Best Tax Saving Instruments

This letter by me was published in Financial chronicle on January 27, 2009
Tax-saving tools ¦
DHIRENDRA Kumar’s article Here’s why you should invest in tax-saving mutual funds made very interesting reading.
People tend to ignore investing in tax schemes until the last minute and then rush in to invest in whatever instruments they can without analysing the pros and cons. Equities are the best avenue to invest your hard earned money.
ELSS not only saves taxes but also give consistent returns. The icing on the cake is the very short lockin period of only three years. The biggest advantage of investing in ELSS is that mutual funds are that rare investment avenue, where not only your investment but also your returns as well as principal are all exempted from tax.

Srikanth Matrubai Bangalore

Visit http://goodfundsadvisor.blogspot.com for Mutual funds
visit http://equityadvise.blogspot.com for Stocks and Shares

REASONS FOR FAILURE OF LIC JEEVAN AASTHA

This article by me was published in Financial Chronicle on January 26, 2009 edition.

MISSED target ¦
APROPOS to the report that LIC failed to garner targetted funds through Jeevan Aastha.
It must be mentioned that Jeevan Aastha failed because of huge misrepresentation by agents and even by LIC itself where it hides the real picture by using weasel words. The insurer claimed 10 per cent guaranteed return on the scheme but it’s not compounded.
An investment of Rs 48,000, as shown in their own illustration, gives Rs 1 lakh after 10 years. That’s about 7.5 per cent compounded, much less than the 10 per cent claimed. The “10% guaranteed return” was a marketing gimmick, and it’s very much likely that the whole marketing infrastructure was paid obscene amounts of money and commissions to push the plan through. In a time when every asset class is losing value, people seem to clutch on to anyone who will guarantee a return, even if it’s low.
The policy is not suitable for any age class. For Young people (20-35 age), investments in market-linked instruments such as equity and debt funds can better returns for a 10 year period than the returns given by the policy. For older people also the returns from the policy is also not much attractive.

Srikanth Matrubai Bangalore

Visit http://goodfundsadvisor.blogspot.com for Mutual funds
visit http://equityadvise.blogspot.com for Stocks and Shares

INDIA WILL BOUNCE BACK

Read my Article in Today's(1/1/2009) Financial Chronicle on Page 12 on "INDIA WILL BOUNCE BACK"

BOUNCING back ¦ AS AN investor and a financial advisor, I am relieved to see the year 2008 being consigned to history. It was a year in which the financial crisis held the entire world in its grip. Equity markets crashed in nearly every country, while most financial institutions across the world were looking up to their respective governments to bail them out of the mess. Though India escaped relatively unhurt from the financial market turmoil, it was badly hit by the slowdown in the commodities market and real estate. Besides, the US recession badly affected the country's information technology (IT) sector. The outlook for 2009 is not too rosy either. With general elections due in April/May, we cannot expect the government to be aggressive on the reform front. The strong dollar is holding back the foreign institutional investors (FIIs) from pumping money in Indian markets. The continuing global recession will be a dampener on the inflows. The key takeaway, however, is that India will see growth when the world continues to be in a fullblown recession.

Thankfully, there is good news too. Falling crude prices will ease the pressure a bit on the country's balance of payment.

The government has admitted that the economy is faltering and taking pro-active steps to stem the rot before it gets out of hand. Easing interest rates have made companies breath easy.







The RBI is looking to make the housing sector as attractive as before and this is one sure shot way of igniting the spark back in the economy as most sectors such as cement and steel are directly and indirectly depended on the real estate sector. Giving stimulus to infrastructure would complete the picture and the recovery would be put on the fast track. Experts have diverse opinions but majority are optimistic that by mid-2009, we should be looking at a recovery and an eventual bounce-back by the Indian economy.

Srikanth Shankar Matrubai, Bangalore


Also visit my other blog goodtravelplanner.blogspot.com, http://buycall.blogspot.com and http://indiahotelstariff.blogspot.com/

Can minors invest in Mutual Funds?

Can minors can invest in a mutual fund? My son's maternal grandfather wants to give him a sizeable sum of money. He is a minor. I would like to invest it in an equity-based mutual fund for over 10 years. And I want to be the guardian for future transactions on behalf of my son.

- Sudhindra

Yes, minors can invest in a mutual fund, but only through a guardian. An adult, being a parent or a lawful guardian of the minor, can hold units of a mutual fund and deal with them on behalf of the minor. You need to furnish the asset management company (AMC) with a proof of age of your son and your capacity to hold and deal with the units.

Also visit my other blog goodtravelplanner.blogspot.com, http://buycall.blogspot.com and http://indiahotelstariff.blogspot.com/

Ulips to have uniform fees

This letter was published in Financial Chronicle on November 19, 2008

POOR STRATEGY

This refers to the news “Ulips to have uniform fee structure” on November 13.

Competition from peers and mutual funds as well as relentless media bashing has led the life insurance companies to reduce the exorbitant commissions paid to their agents. Ulips is a good concept but badly sold by agents.

As Ulips have higher commission structure, agents do not disclose the pitfalls of premature withdrawal and equity exposure limits.

With this issue resolved to some extent, investors will be able to compare various products and then decide.

Srikanth Matrubai,
Bangalore

Lesson learnt in this Market Meltdown

This Blog by me was printed in Financial Chronicle. You can visit http://www.mydigitalfc.com/stock-market/lesson-learnt-market-meltdown for details
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Lesson Learnt in this Market Meltdown
Nov 09 2008

By Srikanth Shankar Matrubai

The five year Big Bull run made everyone that there will always be sunshine. We tended to ignore warning signs and just brushed them aside as an aberration. I was no exception. Have I lost money?. Yes and no. Yes, because I am stuck with an asset which at a given point of time would fetch a lower valuation. NO, because, the loss is only notional.
I have seen two Bear Runs. First, post the Harshad Mehta Scam in 1992-93, next the Technology Meltdown in 2001. I learnt two Different Lessons in these Bear Runs.

In the first Meltdown, I learnt that "Never Invest All your Money at one go, it may the peak you are investing". In that Meltdown, where I burnt my finger as speculator, I qualified to become myself as an Investor. Lesson Learnt : Invest regularly at periodic intervals.

In the second Meltdown, I learnt that "Never Overexposure yourself to One Particular Sector". Lesson Learnt : Do not put all your eggs in 1 Basket. And the Biggest lesson which I learnt from this Bear phase is that I sold Good Stocks to protect my Huge losses in my Bad Stocks. So, ultimately, I was left with Dud Stocks and devoid of Blue Chips. And it took nearly 3 years to get my portfolio on the right track.

And in this present Meltdown, I have learnt not one but Two Big lesson, First, Book Profits Periodically.
Second, Spread Your Investment across Asset Classes including Debt.

I have taken these losses as tuition fees that I have paid to learn from the Markets.

The Biggest Reason why investors lost heavily in this market was due to the prolonged Bull run of 5 years, which made people invest without doing any research due to stocks going up almost every other day.

For me, the market is like an ocean. Anything you throw into the ocean always come back. Whatever you throw into the market will ultimately come back, provided you follow the market discipline.

I may sound naive, but I don't think I've lost anything. That is I have lost money on paper, which I had bought long long time age, and I am sure they will be back up sooner rather than later. The stock market going down doesn't mean the end of the world. The compaines I hold still continue to rake in profits.

But, yes, my faith to be completely invested in equities has been ripped to shreds, as the even the bluest of blue chips have got hammered. So, while I have not changed my current holdings, I will be looking to change my future asset allocation with a provision for debts and a bit of cash reserves to go with.

But, thankfully, I am not even 40 yet, so retirement is still a long way. I am sleeping peacefully, for I know I do not need this money for another 15 years at least.

My advice would also be on the same lines. It is always wise to have a properly diversified investment strategy based on your risk tolerance and as you age, you should become more conservative and shed your aggressiveness and shift towards debt and Large Cap Mutual funds.

I also plan to diversify further by investing in some International Funds.

I also plan to invest through SIPs to take advantage of NAV volatility (and indirectly time the market!) and restrain myself from making Lumpsum Investment.

I also plan to diversify further by investing in Other Asset Classes too like Gold, Silver and commodity funds by committing a small percentage.

I have decided not to borrow funds for investing. (this lesson I learnt in 1992-93 bear run).

I have decided to avoid ULIPs.

I intend to invest only for Long Term.

I`d like to end with some quotes that are defining my behaviour on the market these days -'Be fearful when people are greedy and be greedy when people are fearful.' - Warren Buffet

“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell,” - Sir John Templeton (founder of Franklin-Templeton).

'buy when there`s blood in the streets'


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