Category: Investments

In the past I’ve written about portfolio tools like Rediff Money Portfolio and Moneycontrol portfolio, and today I’m going to write about a new web based portfolio tool from MoneySights.

Regular readers may recognize this name because I’ve mentioned them earlier when I used them to research mutual fund data for the post about calculating returns from mutual fund SIP.

The tool is still invite only, and they’ve been gracious enough to give our readers a special link to open an account immediately, and I’ll recommend taking advantage of that since this is a good tool, and is free as well.

You can go here and register your account.

I’ve used this for about a week, but only rigorously used it for the last hour or so, and based on that I’m writing my thoughts here.

1. Look and Feel: The look and feel of the site is simply awesome, and you will love using it. The interface is very intuitive and the response time of the site is great as well. This is an important aspect because some of you complained that Moneycontrol portfolio was cluttered. The interface on MoneySights is quite good, and there’s no clutter anywhere.

2. Mutual Fund Options: There are several very good options to analyze and evaluate mutual funds. You can enter mutual funds from a past date, and also own them as you would’ve owned them if you had done a SIP.

You can also compare the portfolio returns with Sensex over a period of time which tells you when your funds did well, and when the Sensex did better.

3. Quick: The site is quite quick to load, and even when you make changes mid-way the response times are pretty good, and overall I was quite impressed with how intuitive and quick to respond the site was.

4. Can’t add cash to the portfolio: I was disappointed to see that I can’t add cash to my portfolio – this is quite an important thing for me as I want to keep track of my liquid assets too. I’m sure there are several other people who want to do this as well.

In fact you can’t add anything other than stocks or mutual funds right now, so you can’t create custom assets or track ULIPs  on this tool.

5. Stock advice: The portfolio tool gives you stock advice in terms of “Top 5 Stocks to Buy”  and “Upside Potential”.

I’d recommend my readers to ignore this completely because I don’t quite understand how they know which 5 top stocks to buy and the upside potential of it. And though I don’t know how they are arriving at these conclusions I doubt if there is anything that can convince me of their utility. I wished there was a way to turn them off, but ignoring them is just fine as well.

There is another indicator there called “Financial Strength” and if you own a stock which is low on that then you can look at the numbers again to see if there was something that you missed earlier.

Conclusion

On the whole I like this tool, and I think it makes sense to create an account now, and play with it. Even if it doesn’t fulfill all your needs now they are still building it and in time it can become your primary portfolio tool.

You can go to this here and register for your account.

One of the most frequent questions on the NPS post is how one can open a NPS account, and though things have improved in the past few months – most of the times opening a NPS account is not as easy as it should be.

I tried to look at the various ways you can open a NPS account, and thought I’d make a list of NPS account opening options I’m aware of. In doing this research I found that there is reasonably good information about where you can go to open an account, but it’s just that it’s not very well known.

For instance, on the PFRDA website – you can see the number of PoP-SP (Point of Presence Service Providers) (pdf) and it’s quite clear that SBI with 3,820 registered branches is quite clearly in the lead, followed by Alankit Assignments with 890 branches, India Post NPS Nodal Office with 807 branches and State Bank of Hyderabad with 714 branches.

This is an interesting stat, and the PDF itself has got a list of number of all PoPs, and gives an approximate idea of where you’re more likely get someone who can open an account for you.

With that said let’s take a look at the various options to open a NPS account.

Open a NPS Account with ICICI DIRECT

This is probably the easiest way to open a NPS account because if you have a ICICI DIRECT account, then you can log into your account and open a NPS account without any additional documentation. They don’t currently have the facility to open a Tier II account, but say that it will be introduced shortly.

I don’t know of any other online broker other than ICICI at this point in time that’s offering this service.

Open a NPS account through CAMS Online

CAMS is another registered PoP-SP that allows you to fill up the form online and enter information to open a NPS account.

This info was left by Dr. Shetti in a comment, and I’m not familiar with how the entire process looks like, so before you start entering the details there I suggest giving them a call and find out more.

Here is their contact information:

Point of Presence(POP)
Computer Age Management Services Pvt. Ltd.
PFRDA Unit
Rayala Towers, 158, Anna Salai
Chennai – 600 002.
Phone : 044 – 30212 636 / 662 / 678 / 789 / 808 / 900 / 987 / 989
Fax : 044 – 2841 1893
Email :[email protected]

If someone has first hand experience with this then please do leave a comment.

Go to a bank branch that’s a registered NPS PoP-SP

This is going to be the way most people open a NPS account – going to a bank branch and opening one. The trouble is that a lot of people find that when they go to the bank – the employees don’t even know what NPS is!

The PFRDA website has this excel sheet which has a list of all branches along with address and phone numbers where you can open a NPS account. So, if you’re in Gurgaon – you can just search for that in this file and it will show you the branch that’s present near you.

If you don’t have an ICICI Direct account and are interested in opening a NPS account, then this file should prove to be a good starting point for you as it will tell you where you can go and find some people who actually know what NPS is.

In due time – the number of branches will increase, and it will become easier to open an account, but till then some of you might have to struggle a little bit with this.

Amit left the following comment a few days ago:

I want to buy gold for my sisters marriage which will be in december 2012.
So i am planning to buy gold(in solid form) for making jewellery for her wedding.
Please let me know which month is the best to buy gold in solid form.

Before I could get to the answer – Niraj Kothari replied to it in a very comprehensive manner, and I think his response has some good insight for people who are planning to purchase gold in the near future for a wedding or some other occasion, so I’m bumping it up to a full post.

Even if you’re not planning to buy gold – this is a good thing to be aware of.

Dear Amit,

First of all, it is highly unpredictable to say in which month the gold rate will be lesser/ optimal so that you can buy buy pure gold .

I suggest you the below options by which I hope that you can take advantage of current high gold rate fluctuations and also get some benefit from jewellers schemes

1. You can go with monthly savings scheme / monthly fixed amount investment scheme with reputed jewellers in your city, the advantages of such type of schemes are

a. These monthly fixed amount investment schemes give you a bonus amount at the end of the     scheme.
Ex: Deposit Rs.5000 / month for 13 months and get a bonus of Rs.5000 at the end of 14th month , so you will be benefitted to buy gold worth Rs.70000/- though you have deposited Rs.65000/- in total for 13 months.

b. These schemes have some discount on the making charges*
* The discount should be taken in written on the day when you start the scheme.

c. Usually the gold price is taken on the final day on which you purchase the jewellery.

d. Make sure that whether the jeweller is offering the bonus only on purchase of gold jewellery or also on purchase of on gold bullion( 24kt gold ).

e. The jewellery which you purchase should be all BIS 916 hallmarked on every product.
Ex: If you buy a 6 piece bangle set, EACH BANGLE should be 916 BIS hallmarked for 22kt gold and 958 Bis hallmarked for 23kt Gold.

2. You must have decided how many grams of gold jewellery you are planning to buy for your sisters marriage, so for Example , If I assume it to be 200 grams and you 20 more months in hand.
So, you can buy just 10.000 grams 24kt pure gold of 99.50 purity or above every month on a fixed date , this way you will make an average price at which you buy gold and also it won’t overload your investment portfolio/monthly budget.

At the end of Nov.2012 you will accumulate 200.00 grams of 24kt gold, now when you go to a jeweller to exchange this 22kt gold jewellery , make sure of the below mentioned points.

a. Your 24kt gold should be converted in cash at that day’s prevailing 24kt gold purchase rate of the jeweller.( Rs.100 – Rs.300 / 10 grams is difference between sale and purchase price of 24kt gold at reputed jewellers )

b. You pay ornament rate + making charges to the jeweller for the jewellery you purchase , in this total amount your 24kt gold total value should be deducted.

c. Again make sure you buy in Bill/ and all the jewellery is 916 BIS hallmarked.

Hope the above information is useful to you…

I think there is value in exploring this option not so much because of the math of it but because of the psychological benefit of setting aside a certain sum every month for a very specific purpose with a jeweler. If you decide to get into a scheme with a jeweler where you invest a sum regularly to get a bonus at the end, then make sure to compare that with at least a bank recurring deposit, and see that it’s not too far off.

Be it stocks or other assets – regular investing is likely to trump timing the market as far as the retail investor is concerned.

Finally – thank you to Niraj for sharing his experience with everyone.

HDFC bank has become the first bank in India to sell physical silver.

I was unaware of this development till I received a comment, and had a small commentsation (comment + conversation – word that I just  invented; likely to cause embarrassment many years from now) that I thought is worth reproducing here for others.

Sanjeev March 1, 2011 at 6:01 am [edit]

Just got duped..
Bought 500 gms silver @ 3370/50 gms (discounted for being a classic customer)

paid 67400 /kg vs market price of 49915/kg

we should sue these banks.. will go to bank tomorrow & see if anything can be done.. will keep you all posted

HDFC Rates
http://www.hdfcbank.com/common/gold_rates.htm

Market price
http://www.sify.com/finance/gold_rates/

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REPLY

Manshu March 3, 2011 at 8:30 am [edit]

Banks are selling silver also? Which bank is it and in which city?

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Loney March 3, 2011 at 8:35 am [edit]

Only HDFC bank is selling silver as 50g bars.

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Manshu March 3, 2011 at 8:49 am [edit]

Oh – I didn’t know about that – and they are charging a fat premium I guess, and then won’t be able to buy it back either?

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Loney March 3, 2011 at 8:56 am [edit]

exactly!

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Manshu March 3, 2011 at 1:43 pm [edit]

Well then I better get ready for some more angry comments now!!!

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If you are going to buy silver from banks then please keep the following two factors in mind:

1. Banks charge a premium when compared with your local jeweler. Buying silver from a bank may give you the satisfaction about purity of silver since a bank is more reputable than a jeweler next door, but will also mean that you pay more.

2. Banks will not buy back the silver from you. Many people have found that when they buy gold bars from banks they pay a premium, and when they try to sell it to jewelers – the jewelers ask for a deduction, so the retail investor gets dinged at both ends of the transaction.

These are points that you should keep in mind, and factor in your decision making process.

There are several people who think that paper gold or silver is not safe and for them it’s not even an option to buy anything other than physical gold or silver.

Then there are some people who are not comfortable with buying gold or silver from jewelers and since bigger brands like Tanishq also charge a premium they don’t mind going to a bank.

The point I’m trying to make is you need to be cognizant of the premium, and the fact that you will have to figure out how you’re going to sell this silver later on.

It’s not necessarily a good or bad thing because that depends on how you look at it, but you certainly need to be aware of these facts.

IIFCL is also offering infrastructure bonds under section 80CCF, and their issue started on the 4th February and will close on the 4th of March.

IIFCL Infrastructure bonds have a face value of Rs. 1,000 and the minimum investment needed in them is Rs. 5,000. The bonds can be issued in both physical and Demat format, and the issue has been rated AAA / Stable by CRISIL and CARE AAA by CARE, which indicates their highest safety rating.

These are secured bonds, and have a lock in period of 5 years after which they will be listed on the BSE.

No TDS will be deducted on bonds on Demat form, and for the bonds in paper form no TDS will be deducted if the interest is less than Rs. 2,500.

Here are some details of the IIFCL Infrastructure bonds.

As you can see from the above table there are 4 series, and every series has the buyback option on it as well. The buyback means that even though the maturity period of the bond may be 10 or 15 years, you can get your principal back earlier than that.

In series 1 and 2 – you can ask the company to buyback these bonds after 5 years whereas if you opt for series 3 or 4  – you can ask the company to buyback the bonds after 7 years.

Since the main benefit of these 80CCF bonds is tax saving, I’m of the opinion that the series with the shorter tenure makes more sense, but this is ultimately your decision and you have to see what makes most sense for your finances.

One more thing I’d like to emphasize is that these 80CCF bonds are all under the cumulative limit of Rs. 20,000. If you have already invested in some other infrastructure bond then there is no point in investing in this again since you won’t get the additional tax saving.

This is another post from the Suggest a Topic page, and this time we’re going to take a look at the difference between debt and equity products, and some examples of both.

What is equity?

Equity refers to part ownership in a company, and in the Indian context – equity and shares are used inter-changeably.

So, if OneMint were a company that had 100 shares in the market, and if you bought 1 share of OneMint – you would be the owner of 1% of OneMint.

If OneMint was valued at 1 lakh rupees today, then your share would be worth Rs. 1,000.

If 5 years from now – OneMint were valued at Rs. 10 lacs then your share would be worth Rs. 10,000.

If however, the company went bankrupt then your share would be worth nothing. Equity products are generally considered to be high risk – high return products for this reason.

Examples of equity products:

Shares: Shares trading on the stock exchange are the most direct examples of equity products.

Equity Mutual Funds: Mutual funds that own shares are another example of equity products. ELSS mutual funds that are eligible for 80C tax savings are a popular example of equity mutual funds.

Equity based ETFs: ETFs that are based on shares like Nifty Index Funds are also an example of equity products.

What is debt?

Debt is loan, and carries a fixed rate of interest, and a promise to repay. Debt is generally safer than equity, and there is generally no upside in it. You get paid the promised interest, and as long as the company (or country) is not bankrupt – you’re safe.

For example – OneMint could issue debt of Rs. 1 lac at an interest rate of 15% per annum, and as long as OneMint is not bankrupt – you can expect your interest repayment, and also the repayment of your principal.

If OneMint goes bankrupt, then first the shareholders are wiped out, which means that your shares in OneMint are worth nothing now, and then the debt is paid off according to the hierarchy of creditors.

A secured debt is debt that is secured against a collateral like a building, land, machinery etc. and they have a higher repayment priority than an unsecured debt, which is not secured against any collateral.

Examples of debt products:

Fixed Deposits with banks are the prime example of debt products. They are extremely safe investments, which have a pre-determined interest rate. The stock of SBI may have wild swings but your fixed deposit with SBI is safe, and won’t be affected till something really serious happens.

Infrastructure bonds that have recently been launched are another type of debt product as they pay you a fixed interest rate, and the principal is protected as well. They are not as safe as bank fixed deposits, but if any infrastructure company defaults on their debt – that would be an exception rather than the norm.

FMPs – These are a special type of mutual funds that have become popular in the past few years, and work like fixed deposits (though not as safe as them). They have become popular due to favorable tax treatment when compared with a fixed deposit,  so people don’t mind taking the little bit of extra risk.

POMIS: Post Office schemes are also debt schemes as they pay a fixed interest, and are also guaranteed. These are very safe instruments.

Provident Funds: This is also a debt product, which is quite safe and pays a fixed rate of interest.

These are some of the key things that come to my mind when explaining the difference between a debt and an equity product – feel free to add anything that I have missed, and as always – comments are welcome.

The author is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at [email protected].

Today I am going to debunk a few investment myths. You will know ‘why individual investors are failing miserably and how you can avoid being one of them’.

I am too young to plan for retirement

Have you started planning for your retirement? You may be saying ‘who me? I am too young to be thinking about retirement”. It is not so! Rethink. You should have started thinking about it yesterday. Because time flies quickly.

If you were smart, and planned for retirement when you are young, your retirement years will be really those “Golden years”. If not you need to compromise and you need to work longer and retire later than others.

East or west FDs are safe and best

Nothing wrong in investing in FDs. FDs are really safe and it gives us fixed return. But there is no meaning in investing all your money in FD. The post tax return of an FD will hardly beat inflation. If your investments are not beating inflation, then your money is losing its purchasing power. FDs are safe but not always the best option.

I can never be as good as Warren Buffet or Rakesh Jhunjhunwala so why try?

In the words of Warren Buffet “Success in investing doesn’t correlate with IQ once you’re above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.” You don’t need a super brain for making investment decisions. You only need common sense and discipline. If you don’t have enough time and expertise, then you can get assistance from professional financial planners.

The best way to make money is investing in what is hot

If you are investing in what is hot, then you are following the crowd. If you follow the crowd, you will get what others are getting. You will not get anything more. You need to be fearful when others are greedy and you need to be greedy when others are fearful. So don’t go by the market trend or the hot pick of the month. Think like a contrarian and follow value investing.

Stock markets can earn me quick bucks

This is a common myth among investors. Stock market will reward the long term investors. Stock market is a system which transfers money from investors who are fearful and greedy to the investors who are balanced and rational.

You need to be calm, patient, disciplined, and rational. You don’t have to be smarter than the rest; you have to be more disciplined than the rest.

There is no such thing as too much diversification

Diversification is needed. A well diversified portfolio can be created with 10 stocks or 3 mutual funds. Having more than 20 stocks or 6 mutual funds can dilute your returns. The reason is you are not only investing in best stocks and funds, you are investing in above average and average stocks and funds. So your returns will come down. Instead of over diversification, you need to concentrate on a few stocks. It is possible to achieve the required diversification with a few stocks or funds.

Timing the market is important

Investors often spend a lot of their time in trying to identify when the market is very low or high, and timing the purchase and sale of investments accordingly.

In other words, they want to time their exit when the market has reached its top and to time their entry when the market has reached a bottom. This not a practical idea because there are so many influencing factors to the stock market. Predicting all the factors and making investments is practically not possible.  Instead of that stagger your investments through SIP, STP and stay invested for long term.

Saving tax is the only objective for me to Invest

Which group you are in? There is a group of people who invest just to save taxes. They will not bother to invest anything more than that. They will meet their objective of saving tax. There is another group which invests to save tax as well as to save for their other life goals like retirement, children’s future. They will meet the objective of saving tax and achieving other life goals. Kindly check you belong to which group.

You can be an assured successful investor if you could avoid these investment myths.

Kunal still has some way to go before he reaches his 1 lakh limit, and he left a comment about comparing a tax saver fixed deposit with the 80CCF infrastructure bond, and which one works out better.

I responded to that question, and since I’m a bit lazy today I thought I’d use that response as a post for today.

Here are my thoughts:

Personally, I’d opt for the fixed deposit, and here is my thinking behind it:

1. First and foremost, you get tax saving FDs that pay higher than the bonds, and there is a possibility that even these rates might get hiked in a few more days. So even though the absolute sum won’t be very high, one point in favor of the tax saving fixed deposit.

2. When you have the option available within your 80C (1 lakh) limit then use that up, and keep the option of infra bonds open in case you find that you can invest in them later on.

3. You will have to wait a little bit to get the investment proof, and then some people have faced the issue where the allotment advice has been sent to their old addresses, or the bonds are in the wrong name, or other issues to produce proof of payment.

4. There are some other issues that people have faced like a person wanted to close their Demat account, but since the infra bonds they owned were locked – in – they couldn’t do it right away.

5. The bank fixed deposits are more secure than the unsecured infrastructure bonds, although a situation where such companies will come to a point where they default on their bonds is unlikely.

So, I’d personally make a decision keeping all these points in mind.

What do you think? Does this make sense? Would you do things differently or have to add anything?

Reader Rakesh emailed me with a link to a Moneycontrol story about how LIC may not come out with an infrastructure bond issue by 31st March this year.

LIC is one of the institutions that’s approved to issue infrastructure bonds under Section 80CCF, and there were some news reports earlier that said they would come out with an option where they offer free term insurance along with the bond issue.

I know from comments and emails that a lot of you were waiting for the LIC infrastructure bond issue, so be warned that the chances of them actually coming out are quite low now, and if you’re interested in investing in infrastructure bonds, then it’s time to look at other options now.

Link to Moneycontrol Story

Link to Moneycontrol Video

I’ve got a couple of emails about this subject, so I thought I’d share it here, and see if anyone has any fresh ideas.

These readers bought the 80CCF infrastructure bond in the Demat form, which has been now allotted to them, and credited to their Demat account.

Now, these readers want to close their Demat account, and open one some place else, but they are being told that since the bonds are currently locked – in (these bonds have a lock in period of 5 years) they can’t transfer the bonds to another Demat account.

One way to deal with this situation is to rematerialize the bonds, and get the company to issue a physical certificate to them.

This can be done after the bond has been allotted, and you don’t have to wait for the lock – in period to expire to do this. After the bond has been rematerialized you can close the Demat account, and open a new one.

Does anyone have any other ideas on this, or any experience with the process of rematerialization?