Finance Minister has increased the Dividend Distribution Tax (DDT). The dividend distribution tax is at 12.5% for the debt funds earlier, now it has been increased to the 25%. It is is steep increase in the tax and would hurt the retail investors to attract more investments towards the debt funds. DDT is not applicable for the equity funds. Dividend Distribution Tax (DDT) on all non-equity funds. This article provides basic insights on DDT and how it will affect the retails investors.

What is dividend distribution tax?

• Tax Implications on Equity Investments
  
• Learn About Mutual Funds
  
• What is Open Ended and Close Ended mutual funds?
  
• Think before investing in New Fund Offer (NFO)
  
• Birla Sun Life Capital Protection Oriented Fund – Series 1 
  

If you are a retail investor who invests regularly on the debt funds, the accumulated profit from the companies would be distributed by the company to all the investors on that company. Note that company’s profit is arrived at after paying the income tax for the total income. DDT is not fall under the income tax category. It is a special tax levied on the distribution of the profit to the investors. It is a controversial tax burden on the investors pocket. The reason is that, company has already paid the tax for its profit, but it becomes another tax payment for the distribution to the investors.

In the recent announcement, Finance Minister has announced that  there will be 25% tax deducted on the dividends. Note that investors are not asked to pay the tax on its dividend income. It is tax free on their hand. Infact it is not a tax free income, the actual tax is paid by the company itself before transferring the dividend.  This change would impact the total dividend distributed to to the investors.

Hope this article helps you to understand the dividend distribution tax and how it impacts retail investors.

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This post summarizes the list of posts published on last month Jan 2013 and which are most useful for you. This list would provide you the good overview if you have missed the some of the posts. You can get a chances to look into all the articles in a single location. I have published articles related to insurance, credit cards, income tax and other investment related topics in the last month.

1. Public Provident Fund (PPF)
2. Rupee value, recession, europe problem and global issues coverage
3. How to get duplicate insurance policy?
4. How interest charged on your credit cards?
5. How to buy the right Critical Illness policy?
6. Tax deduction of income from winning of lotteries, games
7. Low priced stocks are not always cheap
8. EPF withdrawal conditions
9. Diesel price deregulation
10. How you are taxed for your abroad (onsite) income?
11. What a travel insurance policy covers?
12. Home Loans Interest Rates Update (Jan / 2013)

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As per the Security Exchange Board of India (Sebi) circular on August 2012, Depository Participants (DPs) has to make available of the Basic Services Demat Account (BSDA) for the retail investors who are having the minimum holding on the demat account. One of the challenging task for the SEBI is to bring more domestic retail investors to participate in the market. Most of the retail investors stay away from creating the DP account only because of the maintenance charges levied on the account.

The recent move to introduce Basic Services Demat Account (BSDA) is allowing the small investors to open DP account without any charge for their annual maintenance. This encourages more financial inclusion in the country. The changes are implemented from Oct 1, 2012 by all the Depository Participants (DPs) in India. This article explores the basic details about that account and how you can benefit from that as a retail investor. If you have any questions, please post it in the comments section. if you are interested in receiving the future articles on investments, please subscribe here.

• How NRIs can invest in Indian stock market?
• Invest in share market and mutual funds
• Learn about mutual funds

Everything you wanted to know about stock market

Who can open this accounts?

This BSDA account is aimed at people who are maintaining the net worth of the total investments below Rs. 2 lakhs. The net worth is calculated in the latest NAV or Unit values as per the market. This account is aimed at the small retail investors who are coming under the lower end in the society. This account can be opened only one across all the  Depository Participants (DPs). For example, there is no restriction on opening the multiple demat account in your name, but the BSDA account can be only one across all the DPs.

Charges levied on BSDA account

If the total value of the units are less than Rs. 50000, then the annual maintenance charges of your holding would be zero. If the total value of the holding is Rs. 50001 to Rs. 200000 then the charges would be Rs. 100 for one year. The value of the holding will be decided by DPs who are authorized and instructed by SEBI.

If you are receiving the electronic statements, then account holder need not pay any charges for the statements. If you choose to receive the hard copy of the statements, then two statements will be free during the billing cycle. But addition statements will be charged a fee, which cannot be more than Rs25. You will get a transaction statement at the end of every quarter, provided there has been at least a single transaction in the quarter.

If you are existing DP account holder, then you can ask your DP to convert your account to the BSDA account based on the total value of the holdings. If the value of holding in such BSDA exceeds the prescribed criteria at any date, normal charges as applicable to regular accounts (non-BSDA) from that date onwards shall be levied.

• How NRIs can invest in Indian stock market?
• Invest in share market and mutual funds
• Learn about mutual funds

Everything you wanted to know about stock market

I hope this information will be useful for those who are maintaining the account and having the less balance. There is no need to pay the more fees and can be converted to the BSDA account. If you have an account and the holdings are less than Rs. 2 lakhs then please convert your account immediately. Share this information with your friends. If you have any questions, please post it in the comments section. if you are interested in receiving the future articles on investments, please subscribe here.

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In the previous week, sensex has crossed 20000 mark after two years of time. When stock market is on the bull run, it is the time when our retail investors steps in and start picking the stocks. The primary problem is valuing the stock by seeing the price of the stock. The real value of the stock is not the actual price. In fact, higher priced stock may be cheaper than the lower priced stock.

For example, Rs. 800 valued stock may be cheaper than the stock valued at Rs. 50. Investors has to pick the right stock by analyzing some of the key ratios. This article explores three ratios which are very key to determine the value of a stock. If you have any questions, please post it in the comments section. If you are interested in receiving the future articles, please subscribe here.

• How NRIs can invest in Indian stock market?
• Invest in share market and mutual funds
• Learn about mutual funds

Everything you wanted to know about stock market

Price-to-earning (P/E) ratio

This most common indicator of the stock is arrived at by dividing the stock price by average earning per share (EPS) during a past or future period. It is thumb rule that having P/E value for past five years at low is more attractive for a stock. When you are planning to buy a stock, first have a look at the P/E ratio and compare that with the peers in the same industry. The lesser P/E ratio is better for investing. Note that, it is one of the criteria for choosing a stock, but the lower P/E may not be good in all the scenarios.

Price-to-book value (P/BV) ratio

P/BV is another important ratio to consider. Every company has the total value of stocks, and the real value of the assets. Book value is arrived from total assets value deducted by total liabilities. If company bankrupts, book value is money what investors will get from the company after selling all their assets. If the stock value is having great difference from the book value, then the company is over priced in the market. The book value ratio is arrived at stock price divided by its book value.

It is thumb rule that if the book value is less than the stock price, company is valued lower than its real value. Also note that it is one of the indicator of the value for stock. By seeing only this ratio is not enough to decide the health of the stock. The value may be higher if the company is growing at faster pace then its book value. In that case, this ratio may not be applicable.

Return on Equity (RoE)

This is net profit after payment of dividend on preferred stock divided by shareholder equity. This ratio expressed in percentage, this ratio tell us that how much money the company making using the shareholder money. As the name suggests, return on the investment for the shareholder money. Normally, RoE is 15% or more is considered as good for a stock. If its lesser than that, investor has to further analyze if the value will be increased in the future. Here also, compare the ratio for the long term trend like for the past five years of time.

A company with low P/E and P/BV will be a good pick only when it has the higher RoE for the long period. Otherwise it means that the company is not making the good returns, that is the reason P/E and P/BV values are less, hence investor has to reject that stock.

A stock price is not gauged by its price alone, but depends on various parameters and ratios. Before buying any stock you have to do a decent analysis on the stock and then invest your money. If you are a new comer to the stock market, avoid being a trader (buy and sell in same day) instead choose for buying in the long term. Investing in the stock market is high risk category, be safe before put lump sum amount into the market.

Everything you wanted to know about stock market

Hope this article provides basic details about the key ratios on the stock market. If you have any questions, please post it in the comments section. If you want to receive our future articles, please subscribe here.

• How NRIs can invest in Indian stock market?
• Invest in share market and mutual funds
• Learn about mutual funds

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If you have shares and want to gift to some one you want, you can transfer or donate the shares to them. This can be done through the off-market transactions. If you are giving the shares, you will be called as donor and who receives the shares called as donee.  An off-market transaction is initiated by the donor with his depository participant (DP) by submitting a delivery instruction slip (DIS) to transfer securities from his depository account to that of the donee. The following are the important details to consider:

• The delivery instruction slip (DIS) must have the name of the donee and security being transferred, ISIN number of the company and quantity of shares being transferred.
• Also donee who receives the shares must give the receipt to accept the shares.
• If you are gifting the shares, it is good idea to execute the gift deed with stamp paper to avoid any tax issues in the future.
• The details mentioned in the delivery instruction slip and receipt instruction for off-market transfer must match, otherwise the transfer will not take place.
• If you are receiving as gift from your relative less than Rs. 50000 worth of shares, then it is not liable to pay any tax.
• If you have paper shares, first convert to the DP format and goft it. It will save the stamp paper charges.

This is a quick tip to help the people who want to transfer the shares. If you have any questions, please post it in the comments section. If you want to subscribe for future articles, please click here.

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In the near future, the Employee Provident Fund (EPF) organization is planning to issue the passbook for all the EPF account holders. It is very good news for the salaried employees who has the EPF account. This can be announced or started from the coming April 2012 onwards. There are lot of benefits in issuing the passbook for the EPF account.

• Get EPF information on SMS
• Use EPF for retirement planning

• In the current scenario, switching the job become inevitable and employes are finding trouble in transfer the PF amount to the new company. Even they are not able to get the status.
• If the PF account holder dies, their nominees can easily get the PF amount using the passbook.
• This will help the account holders to keep track of their PF amount and encourage them to save that for the retirement planning.

The decision will be taken in the EPF meeting Feb 22, 2012 (next week). Hope this will be a positive news for every one.

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In the recent times there are lot of changes in the interest rates of debt instruments. It includes the interest rates changes on public provident fund(ppf), post office savings, employee provident(epf), etc.This is the main investment options for the people who are ready to take less risk. 2011 has been very bad year for the stock market because of the uncertainty on global economy, this creates huge demand for the safe investment options among the investors. This article summarizes some of the popular investment options with the latest interest rates and its tax benefits. This would be good refresh for the investors to know the latest interest rates on these schemes. If you have any doubts, please post it in the comments section. Subscribe to our future articles here.

Employee Provident Fund (EPF)

I have written about this many times in our blog. It is one of the traditional savings scheme in our country for enforcing the salaried employees to save for their retirement planning. Following are the few points to consider about the EPF:

• At present interest rates on EPF is 9.5% p.a.
• There is no tax liability of you withdraw money after the 5 years in the EPF account.
• When you are changing job, you can transfer your EPF account to new employer by submitting the form 13 or withdraw the money by submitting the form 19.
• Amount contributed towards EPF account would eligible for the tax exemption under section 80C.
• You can receive the SMS on your EPF balance by registering here.

Public Provident Fund (PPF)

If you are not salaried person and don’t have the option to save in EPF, open PPF account and save for your long term goals.

• It is 15 years lock-in period.
• At present PPF offers 8.6% interest on the investment, the income is not taxable.
• Minimum amount is Rs. 500 and Maximum Rs.100000 can be deposited in an single year.
• The investments are eligible for the tax exemption under section 80C.
• It is good idea to save in the PPF for your long term goals like retirement and children education or marriage.

New Pension Scheme (NPS)

The following are the important points to consider.

• NPS is available for people aged between 18 years and 55 years.
• The minimum amount per contribution is Rs 500, to be paid at least four times in a year. The minimum amount to be contributed in a year is Rs 6,000.
• If the subscriber exits the scheme before the age of 60, s/he may keep one fifth of the accumulated saving and invest the rest in annuities offered by insurance companies.
• Since the NPS is meant for post-retirement financial security, it does not permit flexible withdrawals as are possible

Senior Citizen Savings Scheme (SCSS)

The following are the important points to consider:

• Duration of the scheme is 5 years and can be extended to three years.
• Interest rate is 9% and compounded quarterly.
• The interest income on this scheme is fully taxable.
• The maximum investment on this scheme is Rs.15 lakhs.
• The application forms are available with post offices and nationalized banks.
• You can read our previous article about SCSS scheme.

National Savings Certificate (NSC)

It is one of the oldest traditional savings scheme. The following are the important points to consider:

• NSC is available in 5 years and 10 years duration.
• This investment is available in the post offices.
• The interest rate is 8.40 for 5 years and 8.70 for the 10 years investment.
• The interest income on NSC is entirely taxable.

Comparison Table

The following table lists the above savings schemes and its features.

Summary

Many of the product in this article has been already discussed in our earlier articles. This is a refreshing article to update with the latest interest rates on the each scheme. If I have missed any of the popular scheme in the list, please post it in the comments section. If you have any doubts, please post it in the comments section.

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Retirement is one of the crucial phase in every one’s life. If you want to spend your rest of the life in peace without any hassles, you must have the proper planning for your post retirement life. In this aspect, saving money for the retirement life if very crucial and have the significant role for the retirement planning. In the busy world, many are not planning for the post retirement life and want to spend most of their earnings for their present day happiness. You must enjoy the current moment, also should have the planning for your future. This article explores the various points to be considered for the retirement planning. If you like this article, please subscribe to our future articles here.

1. 10% of income for retirement

• Salaried
• If you are salaried person in a company, the 12% of your salary will be deducted for your provident fund contribution. Investing in EPF is one of the best avenue for the retirement savings. The interest rate for the EPF is 9.5%. When you are switching your job to new company, make sure that you are transfer your EPF savings instead of withdrawing the money.

EPF Balance on SMS

• Self-employed
• If you are self employed, then you will not have the option to invest in the EPF fund. You must plan for your retirement. There are various investment options in the market. One among  them is the PPF investment which is similar to EPF for the salaried employees. The interest rates for the PPF is increased to 8.6%.
• It is advisable to allocate 10% of your total income to the retirement fund. It is not necessary to allocate your whole retirement savings into the same investment scheme, you can diversify and invest in the various schemes depends on your age.

2. Increase your investment

If you are salaried person or self employed, you would come across annual salary hike or the increase in your total annual income. It is very common mistake that when your income increase you are tend to increase your expenses and lifestyle, but forget to increase your savings. Whenever there is any increase in your income, increase your allocation to the retirement savings. This would help you to reach the good corpus at the time of retirement.

3. Don’t withdraw the retirement savings

You would have the important expenses in your day to day life. It is very common mistake done by every one to dip into the retirement corpus for meeting the emergency expenses. It is not at all good idea to break the long term investments like retirement. For example, if you have kid’s education or buying a car, you must think of arranging the fund from outside source like applying for the loan or your short term financial plan rather then dipping into the retirement corpus.

4. Borrow for education and save for retirement

If you have expenses for the kids education, get the education loan and don’t disturb the retirement corpus. There are various sources available to get the money for kids education, but many parents sacrifice their retirement savings like provident fund to meet their kid’s education. It is not the good idea.

5. 100-your age=allocation to stocks

• Stocks
• In our country, there is misconception that one should not invest on the stocks for the long term goals like retirement because it is too risky. But, that is not correct thinking because stocks would give higher return than any other investments for the long term goals. But, one must consider their age before exposing to the high risk investments like stocks.
• It is general rule of having percentage stocks in your portfolio is 100- your age. It varies based on the individuals financial capacity. If you are in 20′s, then don’t hesitate to invest in the stocks. It is the right time to pick up some good blue ship stocks and invest your money. If you are over 40′s, then start reducing your exposure to the stock market because.
• Mutual Funds
• If you don’t have time to monitor the stocks, mutual funds are the good option for you. It is less risk compare to the stocks and offer good returns in the long term.

6. Power of compounding

You must understand the power of compounding in the investments. For example, you start in 2008 and want to save for retirement and If regularly invest 1 lacs every year at 15% return per Annam , the investment will be Rs 4.35 Crores in 2038 , but if you do late for 2 years and start in 2010 , it will be Rs 3.27 Crores only by 2038 , that will leave you with Rs 1.08 Crore less money. So, it is always good idea to start investing in your early age for the retirement.

7. Initial years of retirement spending

Once you are in the retirement starting stage, don’t spend in the lavish way because your savings must go for your entire life. In the initial years, take only the 5% of savings each year and later on increase the spending because there would be more medical expenses in the later stage.

Summary

I hope this article would have provided the basic idea on the retirement planning. If you want to read and learn more on the retirement planning, please read the best selling book for retirement planning  Retire Rich Invest by P V Subramanyam. It is one of the best book in the market. If you have any doubts, please post it in the comments section.

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In my previous article I have listed down the investment proofs needs to be submitted for this financial year 2011-12. I would be writing in detail about the each topic. This article explores the details of employee provident fund (epf) and how it can be used to show an tax exemption component. It is compulsory deduction on your salary and many don’t consider this while computing their total investment needed for the tax exemption. If you have any doubts, please post it in the comments section. Please subscribe to our future articles here.

Section 80C

As we know that there is maximum of Rs.100000 can be invested for the tax exemption under section 80c. This includes various investments like Life Insurance, Home Loans, Health Insurance, Public Provident Fund (PPF), etc. These investments has to be invested by you and submit the proofs while end of the year. But, EPF is compulsory deducted by every employer for their employees to save for their retirement planning. By default, EPF savings fall under the section 80c’s Rs.100000 category.

When you are planning to invest Rs.100000 for this year to utilize the section 80c, you must include your contribution towards EPF and plan your investment.  For example, your employer is deducting Rs. 3000 for every month towards EPF, your yearly contribution would be Rs.36000 (3000 x 12). In this case, under section 80c you are left with Rs.64000 (Rs. 100000 – Rs. 36000) for the tax exemption investments. You are not required to submit the proofs for EPF, since your employer would calculate and send to the govt.

What is EPF?

also read

• Invest in EPF for retirement planning
• EPF Balance Information on SMS
• EPF Transfer and Opening PPF Account
• EPF (PF) Transfer and Form 13

The above section explains the tax computation part using the EPF. This section explains the EPF and what are the benefits. The following are points you must know about the EPF:

• Interest rates for employee provident fund (EPF) is 9.5% monthly cumulative. It is the best investment avenue for low risk category.
• Minimum 12% of your basic salary would be deducted towards EPF. Also, you can increase your EPF investments by submitting the declaration form.
• If your salary is above Rs.6500 per month, then you would be eligible for the EPF deduction.
• Interest income on provident fund is not taxable.
• When you are switching your job, you can transfer your EPF to your new employer by submitting the form 13. If you would like to withdraw your savings, you have to submit the form 19.
• If you are withdrawing EPF before the five years, the amount is taxable.
• The maximum amount can be shown under tax exemption is Rs.100000
• You can find more details in the official site.

Summary

I hope this would have given the basic idea on EPF and its benefits. It creates the lump sum corpus for your retirement and helps in saving the tax. But, make sure that you are not withdrawing or closing the EPF account. The power of compounding is important for your long term goals. If you have any doubts, please post it in the comments section.

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Earlier Shyamala Gopinath Committee has proposed the set of changes on small savings interest rates to the govt. The reason for the proposal is to compete with other investment areas like bank deposits and fixed income categories. In the last week, govt. has announced  changes on the small savings schemes for the customers,  the interest rates and other changes to the small savings schemes like PPF, Post Office Savings, Monthly Income Scheme (MIS), etc. This would benefit the customers who prefer the small savings scheme like Post Office. Subscribe to our future articles here.

Public Provident Fund (PPF)

• The existing limit for the yearly investment of Rs. 70000 has been increased to Rs. 100000. Now onwards, an individual can invest up to Rs. 100000 for a financial year.
• The interest rates for PPF account is 8.0% p.a. and it has been revised to 8.6% p.a. which is very good for the customers. It will attract more investors to open the PPF account.
• Interest on loans from the PPF will be increased to 2% p.a. from the existing 1% p.a.

Tax Planning and PPF

Post Office Savings Accounts (POSA)

• Existing post office savings accounts fetch only 3.5% p.a. as the interest rates. In the revised rate is 4.0% p.a.
• This has been revised with effect of banks accounts has revised the interest rates to 4.0% earlier. (update: bank’s savings account interest rates deregulated).

Post Office Savings

Post office Time Deposit (POTD)

• Liquidity of post office time deposit – 1,2,3 & 5 years to be improved by allowing premature withdrawal at 1% less than the time deposits of comparable maturity.
• For premature withdrawals between 6 and 12 months of investment, the POSA rate of interest will be paid.

Monthly Income Scheme (MIS)

• Existing rate of 8.0% p.a. will be revised to the 8.2% p.a.
• The duration of the scheme is reduced to 5 years from 6 year.
• Payment of 5% bonus on maturity is discontinued.

National Savings Certificate (NCS)

• The maturity period of National Savings Certificate (NSC) reduced from 6 years to 5 years.
• A new NSC instrument, with a maturity period of 10 years, to be introduced.

 Kisan Vikas Patras (KVPs)

• Kisan Vikas Patra certificates is that the deposited amount doubles itself after the completion of stipulated period and the rate of interest offered by the post offices for these certificates remain same throughout the loan period.
• The tenure of Kisan Vikas Patra certificates is 8 years and 7 months.
• This scheme will be discontinued and no longer will be available with the post office savings.

• Tax Deduction on Post Office Savings Account
• Post office Monthly Income Scheme (POMIS)
• Fixed Deposit for Monthly Income

The following is the table contains summary of changes proposed:

Bad News for Commission Agents

• The payment of commission on the PPF schemes (1%) and senior citizens savings scheme (0.5%) will be discontinued.
• Agency commissions under all other schemes will be reduced from the existing 1% to 0.5%.
• The commission at the existing rate of 4% will continue for the Mahila Pradhan Kshetriya Bachat Yojana agents.
• Incentives, if any, paid by the state/UT governments will be reduced from the commission paid by the central government.

Summary

I hope this changes would bring more investors to the post office savings schemes. But, still there could be more changes because the investors who prefer the post office savings are from rural areas with less income. The revised rates are not effective now, it is expected that government would announce it from the Dec 1,2011. If you have any doubts, please post it in the comments section.

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We all tend to invest in companies which are earning good profits and have a good future earning potential but how many of us tend to care about what the company tends to do with these profits. Very few retail investors tend to look into whether the company intends to re-invest the past profits or does it tend to distribute this profit among the shareholders as dividends.

Some analysts prefer high dividend paying companies and other analysts prefer companies which tend to re-invest the profit and pay lower dividends. In this article, we try to highlight the benefits of investing in High- Dividend paying companies considering the current economic situation. Subscribe to our future articles here.

Stock Picking Ratios

Benefit of Investing in High Dividend paying companies

Uncertain future Economic Situation

With the Stock Markets meandering, investors could be hard-pressed to find growth stocks. There is not too much of good news flowing in either. Inflation is still worrisome and, therefore, the markets are expected to stay range bound, or even inch down, in the next few months.

In such times, it is always advisable to go for companies with a high dividend yield, as they tend to provide a cushion during periods of downturn. As the economic scenario still looks gloomy, it would be better to opt for companies paying higher dividends rather than companies which tend to re-invest the profits as the future is still uncertain.

Improves Cash Flows

You might be investing for capital appreciation, but receiving a handsome dividend once in a while helps you build up your own cash flows. In fact, good dividend paying companies should form the core of long term investor’s winning strategy in the Stock Markets.

This is because every year as the Dividends increase so does the investors cash flow. Dividend is the best way in which an investor can par take of the profits of the company. And companies that generate good cash flows often reward shareholders with good dividends. As profits and cash flows of the companies increase over the years, dividends too tend to rise, and an investor too makes a good bit of money from dividends alone.

Tax Free Income

As per Section 10(34) of the Income Tax Act of 1961, the Dividend paid by Companies is exempt in the hands of the Investor and is thus the Investor is not liable to pay any taxes on the Income from Dividends.

Companies with High Dividend Yield

Following are some of the companies paying a high dividend yield. The Figures have been computed taking into account the share prices as on 11th September 2011.

How to Choose Good Dividend paying companies

While investing in high dividend paying companies, you should always be wary of companies that offer irresistible dividend yields. Often investors see high dividends in the pink papers and rush to purchase the stock only to find that the company has discontinued its dividend payout or reduced it considerably.

While selecting good dividend paying companies for Investment keep in mind the following points:

Opt for companies with Good Dividend Paying Track Record

It is highly advisable for an investor to opt for companies that have a good dividend paying track record. A company which has consistently increased its dividend payout is your best bet. Companies in consumer businesses that require less capital are often the ones that tend to pay high dividends to the shareholders.

Good Dividend Yield

Looking for companies with a good dividend yield is also a way to dig for value stocks. They are often trading at such low PE multiples that any downside is limited. And if you hold these stocks long enough, at some time or the other, the investors will start moving in and you would be able to unlock significantly higher valuations. However, sometimes the investors might have to wait long enough for that to happen.

Companies in the process of Announcing Dividends

If quick cash flows are what you are seeking, always look for companies who have not currently paid out dividends as they would be in the process of paying announcing dividends and you would be able to receive dividends within a short period of investing in the company.

It is also advisable to keep an eye on the record dates for dividend payouts. If your company is paying a windfall dividend, the stock price often adjusts to take this dividend payout into account by correcting a little. But that should not be too much of a cause of worry for investors holding good dividend payout companies in the long run.

Summary

Opting for High-Dividend Paying Companies or Low Dividend Paying Companies is always a matter of personal opinion as both have their plus and minuses. If you have risk appetite, Low Dividend Paying Companies are suitable for you as they would be reinvesting the profits to earn more returns, and if you have a low risk appetitive – High Dividend Paying Companies are better suitable for your profile as the profits earned are distributed amongst the shareholders rather than being reinvested which decreases the risk associated with the Stock.

Whether you are a High Risk Investor or Low Risk Investor, an efficient portfolio should consist of both types of stocks. The proportion of these stocks in your portfolio however would depend upon whether you are a high risk investor or a low risk investor.

This article has been authored by CA Karan Batra who is a finance and tax blogger on www.charteredclub.com

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One of the traditional and more safest investment or saving habits in India is monthly contribution for the Employee Provident Fund (EPF). Still many of us not aware of the advantages on EPF contribution and how it is superior when compare to the other safe investments. If you are looking for the retirement planning, have the continuous contribution towards the EPF is the way to go. This will show the power of compounding on the long run. This article explores the few important facts about the EPF and how you can do the perfect retirement planning using the EPF contribution. If you have any thoughts, please post it in the comments section. Subscribe to our future articles here.

• Check EPF Balance Online
• Buy Retire Rich Invest Book

High Interest Rates

It is one of the main reason why EPF is the best investment option compare to the other debt instruments like Fixed Deposit, PPF, NSC, etc. Provident Fund Commission offers 9.5% p.a. as the returns for your savings on the EPF account. This is compounded monthly which never offered in any other investment portfolios. The effective rate of return will be much higher in the log run. The following is the table lists interest rates of the other debt instruments:

Voluntary Contribution to EPF

It is commonly allowed by the companies and govt. institutions to increase the amount destructed for the EPF. It is compulsory for the salaried person to give 12% of the basic into the EPF. Apart from that employee can increase his contribution towards EPF up to 100% of basic salary and Dearness Allowance. Company is obliged to contribute 12% of the basic salary to your EPF account. Which is added bonus of the employee because at the end money goes to employee.

If you don’t have any expenses and commitment to pay EMI, etc, it is good idea to increase the EPF contribution. Note that surely it is better investment than any other debt instruments for the long run. It will be very good for the retirement planning. The amount excess of Rs.100000 will not be eligible for the tax exemption. See the next section for details.

Tax Exemption of EPF

The contribution towards EPF is coming under the section 80c of the Income Tax exception. As we know, Rs.100000 is shown under the section 80c of the Income Tax act, EPF also comes under this section. You can add the total yearly contribution towards EPF, if it is less than Rs.100000 remaining amount you must plan for the other tax saving investments.

There is no tax for the interest income on EPF and when receiving the lump sum amount after the retirement. But, other debt instruments like fixed deposits attract the TDS towards the interest income. Note that, if you are withdrawing money within five years, the amount will be taxable.

Retirement Planning using EPF

Undoubtedly, EPF is one of the good avenue for planning the retirement. If you are salaried person working for more than 20 years for a company, you must plan your retirement using the EPF. You don’t take any loans or withdraw for any other purposes. It will compound and will make the huge amount which can be utilized for investing in the retirement scheme.

Calculating the current inflation scenario and lifestyle, it wouldn’t be enough to run your life with the pension amount. You must have the retirement corpus to run the happy life. There are many schemes available with the insurance companies to provided the monthly income. Pay the EPF amount and receive monthly income after the retirement.

Advantages of Employee Provident Fund (EPF)

This section summarizes the important points about the EPF which you must remember to take decision on EPF.

• Interest rate is 9.5% p.a. which is higher than other debt investments.
• It is the long term investment. Don’t use EPF for the short term goals.
• You can take the loans from EPF amount instead of taking the personal loans.
• If you are switching the company, instead of closing you can transfer to the new employer.
• Employer needs to contribute 12% of basic salary to your EPF account.
• It is maintained by the govt. organization, so it enjoys the most safest investment.
• Tax exemption under section 80c
• There is no tax for the interest income and no TDS deducted at the time of retirement.

Summary

I hope this article would have been the eye opener to understand the power of EPF contribution. Please don’t take this as slightly, you will be worrying when time is gone. Most of the employed are not taking this as seriously, because it is very common in the scenario of switching the companies very often. If you have any thoughts, please post it in the comments section.

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Introduction

In the rising interest rates scenario and falling stock market, most of the investors look for the safest instrument to park their money. First come into their mind is the debt investments. A decade ago, the most popular investment is the bank deposits and there is not many other options or people not willing to take the risk. In the current market, if you want to invest in the debt markets, you have the option of bank fixed deposit, company fixed deposit, debt mutual funds or non-convertible debentures issued by the companies.

Fixed deposits are more safer then the other instruments. But, when it comes to choosing the Non-Convertible Debentures (NCD), there are many things to be inquired before making the any investment decision. It carried the risk on its valuation, because it is traded in the stock market exchanges. This article looks into the concepts of NCDs and points to consider while investing in the NCDs. If you have any ideas, please post it in the comments section. Subscribe to our future articles here.

What is Non-Convertible Debentures?

Debentures are bonds issued by the companies, banks or governments to the public for collecting the money for their business. The bond is associated with interest rates on it. For example, if company X issuing 5 years bond with 10% p.a., who ever buying the bond would get the specified interest amount on half-yearly or yearly till the maturity. But, how it differs from the fixed deposit investment. Fixed deposits are safe instrument where it is not traded in the market. Debentures are traded in the market and any changes in the interest rates would affect the principal amount of the investment.

There are two types of debentures. A normal debenture can be converted into equity. For example, if you have bough bonds worth Rs.100000 from the company X, later point of time company may convert your bonds into the issuing the equity (shares). In the case of non-convertible debentures, investors can not redeem the bonds into any other conversion. NCDs has the highest risk compare to the other debt instruments.

How to choose a good NCD?

Safety of your capital

Unlike the other debt instruments, bonds are not the low risk investments. It is traded in the secondary markets like how company shares are traded. You must first think about the safety of your principal amount. The main reason why companies are issuing bonds are to raise the funds which they can not get through banks or any other institutions in the low interest rates. Normally bonds would come with good interest rates. You must look into the following things:

• Why the company is issuing bonds?
• Financial strength of the company.
• Whether the company cash good cash flow to pay the creditors .
• Whether the company has the good credit ratings for its bonds.
• Past records of the financial results.

If the company is struggling with the high debts, please avoid investing in the companies. You may not be able to get back your principal amount. Company would lure the investors by offering the high interest rates. When a company has the good credit rating for its bonds, the interest rates would be lower then the other peers.

Liquidity of the Investment

One advantage of the bonds is that it is not necessary for the investors to hold till the maturity. They can sell it in the secondary market. Another problem is that, there will be very less buyers for the bonds. You have to check whether the bonds have more demand in the market. If you are looking for the liquidity, you must be able to sell it in the market.

PUT and CALL option on NCDs

Some of the NCDs has the PUT and CALL option with the debentures. If a bond has the PUT option, investor has the rights to sell it to the issuing company. If a bond has the CALL option, company has rights to pay the investors prematurely and close the bonds. Please check while buying the bonds. Most of the bonds will not have these options.

List of Credit Rating for Debentures

The following is the possible list of credit ratings given for the bonds. The list has only the main indicator, it may have the positive or negative mark associated with it.

Summary

In the rising rates scenario, most people are looking for the debt investments. But, many people not aware that some of the debt instruments have the risk of losing its value on interest rates fluctuation. This article would have given the basic ideas on the risk associated with buying the bonds. If you have any ideas, please post it in the comments section.

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In 2009, I have published an article about the gold investment. In that article I have recommended the gold investment and predicted the upward movement in the prices. If you look into the recent rally after the credit rating downgrade of US govt., investors gone crazy on buying the gold as alternative to dollar. It sent the gold to historical high. This kind of price movement made retail investors to confuse on taking the decision to buy or wait for the correction on the gold prices. This article would explain the gold price movements in details and how it will react in the future. If you have any ideas, please post it in the comments section. Subscribe to our future articles here.

Why the sudden jump in the gold prices?

For the past couple of years, most of the investors are bullish on gold as investment. It took the gold into new level. Bit, in the past couple of days has seen the bold rally never before. It is astonishing price rise and this kind of rally has never seen by the investors in the recent times. What makes the gold prices to drive very high when other commodities and equity markets are stumbled?. This itself is one of the reason, because gold has the inverse relation with equity markets. When equity market is bearish, investors sell the equity and buy gold as the safe heaven. This is basic mantra of the global investors.

But, in the last couple of days seen is mixed with the equity markets crash and the future uncertainty. The world is looking for a alternative global currency apart from dollar. We are in a position where there is no previous history to help us. In 2001, the total foreign reserves kept by the countries was above 75%. By this time, it has been reduced to 55% and still on the decline path. It clearly shows that countries lost hope on the  dollar as strong currency. The momentum is starting to pressure USA to make its economy robust or search for the alternative currency. China is warning USA to maintain the good economy, because they are the highest creditors to the USA. They have huge amount of dollar reserves.

The above reasons, makes the fund managers, retail investors and countries started buying the gold. Dollar has the inverse relation with gold prices. When dollar price goes down, gold prices move upwards. The uptrend on gold prices will continue till the USA economy is stable or any good solution is on the table. Till that time we can not think about decline on gold prices.

Is it good time to buy gold for investment?

Most of the investors are worried on such a strong rally whether to enter now or wait for some more time. As the thumb rule, you must always understand the fundamentals of the rally before taking any decision. As I have mentioned in the previous sections, this strong rally it fueled by the panic of dollar’s future as the world currency. It is supported with US debt ceiling problem, credit rating downgrade and euro zone problems. This rally will continue till the economy is stable and investors has the better alternative for the safe heaven. I would recommend investors to buy only for the short or medium term. It is expected that for the next 2-3 years this uptrend will continue.

It is not good time for the long term investors to invest on the gold.  The gold is over priced and many of the experts feel that it is the sign of gold bubble. It may burst any time. After 2-3 years of time, we can expect a sharp fall in the gold prices and it may touch the bottom. As per the statistics, the trading volume is much more than the physical gold’s existence. It clearly shows the over bought situation. You must be very careful on investing on the gold at this price.

Summary

In the recent times, gold is touching its new peak every day. India’s most celebrated festival Deepavali is approaching, it is difficult for the common man to buy gold at this price. We don’t have any control on the price, it is purely driven by the global economy and other factors. We are in the situation where history is  not having any records. The only way is to wait and watch the game. Lets hope the problem would solved without much damage to the economy. If you have any thoughts, please post it in the comments section.

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Introduction

Are you an avid stock trader?. How are you assessing the good stocks?. Is it based on the technical chart or based on the fundamentals?. It is common for short term traders to look for the technical charts and invest based on the current trend. It is long term investor who will be keen to understand the fundamentals on the stock. Here fundamentals means understanding the complete details of the company and its business. It helps investors to park their money with confidence, the price may go down even if the company has good fundamentals. But, in the long term the stock will give the better returns.

Understanding the fundamentals of a stock is one of the tough task for the investors. It is not so easy for a novice investor. One can gain the knowledge on understanding the fundamentals by reading the basics on financial statements and through experience. One of the key factor is the ratios which shows the clear ideas to the  investors. There are number of ratios each has the different significance to reveal the facts about the company’s financial strength. This article looks into the seven key financial ratios which would be more important for an investor to choose the best stock. If you have any thoughts, please post it in the comments section. Subscribe to our future articles here.

Price to Earnings Ratio

This is one of the important ratio and mostly used by the investors to see the earnings potential of a stock. The Price/Earnings ratio can be derived using the market price of the share and the earning per share. Assume the share price of a company is Rs.250 and its Earnings Per Share (EPS) is 50, then the price/earnings ratio will be 150/50=5. How do we know that the P/E ratio is stretched or not?. Just looking into the P/E ratio will not provide any further details.

The P/E ratio indicates the growth of the company in future. If the company is growing at the rate of 50% every year for the next 5 year, the P/E ratio 5 is fine for the above example. If the rate of the growth is very slow, but the P/E is very high, then it is warning signal that the price is over valued. It is better avoid those stocks.

The following formula is used for calculating the P/E ratio:

Price to Sales Ratio

This ratio compares the share price with the revenue per share. Price to sales is calculated by dividing a stock’s current price by its revenue per share for the trailing 12 months. This ratio doesn’t have much significance to take any major decision.

The following formula is used for calculating the price to sales ratio:

Price to Book Value Ratio

This ratio can be calculated using the price of the stock and book value per share. Book value means the total assets of the company minus liabilities. This implies that the shareholders will be getting the book value when the company goes bankrupt. It is the real value of the stock in terms of assets in the company.

The good indicator is the low book value for the stock. If the value is less than one, it indicates that the stock price is lower than its real value for the business. This indicator is very useful for weighing the banking stocks. But, sectors IT or Phrama will not be much useful with this ratio.  Also keep in mind that, one can not just go with the ratio. If the ratio is less than one, it may be because of some other bad reason too.

The following formula can be used for calculating the price to book value ratio:

Debt to Equity Ratio

This ratio indicates how much money a company can borrow without any problems. This ratio can be derived using the total debts (both short term and long term debts) and total equity shares/reserves. When a company keeps borrowing, its fixed costs will be increased due to the interest payments. The good indicator is that debt equity ratio is less than 1.

It is only the indicator but it may be some other reason the ratio is high. The ratio can be high for the newly started companies because of the too much debt. If you take example, Idea cellular when its started has more debts because of the initial investments need for expanding the company. In this case, the funding would be supported from its parent company Aditya Birla Group which is strong enough to  invest in the Idea cellular. Like this you have to look for the reason why the ratio is high whether it has good reason to pay back all the outstanding dues and come back the profit path.

The above explanations are only indicative and need more research to find the root cause of the ratio movement. Don’t take any investment decision by just looking into the ratios.

The following formula is used for calculating the debt equity ratio:

Current Ratio

The simple meaning of current ratio is to find how the company can manage the short term debt obligations. The current ratio can be derived from the current assets and the current liabilities. The current assets include inventories, cash, accounts receivables (debtors), loans and advances. The current liabilities include interest payments, accounts payable (creditors), provisions for payments of taxes, dividends. In simple terms, if a company has the interest payment due of Rs.150 crore in the next month, the possibility of the company can get the money from day to day operations.

If the current ratio is 1 or less than one, it implies that the company will face the difficulty on the short term debt obligations and may dent company’s growth path. It will lead company to sell it’s assets to pay the outstanding debt. The good ratio is 1.5 and above. But, the ration would be differ from the each sector. Also, the high ratio doesn’t mean the company is in good position. It may not be using the excess cash effectively.

The following formula is used for calculating the current ratio:

Asset Turnover Ratio

Asset Turnover Ratio is much useful to check the sales generated from the each rupee spent on the business. This ratio would be very high if the company has the very low profit margins and will be less if the company has the very high profit margins. For example, the oil companies ratio would be much higher because the profit margin is very low and volume of the business if high. We can not take any firm decision on using this ratio, it will be depend on the industry. If the ratio is higher, it is more efficient.

The following formula is used for calculating the asset turnover ratio:

Return on Capital Employed Ratio

If the ratio is higher, it is better. The ratio used for finding the efficiency of company’s investments to generate the profits. The increase in the ratio must be because of the reduction in the expenses, not because of the reduction in the capital in the company. This ratio has to be used with other ratios to take any investment decision.

The following formula is used for calculating the return on capital employed ratio:

Summary

The above are the few important financial ratios used from finding the current status of the company. If you are the beginner, it is not wise to take any expensive decision only looking into the ratios. Do your home work by studying the financial statements of the company and understand why the ratios are moved and compare the different ratios. Because the same ratio can have different significance for different industry. If you have any thoughts, please post it in the comments section. Subscribe to our future articles here.

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From this week I will start writing about the selected mutual funds scheme and complete analysis on the scheme. In this article, I will explain about the HDFC Balanced – Growth which is one of the good scheme by the HDFC  Mutual Fund.

Few important points about this fund

• This fund got five star rating from value research online which is the popular for rating the mutual fund schemes.

• This fund has the return of
• 26% in 2006
• 28% 2007
• -36% in 2008
• 73% 2009
• 25% in 2010
• This fund gave average return of 17% from the beginning.

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If you are planning for your child’s future or you want to open a mutual funds (What is mutual funds?) account for a minor, this article would be useful. It is obvious that, any financial planner would advise you to invest in the mutual funds for your financial goals like daughter’s marriage or child’s education in the long distance like 10-15 years. It is good idea for you to open the account in minor’s account itself. But, there are certain guidelines to be followed for mainlining the mutual funds account for a minor. Subscribe to our future articles here.

Points to remember

The following are the guidelines investors to keep in mind while operating the minor’s account:

• The guardian in the portfolio should either be a natural guardian (father or mother) or a court-appointed legal guardian.
• Date of birth of the minor must be provided in the application form.
• Along with the form you must provide the supporting documents like birth certificate/passport/school leaving certificate
• You can start Systematic Investment Plan (SIP) in your child’s name.
• Till the minor becomes major, guardian must operate the account.
• Prior to minor turning as major, mutual funds will send communication to the guardian to submit the documents to change the status from minor to major.
• All the account will be suspended till the status change process is completed. Guardian can no longer operate the account.

Summary

The above points are important to remember if you are planning to operate minor’s account. This would be useful if you have child and want to open separate mutual funds account on his/her name. If you have any doubts, please post it in the comments section. Subscribe to our future articles here.

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In this article I will be explaining about the new notification sent by the Central Board of Direct Taxes (CBDT) regarding the tax deduction for the Post Office Savings account. Currently there is no tax deducted for the interest income from the post office savings account. This is introduced to remove the cap on the deposit. Please read this article to know more details on the post office savings account and what are the changes introduced from this fiscal year. If you have any doubts, please post it in the comments section.

Read: Post Office Savings

What is Current Scenario?

In the current scenario, one can open a post office savings account with the minimum deposit of Rs.50 to maximum limit of Rs.1 lakh. If it is join account the maximum limit is Rs.2 lakhs. The interest rates are calculated at 3.5% per annum and balance amount at 10th of every month. Any interest income on your deposits, are tax-free. Where as bank deposits earns 4% interest rates per annum on daily balance.

What are the Changes?

From this fiscal, it is planned to remove the maximum limit for deposits. That means account holders can deposit more than Rs.1 lakh. In this case, if the total interest income of single account exceeds Rs. 3500 and Rs. 7000 incase of joint account will be taxable. This changes are introduced to bring the post office savings account and bank savings account in the same manner. Currently, interest income on bank savings account is liable to pay the income tax.

Summary

Purpose of this this article is to bring awareness on this new notification from the Central Board of Direct Taxes (CBDT). Many would have opened the post office savings account, this information would be helpful for you. But, interest income will be less than bank savings account because they offer 4% per annum on daily balance. Please post your thoughts in the comments section.

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When you realize there is equity in your home, your mind comes alive with possibilities – everything from a shopping spree or a wedding to a holiday or a renovation. However, while your equity can seem like money in the bank, spending your equity is not the same as dipping into your savings account – with a savings account you can work hard, and harder, to replenish the savings you use, but with your home, there is very little you can do to regain equity you have spent, except wait and hope for more capital gains.

Therefore, while it is tempting to tap into your home equity for immediate lifestyle indulgences, never forget the dangers of using your equity for depreciating assets, and the risks of a higher mortgage and a higher loan to value ratio. Instead, if you are considering accessing your equity, make sure you put it to work, making sure the returns are worthwhile and that the benefits and appreciation outweigh the risks.

To successfully invest your home equity, you need to follow these five steps, to keep in mind the risks, and maximize the reward.

1 – Assess current credit and debt levels

While accessing your home equity is really just tapping into the capital growth your home has seen since you bought it, to do so you are actually increasing the size of your home loan. If you were to access the equity as cash, it would be the profit you made from the sale, after repaying your home loan, however, since you want to continue living in your home, you have to have the bank advance you the equity in the form of an increase in your mortgage amount.

Therefore, before you decide to invest your home equity, you need more make sure you can afford to increase your debt levels. You can do this by assessing your current budget and spending to make sure you have enough funds to maintain your lifestyle, and with higher loan repayments you will still be able to spend less than you earn.

Assess your current budget and debts by:

• Writing down your current take home pay. This includes all income which comes into your household from work, and other investments you already have. Make sure the amount is after tax.
• Deduct your expenses. List and deduct all of your expenditures including: your savings contributions; your mortgage repayments or rent; utilities’ food; transport including fuel; child care; medical care and health insurance; clothing; and activities and recreation. Don’t forget to include payments you make on a quarterly or annual basis such as taxes.
• Deduct your existing debts. This is where you include your student loans, your credit card debts and car repayments.

The amount you have left at the end is the amount you can responsibly put towards your higher home equity loan. The amount of the remaining balance you choose to allocate to your home equity repayments will depend on your situation, and whether you want to rely on your savings account for emergencies, and how long it will take to replace those funds when there is an emergency.

2 – Property values and overvalue

The amount of the equity in your home you borrow will also depend on your lender, and on your application. In most cases you are able to borrow up to 80% of the equity available in your home, to minimize the risk of the value of your loan being higher than the value of your home.

To access your home equity you will undergo another borrower assessment and application to determine your ability to repay a higher loan amount. However, in addition to the bank’s assessment, also make your own assessment on how much of the equity you want to draw down on.

You can do this by looking at the property values of other similar homes in your area and compare their features to yours. Be realistic about the value of your home to ensure you don’t borrow more than your home is worth – for example are you in a boom area, with inflated property prices? If so, will the boom continue, and for how long? Look for new opportunities in the area, new infrastructure projects and lifestyle factors which will continue to drive demand in your neighbourhood.

Also remember that while property values go up in the long term, sometimes there are periods of stagnant or negative growth. Therefore, while the overall outlook will show rising property prices, if you have to sell your home in the middle of a slump, there could be little or no difference between the selling price of your home, and your remaining loan amount.

3 – Choose an investment type

To make investing your home equity worthwhile, profitable and safe for the family home, you need to choose the right investment to make. Make sure you spend your home equity on an appreciating asset such as shares, or an investment property.

You can also use your home equity to accumulate more equity by making improvements to your home. Accessing your home equity for renovations, extensions, a new kitchen or a new bathroom can add tens of thousands of dollars to the value of your home, without you having to use all of your equity.

Just make sure that if you invest in your own home, you don’t overcapitalise because turning your three bedroom house into a five bedroom house with home theatre and pool in a neighbourhood of three bedroom houses can make it harder to sell, as the people who can afford the house, aren’t looking to live in your suburb, and the people who are looking to live in your suburb, can’t afford your house.

4 – Secure investments

When you draw down on your home equity, your property remains as security against the loan, in case you default on your repayments. Therefore, to maintain the security of your family home, you need to make sure you can cover the higher mortgage repayments easily, without relying on the returns of the investment you make with your equity.

While you of course want your investment to succeed and grow, with every investment there is a gamble, and you need to be able to meet your mortgage repayments even if the gamble doesn’t pay off. If you’re worried about risking the security of your family home, there are other investment options such as a margin loan which can reduce the risk.

Even though you shouldn’t be relying on your investment income to cover your mortgage repayments, you can make sure the investment is worthwhile, by setting a desired rate of return. For example, if you are paying 6% interest on your home equity loan, you want to make sure your investment returns are at least 8% so your investment is worthwhile after interest and bank fees.

5 – Investment income and interest charges

When you are looking for a home equity loan, make sure you closely compare interest rates, because while you may have secured a great low interest rate on your mortgage, when you apply to borrow your home equity for investment purposes, the lender can see that as a greater risk, and apply a higher interest rate to your home equity loan.

If you can’t find a more competitive interest rate, it could be time to take a cue from your lender and lower your risk by borrowing less equity. For example, instead of borrowing the full 80% you are approved for, borrow just 60% for reduced risk to your home and family, and a reduced interest rate.

Once you have secured the best interest rate, you will be able to work out what you need your investment returns to be. In most cases a 1% profit margin may only be enough to break even after loan fees, and time spent, therefore, if you are paying 6% interest on your home equity loan you may want to look for investments which will return at least 8% to make your investment worthwhile.

Also keep in mind that while the interest and fees on a separate margin loan for investments can be claimed at tax time, when your home equity loan for investments is part of your mortgage, you have blurred the line between persona l and investment lending. As a result it may be harder if not impossible to claim your investment expenses at tax time.

Alban is a personal finance writer at Home Loan Finder, a home loan finder comparison website.

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Investment stock market has chances for both layperson and expert to fall prey committing mistakes. Economical growth depends on two main factors one is the rate of investment and the other is the benefit drawn that contributes to the raise in the growth. To tackle the issues on investment it is essential to acquire good knowledge on the fundamental investment ethics that support to the growth in short term investment.

On choosing a company that you tend to make investment is to be analyzed for its base of history in terms of safety investment. Having the complete knowledge on the procedure of investment and its working is important. Getting advice from experts or professionals who are into the field of investing money is recommended to know more on how to invest at the right place and time.

Stock investment plans are dependent on the investors. Analyzing the statement of finance will find a great scope for marketing value achievable in a short time.  Investment conniver and financial professional advisers makes the same pattern of spreading their informations to the public via advertisement. Investment, retirement preparation, securities and investing in mutual funds are some of the ways which needs more care to be taken to prevent the risk factor management.

Investing in mutual funds

Investing money in mutual funds helps in making the right saving when they are done at the right mutual funds investment company. Financial advisor helps in understanding the goals and objectives better with an investment consultant with various terms being examined at the right standards.

A systematic investment plan is essential in building a strong base for the investment at the right time. Be it a short term investment or long term, following a standard investment strategy is needed to make the investment to make profit on investment. On making the investment to save on your retirement it is a must to look out for the minimization of the risk factors.

We also have several business schools who train the upcoming citizens with informations on how to take up the best investment choice as the trade stocks are being on the long run with various market turns and risk factors linked with the issues of investment. There are several pros and cons linked with the mutual funds and investments that decide upon the benefits on savings.

At times it is found that the mutual funds are more likely to provide the best needful savings than that of a banked deposit. With the availability of the mutual funds and other family funds the advantages of the online list of mutual funds and investment include various forms of investment plans and nature of funds.

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Introduction

The young investors in this field of investment are in constant look out for investment tips. The youngsters should have control over his financial situation as that would help them to have a secured future. They need to remember that “to have money is good but to have control of money is still better” so if they are interested to control their finance then it’s crucial to choose a right investment plan. Therefore this article would prove to be beneficial for amateurs in the investment field as few tips are shared that they can keep in mind before investing.

Simple investment plans

The amateurs in the field of investment are advised to keep the investment plan simple. In order to get a clear perception of the plan ensure that you focus on the significant points. If you invest on the basis of the prediction of a novice then that might lead to some unpleasant surprises. In order to enhance the success ratio of an investment plan choosing a right economic channel would provide security on a long term basis.

Invest when the market is down

When the financial market is going through doldrums this is the best time for investment. Try to buy shares in the “Bear Market” and sell in the “Bull Market”. The value of shares would fall in the bear market that would enable you to buy more shares and fetch more money if you sell in the bull market. Due to lack of investment knowledge the young investors are forced to take wrong decision as they invest in the boom and sell in the time of economic depression.

Invest in reputable companies

The reputed company is like “a fertile ground can produce abundant fruit season after season”. Trustworthy companies usually do well year after year. You can invest your hard earned money in these fertile fields (superior companies) and reap a good amount of cash. As these companies are acknowledged for their high standards in the market so you can blindfoldedly invest in these companies. The returns would be an indication for the following investment and you can be assured that you won’t run at a loss as these companies are not frauds.

History would lay the path for future result

The future result can be predicted from the past performance of the company you are investing. These prosperous companies are in search of new ventures in the field of investments that would help the investors to earn a decent amount of profit. The companies who are planning to develop and interested in new ventures give more credence to those companies.

Take advise from a financial counsel

If you are a newbie in the field of investment avoid taking impulsive decision otherwise you might land up being penniless. Take the help of a financial counselor who would be able to guide you through the roller coaster ride of investment.  As the counselor can foresee the market changes faster than a non professional so there are less chances for you to land up in trouble. Talk to your counselor regarding the investment plan you want to invest in. If there are any loopholes in the plan then he can aware you before hand as that would help you to avoid the danger. The professional investors would do a wide range of research about your financial status and suggest you a plan that would suit you best.

Achieving success in investment field only needs proper market analysis as that would reduce the chances for loss. And a good investment would help you to get a financially secured future.

About the Author

This has been a guest post by Kevin Craig a financial content writer and blogger on Quickly Profit.

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Do you have fixed deposit account with bank?. If yes, then you can list down the reason why you have chosen the fixed deposit over other investment schemes. The common reason would be the safety on bank deposits. The known fact is that, the bank deposits offer very low interest rates compare to any other investment schemes. That too with the soaring inflation (above 15%), fixed deposit option seems to be less profitable. The purpose of this article is to explore the fixed deposits option with the companies. The main concern about the fixed deposits on companies is safety on their investments. Here I will write down all the details about the corporate deposits and how you can choose the most secured company. If you have any doubts, please post it in the comments section. Subscribe to our future articles here.

Related Articles on Company Fixed Deposits

• Tata Motors Fixed Deposit
• Mahindra Finance and Tata Motors Fixed Deposit
• Mahindra Finance Fixed Deposits
• Unitech Fixed Deposit Schemes

Remember These Points

The following are the key points to consider before choosing any corporate fixed deposits.

• You must know the about the company which you are depositing money. For example, if you are investing in Tata Motors, we know that it if good company.
• At least that company should have run the business for 20 years
• Check the history of the company, how they have paid the principal and interest to the investors.
• For the past five years, that company should have been earning net profit.
• Should have good rating for that company.
• If that company is list
• Check if the company is listed in the stock exchanges.
• If you can not decide yourself, then consult with the financial adviser.

What is Fixed Deposit and Cumulative Deposit?

There is two types fixed deposits.

• Fixed Deposit
  • In the fixed deposit, you will get the interest money on periodic time, like monthly, quarterly, half-yearly or yearly. The deposit amount will be the same.
• Cumulative Deposit
  • In this category, interest amount will be added into the principal for specified period. It can be monthly, quarterly, half-yearly or yearly. The effective rate for the cumulative deposit will be higher than the normal fixed deposit. For example, if the interest rates on cumulative deposit is 8%, then when you are receiving the money after three years, the effective rate will be higher than 9.5%, it depend on the cumulative period.

List of  Company Fixed Deposits and Rating

Below are the table indicates few of the popular company fixed deposits and its rating. Also it indicates the risk factor in the last column.

Systematic Savings Plan (SSP)

This year HDFC has launched Systematic Savings Plan(SSP).  The First Ever Variable Rate Installment Deposit Plan. It says

It is a monthly savings plan, where one can deposit a fixed sum every month to accumulate a larger capital for future needs. This plan will be available February 3, 2010 onwards to all resident individuals in select Indian cities where ECS facility is available.

You can read more details about the scheme here.

Don’t put all your money in one place

It is one of the important point to consider while investing your money. The good practice of investment is to diversify your portfolio with different options. Don’t put your all the money into the same investment scheme. Try to identify the different schemes and invest your money.

Non-Resident Indian (NRI)

There are many rules associated on receiving the investment from NRI. Because of these restrictions, many companies don’t accept the investments from the NRI. If they want to invest, they can do it through NRO account only. That too they have to declare that the money is not earned from outside India. Bank deposit is the better for NRIs.

Can you trust Corporate Deposits?

Yes. 100% you can trust the good company deposits. There is more security for your investment. Read all the points I have mentioned in the article and decide yourself.

Summary

I hope this article would be very useful for those who want to choose the best company fixed deposit schemes. What I have given in the article is general idea on the company fixed deposits. Before you start the investment, try to collect the relevant data on that company and make the decision. If you have any doubts, please post it in the comments section.

Subscribe to our future articles here.

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Have you applied for any of the New Fund Offer (NFO) in recent times?. If your answer is yes, what motivates to take the decision and select a particular NFO?. There are many number of  New Fund Offer (NFO) schemes coming in to the market, it makes the investors confused and they are unable to choose the right one. If you are in the same boat, please read this article before taking any firm decision on your hard earned money. This article explores the pitfalls for investing in the NFOs and why more fund house announcing the new schemes. If you have any doubts, please post it in the comments section. If you like the articles, subscribe to our future articles here.

What is New Fund Offer (NFO)?

Like how the companies conduct Initial Public Offer (IPO) to raise the capital to extend the company operations, NFO is conducted by Assent Management Company (AMC) to raise the capital from the public. AMC’s are the mutual fund companies. They raise capital to buy the securities from the market. If you are new to mutual funds investment, read What is Mutual Fund? . Most of the NFOs come with the close ended schemes. That means it is the one time investment. You can not start the Systematic Investment Plan (SIP) in the NFOs.

Learn about NFO

There are several misconceptions about the NFO in the market, that leads novice investors to invest in the less known or popular NFO without proper analysis. Before getting into the NFO investment, analysis the following facts about the fund:

• Does the fund has any previous record to make the decision?. Most of the NFOs are new offerings. There won’t be any previous history to check the performance of the fund. I would suggest you to avoid those funds unless if you have the proper knowledge  to select the good mutual fund.
• Why the AMC offering the new fund or the AMC has the prior experience in the industry. The fact is that few AMCs inexperience and may risk your money.

Don’t take decision on cheap NAV value

It is one of the very common misconceptions among the mutual fund investors to just compare the NAV value for the various schemes and choose the lowest one as the best one.  If you are not aware of the NAV, please read What is Net Asset Value (NAV)?.

For example if you are investing Rs.10000 in fund A with NAV is Rs.100 and Fund B with NAV is Rs.20, you will get 100 units in fund A and 500 units in Fund B. In case if the fund grows by 20% for the next year, both the investments will have the value of Rs.12000.  It doesn’t matter what is the current value of the NAV. It is wise to track the performance of the fund and invest your money.

Summary

I hope this article would have been very useful for the mutual fund investors. Don’t worry if you have missed any of the NFOs. There are plenty of golden schemes available in the market, to start the investment. If you are not taking the risk, it is better choose the existing funds rather than choosing the new one. If you have any doubts, post it in the comments section.

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In this article I will explain the one of the way to find the high risk stocks. It is important to find the high risk and low risk stocks for the investors. There are many factors influence the price movement for the stocks. Broadly we can categorize those movements into technical or fundamental reasons. Short term investors can more focus on the technical data and long term investors can more focus on the fundamentals of the company. This article explains how the beta value shows risk factor for particular stock. If you have any doubts please post it in the comments section. If you like the article, subscribe to our future articles here.

What is Beta value of the stock?

Most popular risk indicator for a stock is beta. Beta measures the volatility of price in the market. Fro example, it gives you the fair idea on how the stock will react for market movements. If the beta is 1, the stock has no volatility and moves with market. If it is greater than 1, it has more volatility  and over react for the market movements. For example, if the market saw a down of 2%, this stock will fell down more than 2% because of its higher beta. (Note that price fluctuations are determined by many other factors. High beta stock may react opposite if the particular stock has any breaking news on that day). A beta less than 1 means it tends to be less volatile than the market.

Why you should know Beta?

It is important to know the risk before investing into a specific stock. For small investors, judging the risk is essential before investing any huge amount. I would advice you to check the beta, if you are interested in investing on the less volatile stock. Any mistake on the stock selection would erode all your money.

List of High Beta Stocks on BSE 500

The following are the list of beta values for the stocks listed in Bombay Stock Exchange(BSE).

No     Company     Beta
1    IVRCL Infra.     1.7235
2    JP Associates     1.706
3    Indbull.RealEst.     1.6859
4    H D I L     1.6207
5    Unitech     1.5856
6    Reliance Infra.     1.5781
7    India Infoline     1.5709
8    Suzlon Energy     1.5513
9    ICICI Bank     1.5432
10    Lanco Infratech     1.4926
11    Reliance Capital     1.4888
12    DLF     1.4756
13    Rel. Comm.     1.4564
14    IFCI     1.4371
15    Orbit Corpn.     1.4327
16    Tata Steel     1.4313
17    Sterlite Inds.     1.4269
18    Nag. Constructn.     1.3699
19    Welsp.Guj.Stahl     1.3616
20    I D F C     1.3523
21    Punj Lloyd     1.3208
22    JSW Steel     1.31
23    Adlabs Films     1.3082
24    Aban Offshore     1.3018
25    Century Textiles     1.2954
26    Hind.Construct.     1.2931
27    Mercator Lines     1.2827
28    Essar Oil     1.2771
29    S Kumars Nation     1.277
30    Ansal Properties     1.2765
31    Aptech     1.2748
32    Bombay Dyeing     1.2693
33    Praj Inds.     1.2687
34    Kotak Mah. Bank     1.2446
35    Sterlite Tech.     1.243
36    Rel. Indl. Infra     1.2427
37    Rel.Nat.Resour.     1.2409
38    Axis Bank     1.237
39    KF Airlines     1.2255
40    GVK Power Infra.     1.2245
41    S A I L     1.2233
42    NIIT     1.2043
43    Educomp Sol.     1.2036
44    Yes Bank     1.2025
45    Reliance Inds.     1.1994
46    Hindalco Inds.     1.1837
47    Parsvnath Devl.     1.1808
48    Triven.Engg.Ind.     1.173
49    Dev.Credit Bank     1.172
50    Larsen & Toubro     1.168
51    Tata Motors     1.1661
52    TV 18 India     1.1599
53    H D F C     1.1582
54    Puravankar.Proj.     1.1496
55    Nag. Fert & Chem     1.1461
56    Hind.Oil Explor.     1.1437
57    Everonn Systems     1.1407
58    Firstsour.Solu.     1.1257
59    Bajaj Hindusthan     1.1256
60    IVR-Prime Urban     1.1232
61    Ispat Inds.     1.1219
62    Voltas     1.1203
63    Moser Baer (I)     1.119
64    JSW Holdings     1.1111
65    Idea Cellular     1.1085
66    SREI Infra. Fin.     1.0993
67    Arvind Ltd     1.0965
68    Polaris Soft.     1.0916
69    Kolte Patil Dev.     1.0905
70    3i Infotech     1.0882
71    Cairn India     1.0843
72    Mahindra Holiday     1.083
73    Rolta India     1.0829
74    Jet Airways     1.0827
75    JP Hydro Power     1.0788
76    Chambal Fert     1.0777
77    Genus Power     1.0776
78    Jindal Steel     1.0763
79    Wire & Wireless     1.0751
80    Core Projects     1.0719
81    Hind.Copper     1.0704
82    Kirl. Ferrous     1.0613
83    KLG Systel     1.0598
84    Sh.Renuka Sugar     1.0594
85    Videocon Inds.     1.0564
86    REI Agro     1.0527
87    D C Holdings     1.0514
88    LIC Housing Fin     1.0514
89    GMR Infra.     1.0425
90    NESCO     1.037
91    R C F     1.0369
92    Brigade Enterpr     1.0351
93    HCL Technologies     1.035
94    Peninsula Land     1.0328
95    Golden Tobacco     1.0327
96    MIC Electronics     1.0324
97    IDBI Bank     1.0323
98    Dish TV     1.0309
99    McNally Bharat     1.0304
100    St Bk of India     1.0285
101    Sintex Inds.     1.0282
102    Neyveli Lignite     1.0267
103    Escorts     1.0232
104    Alok Inds.     1.0226
105    Reliance Petro     1.018
106    Ruchi Soya Inds.     1.0178
107    Walchan. Inds.     1.0165
108    M & M     1.0161
109    S T C     1.0125
110    Patel Engg.     1.0065
111    Prime Focus     1.0028
112    ICSA (India)     1.0014

Summary

I hope this article would be very useful for those who want to understand the risk for any specific stock. Beta value gives you one important aspect for a stock. But, you can not just rely on this information. If you have any doubts, please post it in the comments section.

Subscribe to our future articles here.

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In this article I will be writing about the various tax rules for the equity and debt investments. It is obvious that more number of investors interested in the equity market. It is sad that only few are very much aware of the actual tax implications on the investment. This article explores the important rules related to the equity investments. Good news is that we have good exemption for the equity investments. Please continue read this article for the more details. If you like the article, please subscribe to our future articles here.

Capital Gains on Stock Investments

Profit from the equity investments are classified into the capital gains. There are two types of capital gains. The following sections explains that in detail. Note that equity investments are investments into stock market via buying shares and mutual funds. Also profit from intraday trading is not considered as the capital gains.

Short Term Capital Gains (STCG)

If you sell a investment within one year of the investment, then it is considered as the Short Term Capital Gains(STCG).  The amount of the tax you have to pay on the profit is 15%. For example if you buy a stock for Rs.100000 and sell the stock for Rs.130000 before one year, then you have to pay the tax of Rs.4500(plus surcharge & education cess) for the profit you have made.

In the case of mutual funds, the equity exposure should be minimum of 65% to be considered as the equity investment.

Profits arising out of intra-day trading in stocks or from futures and options (derivatives) segment are to be added to your income and taxed accordingly.

Long Term Capital Gains (LTCG)

If you sell a stock after one year of holding, then it is considered as the Long Term Capital Gains (LTCG). Good news is that, there is no tax liability for the Long Term Capital Gains (LTCG) arising out of your equity investments. You need no worry for the any long term capital gains coming from your stock investments.

Summary

I hope this article would be useful for those who want to invest in the equity and want learn about the tax structure for the investments. If you have any doubts, please post it in the comments section.

Subscribe to our future articles here.

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