four
years. The banking sector being the barometer of the economy and having
the highest weightage in headline indices, historically, has outperformed
during improving economic activity and rising equity markets. Given the
confidence engendered by the new government and expectations of an
improvement in the overall economy, I believe the banking sector and
banking funds are poised to outperform in the next two or three years.

Banking sector outperforms in improving economic environment
The banking sector is the barometer of the economy and reflects its
economic health. Banking, being a relatively high beta sector, has
delivered higher returns vis-à-vis the broader market in the upturns. As
seen in the table alongside, every time the market has gone up the Bankex
has delivered higher returns. Entry into banking funds during an improving
economy and rising equity markets delivers alpha over other diversified
funds. I, therefore, advise that aggressive investors start accumulating
banking funds on every market decline.

Further I strongly recommend you to continue with your currently active SIP/TIPs. SIP/TIPs by design help you take advantage of the market volatility. This would also help you in getting the maximum advantage of the changing market scenario.
Investing regularly through SIP and TIP is one of the best ways to invest. You could start a SIP and/or TIP in our recommended SIP funds viz., UTI Opportunities, ICICI Prudential Focused Bluechip Equity, Franklin India Prima Plus and Birla Sun Life Frontline Equity.

Happy Investing

Market Outlook : December 2014

Market Outlook : December 2014

Index of industrial production (IIP) increased to 2.5% in September 2014 from 0.5% in August 2014, due to a turnaround in manufacturing (2.5% vs -1.4%). However, electricity index contracted in September (3.9% vs 12.6%) and so did the mining index (0.7% vs 2.6%). Core sector growth picked up to 6.3% in October from 1.8% in September.

CPI- Inflation dropped to the lowest point in the new index (5.52% from 6.46%). Core CPI fell to 5.81%. WPI fell further to 1.22% due to a cross sectional fall in all sub indices.

Exports- Total exports contracted 5.0% yoy to $26.1bn in October 2014. This is on account of moderation in iron ore (76.9%), electronic goods (30.7%). Large categories such as engineering goods (up YTD 17%) and petroleum products (up YTD 7.2%) slowed the moderation in exports.

INR depreciated by 1% in the month of November to INR.62.45 to US Dollar.

GDP grew by 5.3% in Q2 FY15, down from 5.7% in Q1. Demand side GDP was driven primarily by private consumption. On the supply side, growth was driven primarily by Agriculture (3.2% vs 3.8%) and the services sector (7.1% vs 6.8%). The industry category still looks weak with mining and manufacturing reporting low figures. Indian markets continued to scale newer highs in November with FIIs (foreign institutional investors) inflows continuing.   Mid cap stocks outperformed the broader market with the CNX Midcap index gaining 4.6% in the month. BSE100 index gained 3.1% in November.   FIIs continued their buying streak and were net buyers to the tune of INR.143bn; also mutual funds were net buyers to the tune of INR.17bn.   Sectors that outperformed were banking, realty, IT, healthcare, auto and FMCG. Sectors that underperformed were metals, oil & gas, utilities and capital goods. The recently concluded earnings season was a neutral affair with no major surprises. The month long winter session of the Parliament started in November and 37 bills were up for introduction along with some pending bills due for passing. The key ones include GST bill, Insurance bill, Coal Regulatory Authority bill, two bills on Labour reforms and amendments to the Land Acquisition and Lokpal Act. The passage of these bills would be closely tracked by the markets.   Government is already in a relative strong fiscal footing for FY15 budget which was further aided by the sharp fall in crude prices (Brent Crude down 19% in November, post no cuts from the OPEC).   Inflation is expectedly moving lower and the RBI remains committed to keeping the economy on a disinflationary course. The RBI did not cut rates in its policy meeting held on 2nd December, but looks likely to cut early in 2015. This, coupled with the Budget expectations, has put India in a sweet spot heading into the year-end.   With this backdrop we continue to maintain a positive bias on the market going forward. The markets are trading at about 18.2xFY15 & 15.2x FY16 estimated earnings for SENSEX. Market Outlook-   The combination of external developments i.e. oil prices and internal developments regarding the food prices have dramatically eased the pressure on inflation. Moreover, economic growth around the world, except the United States, is also slowing down. The slower global growth is leading to fall in prices of other commodities (apart from oil), as well. Domestic inflation pressures are also easing. These developments have created room for RBI to ease rates over the next couple of policy meetings. The markets have already started discounting the start of RBI’s rate cut cycle based on the path of inflation.   Meanwhile, Government’s finances are still a cause for concern. Inspite of the relief on the subsidy front, due to fall in oil prices, the Government faces an uphill task in bridging the gap through tax revenues. The Government and the markets are pinning their hopes on dis-investments of the equity holdings in large PSU entities to garner the required revenues. The markets are not pricing in any slippage in the deficit as of now. The Government remains committed to the fiscal deficit target of 4.1% of GDP.   FII interest in India continues to remain strong. India is one of the few large beneficiaries of the fall in oil and other commodity prices. Apart from the lower inflation, the fall in commodities prices benefits the country’s trade deficit, fiscal deficit and corporate margins as well. India is also among the handful of countries, where interest rates are headed towards a downward trajectory. The stable currency and the positive economic outlook are expected to continue to attract FII investments.   Bond yields are headed lower as RBI gets down to cutting rates. It is, seemingly, only a matter of timing of when RBI starts cutting rates, rather than whether RBI would cut rates. The markets are increasingly discounting an aggressive path of rate cuts. Any deviation in the pace and timing of actual cuts may cause some volatility in the short term. Another risk to the lower yields scenario is the possibility of a financial market disruption caused by sharp currency depreciation in vulnerable EM or Euro area economies or any turmoil caused by the US Fed’s rate hiking cycle. US economic data, though volatile, is pointing to a modest pick-up in growth. Source Newsmedia

A PEEK BACK : YEAR 2014

A PEEK BACK : YEAR 2014
2014 was a landmark year for both the global and the Indian economies. In a striking role reversal between the world’s two largest economies, the US appeared to be rapidly gaining back its mojo and played a key role in boosting the global economic machine, while the Chinese juggernaut appeared to be screeching to a halt.

In India, the year started off with low growth and high inflation. By the time it ends, inflation is low while growth appears to be picking up.

Without ado, here are 10 key economic events that defined the global and Indian economies this year.


Landslide win for BJP in general elections
In a historic mandate, Narendra Modi-led Bhartiya Janata Party coasted to a majority, the first time a party has done this since 1984 (when the Congress swept the polls on a sympathy wave, following Indira Gandhi’s assassination).

The mandate is simple: under Modi’s strong, reformist leadership, voters hope India would create the millions of jobs its young population needs as well as lift the economy from a slump said to be brought on from years of the previous government’s expansionist rule, slow decision-making and graft-ridden policies.



Humiliating defeat for Congress
With voters choosing to side with the BJP in such a big way, the Congress found itself relegated to a position it likely would have never imagined, notching up a mere 44 seats -- the lowest in its history.

While many analysts blamed the UPA’s disastrous performance especially during its second stint, others believe the party’s dynastic, charisma-lacking leadership, as well as its ageing “welfarist” approach to the economy put off voters.



NDA’s maiden Budget short on reforms
 Even as finance minister Arun Jaitley had all of 45 days to prepare for the year’s full Budget, economists, corporate and analysts were still disappointed from the lack of bold ideas in it.

Some even called Jaitley’s Budget as an extension of Chidambaram’s in February, with the focus on high-octane social-sector spending as well as an undue focus on meeting the fiscal deficit target.


SC cancels coal block allocations

In a landmark judgment in the coal scam in September, the Supreme Court cancelled allocations to every single block handed out to captive miners in the 20 years ending 2012.

These mines were given away virtually free of cost to private and state companies in the power, steel and cement sectors (in which coal is a vital input) to allow them to mine the mineral for their own end use, after the only legally-allowed miner, Coal India, was seen failing to meet their, and the economy’s, surging demand for coal.

But the court termed the decision as “arbitrary and illegal” and asked companies to pay a fine of Rs 295 (roughly the profit Coal India makes) for every tonne of coal mined over these years – leading to a total penalty of well over Rs 10,000 crore.

Later, the government decided to re-allocate the cancelled mines in an e-auction that is set to conclude shortly.


Fed ends QE
As outlined by Federal Reserve in 2013, where it had signaled it would start tapering its bond-purchase programs known as “quantitative easing” gradually, the US central bank unwound it this year.

QE is an unconventional monetary policy tool that Fed has resorted to in the wake of the global financial crisis in which it buys long-dated bond securities in order to bring down long-term interest rates down, in the hope low borrowing costs would push consumer spending higher.



But promises to keep interest rates low
Even as the Fed unwound its QE, the central bank pledged to keep interest rates – the standard monetary policy tool used to set the tone for the economy – low “for a considerable period of time”.

However, of late, the resurgence in the US economy has rekindled the debate whether the Fed would increase interest rates in 2015 or not, with many leaning towards the former.


China GDP growth falls to 5 year low
China, the bulwark of global growth since the global crisis, finally appeared to be slowing down, some of it consciously after the government slammed the fiscal brakes and reined in credit growth by tightening bank lending norms – after concerns over rapidly-increasing wage prices and a real estate bubble engulfed the economy.

In the third quarter, the world’ largest economy was seen growing at 7.3 percent, the slowest in five years, as Beijing tries to engineer a “soft landing” as well as calibrates its growth model from export-driven to internal consumption driven.


Japan announces QE; snap polls soon after
If less is good, more must be better. With this philosophy in mind, Japan, the inventor of quantitative easing, announced a massive USD 720 billion program in November, after its economy shrank a mammoth 7.1 percent in the recent quarter.

 After emerging stronger in a snap election, it appears Shinzo Abe is determined to lift the Japanese economy out of 20 years of deflation using an unprecedented monetary experiment that already some critics are warning could have side effects: in the form of currency wars (as yen depreciates from more money in the economy, other exporter countries will be forced to follow suit) and a potential chance of uncontrollable inflation in the future.


Eurozone worries mount on sluggish economic growth
Not just China and Japan, Eurozone, the fourth vital cog in the global economy aside of the US continued to struggle in a big way, expanding only 0.2 percent in the third quarter of 2014 (and 0.3 and 0.1 in the previous two quarters).

But while there is plenty of blame to go around, Eurozone’s recessionary problems are blamed (depending on who you ask) on either its “austerity” drive of the last few years or the Union’s ill-fitting one-size-fits-all approach to monetary policy.

Whatever be the case, it is clear the bloc’s problems are not ending in a hurry – and continuing sluggishness continues to add to the nation that the union idea was not a good one.




Source : Moneycontrol.com
 

INVEST IN YOUR FUTURE

INVEST IN YOUR FUTURE




Join the community of sensible investors in India. Think long term, invest wisely. There is just no need to jump from one stock to another, in search of the next HOT stock. Find few good companies, buy their stocks at attractive prices. Monitor their fundamental performance & keep on holding them with conviction if their performance continues to do well. This is how 10x, 50x & even 100x returns are made via long term investing.



Happy Investing

‘It’s a Bull Market, It’ll Continue’ ... India

‘It’s a Bull Market, It’ll Continue’

 

India is in a bull market and it will probably continue. Seeing the enthusiasm about India abroad, inflows from foreign institutional investors (FIIs) could double from last year. But, there will be corrections and disappointments along the way as India still has economic problems. But at the end of the day, it will continue to have a very bullish market.

It’s going to be a wonderful, dramatic change, by which I mean a revolutionary change for India. We think a lot more opportunities would be flowing into India from an investing point of view. And, more importantly, Indian investors will get excited about investing in their own country. And one is going to see big growth in stock market investing and foreign direct investments into India.

There has been a change in sentiment. People have been following Prime Minister Modi and they want to know about the policies (Narendra) Modi will bring in. It will be important how fast Modi moves towards changing the functioning and ethos of the government machinery.

 

It’s true the earnings growth has not been as good as it should be. But, with reforms, those earnings numbers and estimates will be revised. Valuations are stretched. So, we have to be careful because there will be corrections along the way. One must also remember there has to be revision of those earnings estimates in view of the reforms that are planned for the economy.

 

We should be interested in consumer area in both retailing and production of consumer goods. And we should also be interested in the raw material sector, because reforms in that sector will benefit as there are a number of projects, including production of minerals that are held up because of various problems and government restrictions. Another area that will be quite exciting would be banking. Changes in banking regulations and restrictions will have a big impact as well.

Yes, we should believe the FII/FDI flows will probably double if the promised reforms take place. I also believe India can achieve 10% economic growth going forward.

The government has to revise social budget expenditures and ensure corruption is eliminated, which will probably result in lower expenditures in the social area and more investments in infrastructure. There is lot of corruption in the social programs and this has to be eliminated.

 

In coming days think there could be concerns about the currency. If the currency moves up quickly and gets too strong, that will not be good for the country.

The second concern is in regards to distribution of jobs. We need to see distribution of jobs through all the states in India and not only a few states.

 

Most of the midcaps will become large-caps because of the growth we are looking forward to. So, we should look forward and capitalize the wonderful opportunities in these mid- and small-cap companies, which will definitely go up at a much higher pace going forward.

There is high inflation because of the various inefficiencies in the economy, which is a result of various government restrictions. If one looks at the distribution system of the country, one will realize that inefficiency is the reason. So, it’s important that the restrictions are immediately changed, and that will result in lower inflation. Inflation is not only controlled by interest rates. It is also controlled by much more efficient distribution, by using modern methods and increased productivity.

 

And if the changes don’t come at good pace that may become the reason and there is a chance of disappointment. Modi has incredible challenge in front of him because there is embedded bureaucracy in the system which exists. And, any change will need strong hands and some aggressive stance to overcome these barriers. Modi has so far shown his expertise to be tough and straight forward were required to get the ball moving.

With the possible hike in US interest rates, the currency will get stronger and you may see inflows into fixed income investments because of the attraction of better rate. And that could have an immediate impact on EMs (emerging markets). Over the longer term, the US will have to be careful because higher interest rate could have negative impact on business that needs finance.

 

Yes, India is in a bull market and this is probably going to continue. There will be correction along the way and there will be disappointments as India still has problems in the economy. But at the end of the day, it will continue to have a very bullish market.

Happy Investing

Source :Economic Times

Modi, India’s $10 Trillion Bet : Re-Visiting our Expectations

Modi, India’s $10 Trillion Bet : Re-Visiting our Expectations

The world's largest exercise in electoral democracy has delivered a clear mandate for faster growth and low inflation. The 800 million plus voters have pinned their hopes on Modi to deliver them real jobs, an end to inflation and efficient and clean delivery of services. They want better governance not bigger government, a hand up not a handout. They want India to become a 10 trillion dollar global powerhouse. The UPA was given such a mandate in 2009 - but misread the message and blew away five years into more handouts, large fiscal deficits, raging inflation and eventually a slumping economy. Instead of creating real jobs it focused on make work through badly run schemes like MGNREGA which have cost the country over Rs 200,000 crore so far. It saw expanded subsidy programs costing almost 4%of GDP, but with not much of it going to the poor.

Needed, Serious Reform

Reversing the damage will not be easy. But the new government must try to restore the economy: double the growth and halve the inflation. Quicker decision making, improved inter-ministerial coordination will reverse some of the damage. India could quickly see 6% plus GDP growth and 6% quarterly inflation by the end of 2014-15. But serious reforms will be needed, even to sustain a 6%plus growth rate over the medium terms. India's first generation reforms in 1991, which freed India's product markets, by removing the license raj and trade liberalization, boosted the economy hugely. This helped India more than quadruple its economy, with very rapid acceleration coming after 2000. But later, many of the benefits of liberalization were eroded by haphazard and unpredictable regulatory structures, bringing back a new license raj which has hurt investment and growth and allowed opportunities for brazen corruption. India's competitiveness dropped, the trade deficit soared and manufacturing suffered. India has in fact prematurely de-industrialized in the last decade and job creation slowed down to a crawl.

Factor Markets Must Work

If India can get back to 8% plus GDP growth, India's $2 trillion economy can grow to $4 trillion by 2020 and $10 trillion around 2030, making it the world's third largest economy ahead of Japan. If India remains at 4-5% growth, it will only be at best a $4-5 trillion economy by 2030 and be stuck in a middle income trap, with low job growth and still large numbers still poor— a sure-fire recipe for social and communal problems. To get the economy back to plus 8%, India desperately needs second generation factor market (land, labor, capital) reforms and better infrastructure. These reforms are also central to restoring India's competitiveness. Reforms in land acquisition, labor laws and transparent competitive allocation of natural resources combined with good infrastructure will attract the investment and technology India needs to be more competitive and create 10 million plus new jobs every year. These reforms cannot be driven by the Centre alone but require the active involvement of state governments. What makes this electoral mandate exciting is that the BJP's victory spreads across many states and its strong mandate should encourage federal cooperation, vital for the next stage of reforms including adoption of the GST.

Fix The Financial Sector

Fixing the recently legislated land acquisition law or reforming arcane labor laws will not be easy. One option here is to allow states to experiment with land and labor reforms, to generate more innovative solutions. On infrastructure, India will necessarily need central level involvement. A national master plan for transport, energy and communications—a Rosenstein Rodan style big push is needed like we saw in the previous BJP government— but on an even bigger scale. We need banking and capital market reforms, too. India has for long prided itself on its safe and conservative largely state-owned banking system. But with rising NPAs and evidence of connected lending, the banking system looks badly troubled and hugely exposed to struggling infrastructure projects, which should have been financed by long term finance not deposit taking banks. Access to finance for employment generating SMEs remains hugely restricted while large corporate with capital intensive projects take up the bulk of bank lending. More innovative approaches to leasing, tribal equity ownership in mining and environmental stewardship with dedicated development trust funds are needed to accelerate use of our natural resources while protecting the interests of tribal and local communities. Any other way is fraught with seeds of conflict and delays that no developing country has been able to avoid. We have seen such problems in our tribal belt with a Maoist insurgency that has persisted despite the government's efforts to contain it. A stable government should now be able to tackle difficult second generation reforms. The 2014 mandate is a bet by an aspiration-al India for a $10 trillion economy by 2030 and India's emergence as an economic powerhouse. India's election called ‘the undocumented wonder’ has given the people of India the chance for better governance with which to shape their destiny. It's a bet India can and must win.

With firm resolve, second generation reforms can transform India.

HAPPY INVESTING

Stock View : ITC, A Consistent Wealth Creator

Stock View : ITC, A Consistent Wealth Creator

 

BIG BOOST as Co achieves break-even in non-cigarette FMCG business a year ahead of analysts’ expectations

Cigarettes-to-hotels major ITC Ltd has been a consistent performer year on year building investor wealth. Net profit for the full fiscal (2013-14) rose 18.5% to Rs 8,785.21 crore, while net sales grew 11.5% to Rs 32,882.56 crore. The Kolkata-based conglomerate said it achieved break-even of non-cigarette FMCG business in 2013-14, a year ahead of analyst expectations. This business - comprising packaged food, personal care, lifestyle retail and stationery products business—reported a profit of Rs 21.82 crore for the fiscal against a loss of Rs 81.25 crore in the previous fiscal. ITC chairman YC Deveshwar had set a target to make the non-cigarette FMCG business profitable before his retirement, which is due in 2017. The company has been betting on this business to de-risk dependence on its flagship cigarette business. Analysts say break-even of this business will boost ITC’s profit margins, as the cigarette business has been generating the huge investments required in the personal care and packaged food businesses until now. The company’s non-cigarette FMCG business reported a 17% jump in net sales for the full fiscal at Rs 8,099.21 crore. The cigarette business sales grew by more than 10% to Rs 15,458.05 crore, which analysts attribute to more than a 15% increase in cigarette prices during the fiscal.

The company has the inherent capability to absorb all increase in cost by passing it to the customer thus maintaining its profit margins.

Invest in this stock as a long term capital preserver and give you consistent growth.

HAPPY INVESTING.

India Rising Now Playing Uninterrupted on Dalal-St

India Rising Now Playing Uninterrupted on Dalal-St

Markets has climbed to a record high on brimming investor confidence on the Narendra Modi Govt. And Modi as India’s Prime Minister at the head of a team that’s expected to push for bold steps to revive economic growth, although there is some concern that valuations may have risen too high. Hence the current downfall is being looked as consolidation phase leading to segregation of value stocks.

Sentiments was boosted by better-than-expected results of foreign visit of our Prime Minister and warm interactions with world economic leaders and promise to invest in growth of India. The Sensex has rallied almost 3000 points by now on the expectations of good governance, with more than 726 companies hitting their 52-week high on the BSE. The broader NSE Nifty has also surged more than 1000 points. “Investors are anticipating a spate of reforms from the new government, which could lead to an economic re-rating.” Shares of power and oil and gas companies have led the index gains on expectations of strong reforms started by the new government.

 Select global brokerage houses have, however, become cautious  about Indian markets, with the Nifty having risen more than 30%  since September 13 last year, when Modi was declared the BJP’s prime ministerial candidate. “There is also a risk that the government might not be able to live up to such high investor expectations, especially in the short term.” They are afraid that the Govt may not be able to live upto the hype created. Some of the leading foreign brokerage houses have become cautious, citing expensive valuations relative to lower GDP growth. They have downgraded India’s rating to neutral from overweight and advise no emerging market investors to wait for better buying opportunities. The new government needs to tackle several economic issues urgently and this could swiftly deflect investor attention. The most pressing one will be striking a balance between pro-growth measures and monetary tightening given that the underlying fiscal situation could be worse than it appears. But aren’t we expecting too much too soon.

There is also a strong possibility that the Reserve Bank of India may not lower interest rates given the current inflationary situation and the possibility of a weak GDP data in 3^rd QE. Investors need to judge whether the rally has already discounted most of the good news and if share prices are at risk of a setback. The Sensex is trading at around 16-18 times forward earnings, which is expensive compared with other emerging markets. “The recent market rally has taken valuations to a zone where they can no longer be termed cheap.” The rally over the past eight months has led to price-earnings ratio expansion as companies have cut earnings estimates over the past few quarters due to the slowdown.

However, foreign institutional investors have pumped more than Rs 60,000 crore into equity markets so far this year as global investors have built up high expectations on India. And they are not playing short term fiddle so why as Indians we are looking towards the counters everyday. India indeed is on a roll with 60% of its population below 30 years in age, please understand even if Modi fails India will grow leaps and bound. That’s what the foreign investors are banking on. And if Modi succeeds then it will be what we call “ Sone pe Suhaga”.

Don’t miss this opportunity. Participate in whatever big or small capacity you can as per your risk profile.

HAPPY INVESTING.

The Indian market : 11 Dec 2014

The Indian market : 11 Dec 2014

The Indian market is almost 1 percent lower today with the key benchmark indices losing heavily led by global cues.

The current market fall is not a worry and does not see a major correction in the market anytime soon.

The market is unlikely to correct more than 5-6 percent by December-end.


Nifty to gain about 30-40 percent in the next 24 months.


Government is doing its best to resolve the coal supply issue.


Stay bullish on economic sensitive and cyclical stocks as government’s decisions will have positive impact in the long-term though in short-term growth may remain subdued.

Midcap and small cap funds

Midcap and small cap funds

Indian equity markets have had a phenomenal run in the last five months
on the back of the decisive mandate received the BJP led NDA
government. The first Union Budget presented by the new government
amply addressed the strategic need to improve the investment climate by
emphasising on measures to create a framework for low & stable inflation,
setting fiscal deficit on a sustainable path through tax & expenditure
reforms and setting up a broad based inclusive growth framework for a
sustainable market economy. In this scenario, we expect many sectors,
particularly among cyclicals (banks, infrastructure, capital goods, power,
etc.) to enter a new phase of upturn in terms of financial performance as
de-bottlenecking of the policy logjam and a conducive operating
environment will drive the financial performance. Investment in midcap
funds should help capitalise on this opportunity. However, given markets
have already rallied sharply in a short span of time, investors should utilise
market corrections to accumulate midcap funds in the portfolio with
overall allocation limiting as per their own risk profile


Foreign institutional investors have been major drivers of the markets
as they bought equities to the tune of more than | 70000 crore in the
calendar year 2014 so far. FII ownership in midcaps is currently lower
compared to previous bull runs. FIIs may buy into these midcap stocks
as growth starts picking up and the capex cycle gets revived

􀂃 The midcap and small cap space in cyclical sectors (banks,
infrastructure, capital goods, power, etc.) can offer better value, going
forward, as these are significant re-rating prospects

􀂃 While the S&P SBE Sensex is trading above 24% of its previous high
made in 2008, the S&P BSE Midcap and SME small caps are still 8%
and 27% below their respective all-time high levels witnessed during
2008. This leaves significant room for broader markets to play catch up
and deliver outperformance over the next two or three years

􀂃 Midcap funds are well placed to capitalise on this opportunity along
with optimum diversification. Although there may be some
consolidation in the near term given the sharp run up in recent
months, midcap funds are likely to generate alpha in the overall
portfolio in the next two or three years

Chinese stock market

Chinese stock market




The  recent surge in the Chinese stock market has allowed it to claim the title of the best performing major stock market in the world (+38.2% in US$ versus +34.5%  for the Indian stock market).  This has taken place despite continued widespread concerns (especially in the Western media) about a China hard landing and an imminent implosion of its property bubble. Morgan Stanley, recently publish two reports making the case for the commencement of secular bull market in China, which makes some interesting points and clarifies some prevailing misconceptions about the local stock market. To summarise:
 
-The China A-shares market has delivered superior dollar returns  since 2000 : 12% per annum for Shenzhen-A and 8% per annum for Shanghai-A outperforming the U.S., Europe, Japan and Hong Kong (contrary to popular perceptions that the Chinese stock market has vastly underperformed-see chart below!).
 

 
-The capitalization of China’s A-share market  has tripled since 2009 reaching  $ 5 trillion, while the free float has quadrupled to $1.6 trillion (see chart below).
 

 
-Year-to-date until October 2014, the Chinese stock market (+8.0% Shanghai, +15.8% Shenzhen) has outperformed other domestic asset classes like real estate (+0.2%), bank deposits (+2.0%) and wealth management (i.e. trust) products (+5.9%).
 
-This is a reversal of the trend since 2008, when the stock market significantly  underperformed (-12.4% Shanghai p.a., -4.3% Shenzhen p.a.) the real estate market (+14% p.a), bank deposits (+3.0% p.a.) and wealth management products (+8.8% p.a.). This drove private investors away from stocks and into housing and wealth management products.
 
-This reversal has been supported by  the imposition of regulatory measures  to cool  the property market and impose restrictions on trust products, the government’s effort to support the stock market through official statements (in August and September), loosening requirements for new account openings and margin funding,  and better access to foreign investors through expansion of QFII and RQFII and implementation of the MMA scheme.
 
-Since April 2014 China A shares have rallied and this has continued,  even as the MSCI China and Hang Seng indices have corrected since  September, following concerns about an economic  slowdown in China and the demonstrations in Hong Kong (see chart below).
 

 
-The rally is the stock market has been enthusiastically embraced by local investors, as illustrated  by the number of new account openings which have surged up in recent months (see chart below) and the daily trading volume on the stock exchanges  which are a record high (see second chart below).
 


 
-To develop target prices for 2015, projections of the two key components – EPS growth and P/E multiple are required. EPS growth is assumed to be 10% which is well below the 15.4% historical average but closer to the average over the last few years. Noting that changes in the P/E multiples have been a more important driver of stock market returns than changes in EPS ,  P/E multiple scenarios are developed using historical analysis as well as using the  S & P 500 and the Indian stock market as benchmarks.
 
-With the Shanghai-A currently trading at a P/E multiple of 14.2 x 12-month trailing  earnings, which is a 35% discount to its 10-year average (see chart below), and assuming it reverts to its historical average of 21.8x , the upside for the stock market is 70%  from current levels (as of December 5, ‘14).
 
- If the Shanghai-A multiple goes back to it 10-year low (i.e. a 1 std move below the historical average), then the downside is 28% from current levels.
 
-Assuming the Shanghai-A multiple moves higher by 1 std over its 10-year average  then the upside is 165% from current levels.
 
- If the Shanghai-A multiple reaches its 2007 peak of 71.4x, then the upside is  450% from current levels.
 
-Assuming the Shanghai-A multiple reaches the S&P 500 level of 18.4x then the upside is 42% from now, and if it reaches the India-Nifty level of 21.8x its upside is 70% from now.
 

 
-Great research which makes a convincing  bull case for Chinese stocks. The Chinese stock market does appear to be at the early stages of a  secular bull market which could run until the end of this decade and perhaps even beyond. There will surely  be cyclical bear markets along the way, but  cheap valuations, supportive government actions, and increased participation by both domestic and foreign investors (who are grossly underweight) should provide strong support for the market. In addition, a strong long-term factor supporting the market is that the stock market has significantly underperformed GDP growth (about 5% versus 14-15% for GDP over the last 20 an more years), and over time these two measures must converge – so the Chinese stock market has a lot of catching-up ahead of it – even while GDP growth slows down.
 
-A little publicised factor has been the upsurge in the Shanghai Index since July (see chart below) right after PBOC introduced the CNY 1 trillion of 'Pledged Supplementary Lending' (PSL) to China Development Bank - later dubbed "QE-Lite." This was followed by a $87 billion stimulus announced by the government in September and then the surprise rate cut by the PBOC recently. Government support for asset  prices is a global phenomenon and as pointed out in last week’s letter, it is pointless to position against it. Having said that, the market has had a phenomenal run over the last few weeks and is probably due a pull back. With the final Fed meeting for the year on December 15 & 16, and the increasing likelihood of them dropping the “considerable time” language relating to a rate increase next year, we are likely to see some turbulence in global markets as we approach year-end. If that transpires, use it as a buying opportunity!  ETFs referenced to the domestic market are ASHR-CSI 300 index-large cap A shares, ASHS –CSI 500 index-small cap A shares, or 3188.HK – CSI 300 index.
 
 

How To Never Run Out Of Money

The benefits of early pension planning

HOW TO NEVER RUN OUT OF MONEY

 

NOT saving for a pension ain’t a very glamorous

prospect. So start saving young.

 

“I’d rather spend my money having fun now than on baked beans and cats when I’m an old hag.” This was a genuine thing my 25-yearold housemate recently said. She was explaining why she, like many others her age, can’t be bothered with saving for a pension. If you’re in your 20s you’ve probably thought similar kinds of things, and I have too, but a look at the reality of what life will be like if you do run out of money when you’re old might just change your mind, especially compared with how much better the future could be if you take action to change it now. Saving into a pension doesn’t sound very glamorous. But not saving into one is a far less glamorous prospect that bodes pretty well for a ‘baked beans and cats’ kind of existence, but not much else. Currently, retired people who have run out of money (because they haven’t got any of their own pension savings) have to rely on the Pension which is around Rs 10,000 to Rs 30,000 in best case scenario depending on your job in India or State Pension of around £5,720 a year (£110 a week) in USA or depend on their relatives and kids. And because they no longer work, they will have to survive on this for the rest of their lives. And by the time we’re older, this small cushion of money the government gives us could have worn dangerously thin. This is because over time, the government is planning to reduce the amount it spends on income for retired people – and some sceptics believe by the time we’re old, the State Pension may even have been scrapped altogether. And that is scary. Especially since a large number of us are expected to reach the ages of 90 or 100.

 

What is a pension?

The point of a pension is to provide yourself with regular income to live on when you are retired. Most of us can expect to be retired for over 20 years of our lives. The idea is you build your future retirement income by saving into a pension scheme over the course of your working life. The money you stash away is invested in the stock market so it has a good chance of growing significantly in value over the long term, so by the time you need it, those little bits of money you stashed away over

the years will have become a big lump sum.

 

 

A 25-year-old starting on a Rs 20,000 annual income, receiving salary increases in line with inflation and a 10 per cent contribution  (employer and employee) would build up a pension pot of £160,500 by the time they hit 65. Based on today’s prices this would buy them a level income of £9,300 or an inflation-linked income of £5,600 a year. If they delayed starting a pension by 10 years, their pension pot would be £77,300, which would generate a level income of £4,500 a year or an inflation linked income of £2,700. All assuming 6 per cent net growth after charges and 2.5 per cent inflation.

 

Starts pension at 25 years old builds £160,000 at age 65

Starts pension at 35 years old (delayed 10 years) builds £77,300 at age 65

 

But don’t panic because you are in the best possible stage of your life to make sure you don’t run out of money when you’re old. Let’s look at how much difference you could make if you start saving into a pension aged 25. Let’s imagine a 25-year-old starting on a £20,000 a year salary. They will receive salary increases in line with inflation throughout their working life and will contribute 10 percent of their salary (their employee will pay half of this so they only actually put away 5 per cent) towards their pension. So you can see that by starting young, you can make yourself much better off when you’re older. And the longer you put it off, the more you’ll have to save later on, to get a decent level of income in retirement.

 

Why are pens ions the best way to ensure you never run out of money?

 

You get free money

There are a number of perks you get by saving into a pension you don’t get with other kinds of saving. The long and short of it is you are given free money. This is because stashing chunks of your salary away for long periods feels counter-intuitive, so to tempt you to do it,

both the government and your employer reward you with incentives. When you choose to pay into a workplace pension you decide a percentage of your salary you want to save and your employer deducts it from your wages so you don’t have to pay tax on it. And on top of this, they will usually top up this amount – good schemes will match or double your contribution. And workplace pensions operating under the new auto-enrolment rules also mean the government pops an extra 1 per cent of your salary into your pension.

 

It’s under lock and key

Locking money away for 30 years might feel weird, but if you were allowed to spend your pension money before you retire it could be dangerous. If you frittered it away over the years you’d have nothing left for when you were older so you’d be back to the State Pension

(and the cats and the baked beans).

 

Your money has exciting growth potential

Pension money is invested for the long-term, which means it has the potential to grow much faster than cash in the bank. And the longer you invest the bigger it can get – which is why starting young helps you build a big pension pot.

 

Pensions stop you getting taxed

Pensions are the most tax-efficient savings vehicle in existence and there is no better way to protect your hard-earned money from the taxman.

 

How can you get a pension ?

Aside from the State Pension, the only way you can get retirement income is by saving up a pot of money throughout your working life. The easiest way to get access to a pension you can save into is through your employer. These are called workplace pensions.

 

Workplace pensions

By being a member of a workplace pension you are agreeing to have a percentage of your monthly salary deducted from your wages and transferred into your pension pot. This makes things really easy as you don’t have to do anything apart from decide how much you want to put in. Your employer will also decide how your pension money gets invested, although if you work in the private sector, you can choose how your money is invested if you want to have a say. If not, you can relax because you don’t have to get involved in this.

 

Top tip

If you want your pension to grow to its maximum potential you need to be invested in high-risk funds. However, around 90 per cent of

workplace pension savers have their money automatically placed in a ‘default fund’, which tend to be cautiously invested and often have

poor returns that could cut your pension pot in half. If you’re in your 20s you have a long time horizon for investing, and can afford to

be invested in something more risky that can give you higher returns (which means more money in the long run), so contact your HR

department and have a look at the other investment options available to you.

 

“Young Money rapper Lil Wayne plans to retire aged 30, but does he know the tax benefits of a pension?”

INUTSHELL

Not having pension savings means you could run out of money.

Consider all the options so you can maximise your returns’

Both the government and your employer reward you with top-ups.

 

New government rules mean that by April 2017, all UK businesses will be offering their employees a workplace pension that you will automatically be opted into if you’re aged 22 and above. If you’re working for a medium or large company they probably already have

a pension plan available for you, which you can find out about by asking your HR department, or whoever deals with the financial side of things, although you may have already been automatically enrolled. (You’ll know about this if you have.) If you work for a small start-up company there might not be a pension scheme available to you yet, but you could always ask about how long it will be before you will be enrolled into one.

 

 

Do you wo rk in the public secto r?

If so, the pension scheme offered by your employer is one of the best in the country. We call them ‘defined benefit’ schemes because unlike other pensions where you have to hope your investments do well, your pension guarantees you a fixed amount at the end (depending on how long you have worked and how much you have earned). Not only are they the country’s most generous pensions, but they also mean you don’t have to worry about your investments going down the drain. The general consensus on public sector pensions is you’d be mad not to sign up and you should do so as fast as humanly possible.

 

 

What if I can’t get a workplace pension or I don ’t like the look of it?

If your employer isn’t currently offering you access to a pension, you’re self-employed, or you want another pension on top of your workplace pension, you can set up a self-invested personal pension (Sipp). A Sipp is just another type of pension that isn’t connected to a workplace. Once you’ve done this (it will cost no more than a few hundred pounds) you choose a set of assets to invest your money in over the long term. You can hold all sorts of investments in a Sipp – but the easiest and best investments to buy are funds. See ‘How to get rich by the time you’re 50’ to learn about investing in funds for the long term. For every 80p you invest in your Sipp, £1 goes into your pot (and you get more if you’re a higher-rate taxpayer earning over £41,451 and when you finally retire, 25 per cent of that pot can be taken tax-free. Unlike workplace pensions you don’t get an employer contribution, or a 1 per cent bonus from the government, but you will get a much wider range of investments to choose from that could potentially lead to a bigger pension pot through higher investment returns. If you already have a workplace pension but want access to some more exciting funds – this could be a good reason to get a Sipp.

 

Here are the names of some reputable providers of basic level Sipps:

1. Sippdeal

2. Hargreaves Lansdown

3. Alliance Trust

4. TD Waterhouse

5. Bestinvest

 

 

How much do you need to save so you never run out of mon ey?

Pensions experts say you should be saving at least 10 per cent of your salary into a pension. This sounds like a lot, but if you’re saving into a workplace scheme – a portion of this will come from your employer (in addition to your salary) and if you’ve been auto-enrolled

1 per cent will come from the government – meaning less has to come out of your own pocket. However, you may think this sounds like a lot – and you might find starting with a smaller amount – say 2.5 per cent of your take home pay easier to start with. This might only be around £50 a month, but it will build up over the years into a good chunk of money for the future. And when you get pay rises you could ramp up the pension saving, say, 1 per cent, so you won’t even notice the difference as you weren’t used to having the money in the first place. Employers normally place a minimum and maximum limit on how much you are allowed to save into your workplace pension. It’s typical for them to draw these lines at around 2.5 per cent to 15 per cent of your salary.

 

 

Are you worried about locking your money away until you’re old?

Locking your money away is a scary prospect for a number of reasons. A common worry among skeptical twenty somethings is what if the economy crashes and we all lose everything we’ve saved so hard for? Technically, this is possible. But given that stock markets have historically risen most of the time, it is extremely unlikely. (There has never been a 30- year period in the history of the US stock market in which investors would have lost money if they had reinvested their profits). For your pension money to be wiped to zero, virtually every company it was invested in would have to go bust – and if this happens, it would spell a financial apocalypse. But this really isn’t a serious reason not to save for the future. And if the company that provides your pension either goes bust or gets in serious trouble so it can’t repay what it owes you, you won’t lose everything. This is because the Financial Services Compensation Scheme will compensate the first £50,000 you lose in a company if it goes bust.

 

If you want your pension to grow to its maximum potential you need to be invested in high-risk funds