Confusion Confusion

With markets crashing every day all of us have been forced to imagine that this is probably a bottomless market. My total Portfolio has been reduced to half of its value as compared to last diwali

How low can the markets get

Well I Usually don't have much money to buy new stocks but i make it a point to buy Something at every dip and am very much planning to still buy. Now I'm changing my strategy and have planned to invest only in Bluechip stocks for a while But I'm looking at a long term horizon, maybe a period of 2-3 years for returns, expecting a short term return will be very optimistic and some might say even foolish. With the constantly rising inflation and the value of rupee decreasing everyday the question I seem to be pondering with today is that should I really invest the money in the markets or should I trust the good old term deposits with 11percent annual returns.

CONFUSION CONFUSION but atleast I can wish you Happy Diwali

India's First Gold


INDIA has won its first GOLD in the Bejing Olympics. This is India's first ever Olympic gold in any individual event and ninth in total. All thanks to one man ABHINAV BINDRA.

Atleast we have one GOLD now. Lets see if anyone else can do something.

Money Mistakes

How many of mistakes people commit in their life time? And what about money mistakes, Well there are a few even i regret, No i guess i should be more open about it there are a lot of Money mistakes that i regret. But i am learning from my experience now and hope to be even better as i learn along the way. I am listing down some of the common mistakes as below that even i have committed and i really believe everyone should avoid making them as much as possible.

1. Living beyond your means : There is a simple logic we can apply here, if your expenditure is more then your income then in all probability you will be in debt even before you know it. So avoid this at all times. I have done this mistake several times, like just buying a gift for someone close i get carried away and buy something beyond my means and end up in debt.

2. No Budgeting : I guess most of us just forget to Budget, if you don't know where your money is coming from or going to how will you control it. So Budget, it maybe just a simple excel file to do but it needs to be done. You need to know how your money is moving and then only can you plug unnecessary holes, you will have better control over money.

3. To Much Loan : I made a mistake once of taking a personal loan, and then one mistake that i just keep on doing is spending on a credit card. Its a pain now. You certainly cannot avoid taking a loan for the house but then i believe you should only take as much as you think you will be comfortable in repaying. Same goes for any other loan, you don't need to buy a costly car just because it comes with an easy finance option and you can use it to show off.Just be careful while taking a loan.

4. Not Saving Enough : Saving should be treated as any other expense that you incur during the month, if you are making a budget and writing in the expenses column your electricity expenses, your phone bills then also add a column for savings, it should be treated as any other expense and should be paid for every month. Start small and slowly try to increase.

5. Ignoring Disability Insurance : I am not the sole bread winner of my house but i am certainly the primary bread winner and if i were to get disabled due to any reason and which could effect my earning potential, so i got myself a disability insurance, i know it is not enough but i did get something so don't ignore it.

6. Don't Diversify : Have you diversified your portfolio, Diversification can actually spread your risk and help in minimizing it as well,, it can also optimize your returns. You can diversify by investing part of your money in equity through direct purchase, part of it into mutual funds, buy Gold, Buy Real estate and also Debt funds. You could even further diversify your portfolio by investing in different sector funds etc. But Diversification helps since no one can predict accurately how a certain sector of investment is going to perform over long periods.

7. Not taking professional Advice : No Matter how much you have read about financial planning and tax savings etc but you will be surprised by the nitty gritty that a professional can help you with. And its always helpful to take a professional advice whenever you really need it.

8. Not Having goals : Goals give you focus, they give you a benchmark, they help tell you that there is something you have set to achieve and have not done it yet. So go ahead and make goals for yourself. Otherwise you will never know the purpose your investments serve.

How to Select a Tax saving Fund?

Tax Saving Funds seem to be the flavor of the day now, with more and more funds coming up on a daily basis it becomes very difficult to select the most appropriate fund. How do you select a good tax saving fund. What are tax saving funds. They are basically Mutual funds through which you can save tax as well as save money(is it sounding right). Anyways its a good investment opportunity. I was looking around and one very premium site for personal finance puts it in five easy steps.

1. Before investing in such a tax saving fund ensure that it belongs to a fund house that has a well defined investment process.

2. Go for funds that have a broad investment mandate that permit them to invest across the market with any investment style(growth, value)

3. The tax saving fund must be well diversified across stocks and sectors

4. Keep in mind the NAV returns visavis the benchmark indexes over a long period of time.

5. A good tax saving fund would be one which has given a higher NAV return at lower volatility.

Downtrend in the Markets

With Markets going in for a free fall, it seems they are going to go so low that it might become very difficult for them to recover and for people like myself who have a significant part of there portfolio when the markets were climbing are already feeling the losses, What could you probably do and what not to do is now left all to speculation. I have decided to stick to my present portfolio and maybe do a little bit averaging by increasing my position in some of the stocks. This i might(MIGHT) be able to send some when the market's are in an uptrend and maybe be able to recover some of my losses.

I had some extra money this month and have been thinking of investing the same somewhere but have just been not able to decide yet and don't know if i will be keep that money in my account fo long now since i have to buy some gifts (like gold) for some upcoming occasion which is probably in the later part of the year but am thinking of buying it right now in order to avoid the high prices of gold at a later date. But then this too is a speculation and i really dont know what to do yet. So lets see.

Income tax forms

For all those who are looking for income tax forms for India, for filing returns i am giving a link to the official website of the Income tax department of India from where you can download the forms.
Remember there are separate forms for separate types of income, so be careful for filing income tax returns fill in the right form.

IT Department Website

Holidays and Money

I recently took a break from my work and went on for road trip. Well this is one time that i let go ans decided to enjoy, but thinking about the money aspect as well. Let me first tell you about my trip..

I went to Rishikesh via Haridwar from Delhi(Drove down ofcourse) and then from there on moved to Dehradun and then to Ponta Sahib(Its a Sikh Shrine in Uttartanchal). Drove all the way. Had great fun, went river rafting at Rishikesh(level 1 Ofcourse, this was my first time) and saw to aarti in the night, with all leaves floating in the water with fire on them. The water was damn cold, stayed in a hotel which had its own beach. Jumped into the water from the raft wearing my jeans and had a hell of a time coming out of the water with the wet jean's weight pulling me back.

Well now the money part, the hotel I stayed in was one of those upmarket(as one of the travel guides said) hotel, and had its own small beach. I could have got cheaper hotels but then what the hell, went with my family. Now when i am back and looking back at the expenses, 70% of the total expenditure came from room rent in the hotel. Petrol was also one major expenses. The hotel gave the breakfast as complimentary so saved a bit of money there, also had our lunch and dinner outside in a road side dhabha. And i actually went out looking for the rafting option although my hotel did provide the same but one thing was for sure that i knew was that i could get it cheaper outside, so went to shope asked around and got it for INR350/- as against the INR700/- being charged by the hotel. Then we didnt do any shopping there as mostly these tourist spots are costly and the stuff they sell unless its a speciality is avaiable anywhere, so didnt do shopping.

Also i found out that Petrol is cheaper in Delhi compared to the neighboring states, but i did a lot of saving there as i had a tank full when i left Delhi only had to buy a little extra fuel on the way back. So everyone enjoy in holidays, but also try to save wherever you can and there is no need to do shopping unless and until you really have to.

Buy or Sell Stocks

Its the right time to start buying stocks. With the markets touching a new low and falling, this is the time start buying stocks. I was reading in one website a comment given by an expert that "People give more importance to the right time to sell shares then to buy shares". So its time too get that money out of those fixed deposits that are paying you 8.5% interest and start buying shares in the market. With the pressure on buying, not only will you start getting a good return on your investment but also this a good opportunity to start building up your portfolio.

People normally have the tendency to panic when they see a fall in the market and just to sell along with the fall. But normally this should not be the case, any dips in the market is a good opportunity to buy and not sell. Buying today will probably give you a benefit in the future.

I have also set a aside some money and now am going to start buy from tomorrow morning so you do the same as well.

Good Luck..

Fuel Prices - Where are they going

Has anyone sees the documentary "Who Killed the Electric Car"? Well its an eye opener on how the corporates and governments have not been promoting the battery operated cars and rather promote the fuel driven cars. Well with the fuel prices globally crossing $135 a barrel and the government thinking of decontrolling the fuel prices, some websites are reporting that the price hike could be as much as Rs.17/liter.

RS.17 WHEW!!!!!!

Whats going to happen to people like us who like to drive. I drive down to office every day in my car. With all the odd hours of working, the public transport system is not of much help. Although i can use the metro but have got to change it twice before i reach my destination and that becomes a major hassle. And if i keep coming by my car my monthly budget is going to down the drain. They also go on to say that petrol price increase will in no way effect inflation. But thats not the entire truth although it might not have any effect any price increase or decrease but the fact still remains that it will effect the family budget. And doesn't that account for inflation.

Anyways get ready for the shock of your life and it seems that the fuel prices are only headed upwards from here. And btw, i am already finding an alternate means of transport.

Investing in GOLD

All of us who thought that buying gold by our parents and grandparents in every occasion was a stupid and a very expensive thing, will be surprised to hear that Gold has beaten inflation today and will keep on beating inflation. Gold seems to be the one investment which time and again has been proven to be a solid investment and every portfolio should have exposure to gold. I like most of us out there also have some investment in gold but no in the true form of investment but just through all the gold that my wife keeps buying as jewelery or keeps getting the same from some relative or other.
Some experts feel that every portfolio should have atleast 10% of the total investments in the form of GOLD. This can hedge a lot of investments. A survey done by the Business Line shows the following results on the reasons of why people buy gold :

Some of the advantages you get in investing in GOLD are :

1. High Liquidity
2. Easy to Buy
3. Hedging against inflation

But it seems GOLD has not given returns as high as the SENSEX has given over a period of time but then it has stayed above the Inflation. Plus how can we ignore the emotional value attached with owning Gold.

So dont worry about investing in GOLD, just remember dont invest too much in GOLD.

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Coningency Fund Chart

Hi Everyone, Although i have been talking so much about this Contingency fund, but i want to make a confession. I have just recently started getting it together and now i have added a bar on top left hand corner of my blog to follow it up and also to display it to the entire public about my progress.

Anyways you can see for now that it is progressing very slowly and i am hoping to complete by mid of next year. But now that i am writing about it, i just remembered, what if the contingency fund requirement increases by that time. Anyways atleast the graph is there for now.

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How much does it cost to live in Delhi, India? Well this becomes an important question for all those people who are planning on shifting to Delhi for any reason. The top reason for shifting to delhi is usually Job related. Delhi being the capital of Delhi boosts of a good infrastructure as compared to the other cities in India. With the world class metro train running through Delhi, the Delhi Transport Corporation(DTC) adding new buses, New flyovers coming up everyday and wide roads, it is a good city to live in especially with Common Wealth games coming up in 2010. Except for the extreme temperature conditions(too hot in summer and too cold in winter) that plague the city through out the year its still worthwhile.

Todays Exchange rate is 1 $= INR 41.6

1. Renting an Apartment : Renting an apartment in Delhi is a difficult task in itself, but the costs for a 2 BHK can range between INR 5000 to INR 50000/- depending on the location. The NCR(National Capital Region places around delhi like Gurgaon, Noida etc.) seem to be the hotspots with a lot of developments in these areas and a lot of expats living here. South Delhi has some very Posh locations and a lot of companies have there offices in and around South Delhi and the cost of renting an apartment in South Delhi can range from 15000 INR to 25000 INR. Apart from the rent usually the landlords prefer to take a security deposit equivalent to 3 months of rent , which is returnable once you leave the apartment.

2. Groceries : The cost of groceries per month can be between INR 12000 to INR 16000 for a couple with a plenty of new retail stores opening up in Delhi everyday, its very convinent and fruits and vegetables availble in Delhi are usually fresh.

3. Eating Out : For a couple on an average the cost of eating out in a good restaurant can be between INR 1500 to INR 2000, and add another INR 1000 if you include drinks. Generally a beer in a restaurant can cost between INR 150 to INR 250. Food is generally on every Delhite's mind being a mainly Punjabi Populated, There are a plenty of good small restaurants available and the street food is also generally very good. The cost of eating out in a small restaurant or street side is about INR 250 to INR 500 for a couple.

4. Petrol Prices : As is the case around the world petrol prices are very volatile are bound to change soon but presently the prices of petrol are around INR 45 to 48 per litre.

5. Renting a cab/taxi : There are a plenty of call cabs/taxi services available and usually charge anywhere between INR 15 to INR 50 per kilometer of travel. You can also hire a cab for "4 hours and 80 km basis"which ever is first for INR 800 to INR 1500. With the Metro service available its getting very convinent to travel.

6. Communications : Mobile calls are maybe the cheapest in the world with a local calls can go as low as INR 0.50. There are two kinds of services available GSM and CDMA with multiple operators for both kinds of services. Handsets can start from INR 500 can go upto any amount. You have all kinds of value added services from mobile operators available like internet, GPS, text messaging, Multimedia Messaging etc.

7. Cost of Education for Kids : Some top end private schools charge anywhere between INR 25000 to INR 45000 as a quarterly fees. Good private schools charge between INR 12000 to INR 15000 quarterly fees. The schools during admission also charge some development charges which range from between INR 40000 to INR 150000.

8. Shopping : Shopping in Delhi is not generally a very costly affair unless and until you are targeting some top designer brands for which i think the cost would be the same everywhere else as well. Clothes and shoes are generally available across all Malls and shopping centers (Scores of them across Delhi). Branded and unbranded stuff is available. With a cost of unbranded jeans starting from INR 900 and shoes starting at INR 1500. A branded suit can be anywhere between the range of INR 5000 to INR 10000. You can also visit a retailers website with major stores in and around Delhi and all over INDIA here to get an idea of some prices of stuff.

I guess you can sum up your monthly budget from the information above. And maybe get a fair idea about cost of living in Delhi, INDIA.

Money Saving Tips

Some money saving tips you should really go through and follow....

1. Use Cash : Where ever possible avoid using credit cards.

2. Use Small Savings transfer : Get your online account to transfer a fixed sum every month to another account through which you can build a contingency fund.

3. Stay At Home : Dont go out much stop eating at restaurant's and stop your weekend trips to the mall instead stay at home and bond with the family. And also end up saving cash in turn.

4. 30 day list : If you have a sudden impulse to buy anything, put it in a 30 day wait period and after the 30 days are up if you still need it only then buy it.

5. Exercise : Exercise is the best way to keep your body fit and avoid costly medical bills later.

6. Talk to your Spouse : Its important that you and your spouse should be in the same line of thinking about saving cash.

7. Use a Spread sheet for tracking expenditures.

8. De clutter your home : The less stuff at home the less you spend on maintaining it and also it is said in VASTU it lets positive energy flow.

9. Pay Savings and debt first : Whenever you sit down to pay your bills you should first pay off you savings account then your debt account and then the bills.

10. Try To supplement your job Income : Let your income from you job not be the only income you earn, try getting a substitute.

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Talk about money

Not Many Of us are comfortable talking about money with our loved ones. And to tell you the truth it really is worth it. Money is one of the main reasons of disputes between couples and it is always best to discuss this issue and keep everything transparent so no issues can come up later. This can help making decisions easier about money matters.

The same should also be true about children. Parents actually decide how children will deal with money. It can really help the children make better decisions. Regarding the children we should

1. Include the children while talking about family budgets and bills.
2. Show th children the bills and also how we are planning on paying the bills.
3. Open a savings account for the children and get them into a habit of saving.

Remember it is you who has to decide how to discuss about money and the more you talk about money in the family the better understanding your family will have about it and can help you making better decisions.

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What Is an Endowment Policy?

All of us have been sold an endowment policy by an insurance agent at one time or another and most of these we dont know anything about. Well let me try explaining here what and endowment policy actually is.

Well an endowment policy is actually a contract like any other insurance policy between an individual and the company that on payment of premiums as specified in the contract, the company will pay a fixed amount plus accumulated profits that are declared annually on a fixed date in the future (or the nominees if the individual dies prematurely).

These are assignable, allowing the assured person to pass the benefits of the policy to a third party. The premium payed by the individual partly helps to pay for the life cover and the major part goes into the companies investments for the period of the contract. The profits thus earned from these investments are distributed among the policies. These are called bonus.

Bonus issues by each company highly depend upon the companies investments performances.

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Are You Financially Healthy?

Well here are some questions listed below to check the health of your finances. You need to answer them in all honesty to exactly know how what is your financial health.

1. How much percentage of your income do you save monthly?
a. > then 10%
b. < then 10%
c. Nothing

2. How often do you adjust and review your retirement plan?
a. Atleast once a year
b. Only once in five years
c. You dont have any

3. If you were to review your ability to meet any future financial obligations, you would feel...
a. Relaxed
b. a bit concerned
c. very concerned

4. How many times in the last few months have you paid your bills late?
a. None
b. 1 to 5
c. 6 or more

5. How often do you make your credit card payment on time and completely?
a. Always
b. Only a few payments are delayed
c. There is always some carried forward balance.

6. Do you always budget your monthly spending and always plan it?
a. Always
b. Sometimes
c. Never

7. All high Cost or major purchases are always..
a. Planned in advance and money is set aside for them
b. Planned but no money is set aside for them in advance
c. Unplanned

8. If a sudden emergency were to arise and you would have to take out cash for it then you would use..
a. Cash already available
b. Money available in credit
c. No funds unless bank/someone approves a loan

9. If you lost your job or your source of income, how long would you be able to provide for your basic expenditure
a. Between 3 to 6 months
b. For only 1 month
c. Less then 1 month

10. I have insurance cover for the property, autos, etc...
a. Enough to cover replacement cost
b. less then enough for replacement
c. Dont have any Coverage

Give 5 points for every time you answered a, 3 points every time you answered b and 1 point every time you answered c. If you scored between 40 to 50 you are in excellent financial health and If you scored between 20 to 39 you have made a good start but you need to address a few issues. If you scored below 20, YOU NEED TO START READING THIS BLOG MORE OFTEN AND BOOK MARK IT AND MAKE IT YOUR BIBLE.
And regardless of what you do examine your financial health.

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What Is a Mutual Fund ?

Well although i know most of us already know what is a mutual fund but i just thought for all those new to the investment scene who like to ask this question a lot, so maybe i can explain the basics of Mutual funds and who knows maybe all of you who have been investing in mutual funds may also learn a thing or two about them.

Mutual Fund is basically a company that brings together a group of investors(people like us), and invests their money in equity securities etc. Each person holds a share in the company which represents some part of the total corpus that has been invested.

How can we make money from Mutual Funds? Well there are three ways....

1. Dividends and interests : The dividend of the stocks held by the mutual fund or the interest that it earns from holding bonds is one way of earning money from a mutual fund.

2. Capital Gain : If the mutual fund sells of any part of the equity held by it, due to increase in price value of the equity, the money earned is divided among the investors, and is call capital gain.

3. Sell off : If you decide to sell of your share of the mutual fund after the price value of share has risen for a profit.

Why to invest in a Mutual Fund ?
Let me below list down some of the advantages of investing in a Mutual fund....

1. Your Money of managed by professionals and for a very low cost to the individual investor.

2. Your risk is more spread out, due to the fact that mutual funds will own a variety of shares instead of just you owning a single type of share, hence diversification can lower your chances of risk.

3. Lower cost of transaction to the investor due to the fact that a mutual fund may be doing bulk trading.

4. Your money is mostly liquid due to the fact that these funds allow you to exit any time and take your money.

5. Ease of buying a mutual fund, since its all about issuing a cheque and filling up a form which has been made more easier by online availibility.

Types of Mutual Funds

Although there are many types of mutual funds but some of the main genres are listed below :

1. Bond / Income Fund : The basic purpose of the income fund is to provide a steady income. These type of funds usually hold Government debt etc. Similarly Bond funds mainly depend on where they invest and carry a certain amount of risk.

2. Balanced Funds : The basic purpose of these kinds of funds is to provide safety, income and appreciation of the invested amount. They usually balance there incomes by investing some portion of there corpus in government securities and some in equity.

3. Equity Funds : The most common type of funds and invest in equity. The basic idea being to provide the investor with long time capital growth and income. There are many different types of equity funds depending on their ideology.

4. Global / International Funds : The kind of funds which invest in other countries aside from the home country.

5. Specialty Funds : These are the type of funds which don't diversify too much and only focus on a specific sector/ segment like telecoms, IT or maybe regional like say latin america, China etc...

6. Index funds : These type of funds focus on a specific index of the stock market. They basically replicate what is hapening in the particular type of index they are focusing on.

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What if Something bad happens?

What if Something were to happen? Disaster were to strike. Are you prepared for the worst...
You still have to keep yourself and your loved ones happy. And the same can only be done if your finances are in order, so here are a few suggestions for disaster management...

1. Plan for your monthly spending : We should all create a budget and stick to it. And when you plan for your budget always keep a little money in it for extra spending or impulse buying.

2. Always set up a Contingency fund equivalent to atleast three months of living expenses : What if something were to happen, you may lose your job or maybe fall sick? Prepare for it and get a fund ready to handle these kinds of expenditures. I have already written about how to do this, you can read it here...

3. Create a trust / a will : This is one of the most important things you can do to take care of your loved ones needs in case of an emergency. A will usually avoids a lot of legal hassles.

4. Nomination in your Accounts : Don't forget to fill the nomination columns of the forms used to open your term deposits, bank accounts, PF accounts and Insurance. These are very important to take care of the needs of your loved ones.

5. Open Joint accounts : Keep some of your accounts in th e joint names of your spouse, this way in case of an emergency they can atleast operate your account.

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This is one festival that i really love, the festival of Colours and i have some very fond memories of the same, so guys enjoy life and Happy Holi..

What Do you do with Surplus Money ?

If you have been reading my Blog regularly you will probably have learned about saving better by now and probably be even able to make your money work for you, so you might actually end up with some money surplus. Or maybe someone has just given you an extra bunch of cash and you don't know just what to do with it, well you could probably could use a few tips as mentioned below...

1. Pay of that high interest credit card.

2. You could probably make that contingency fund finally, maybe if not more just a 2 month emergency fund.

3. Get that extra insurance, maybe a term policy or maybe a one time payment policy in for your pension fund.

4. Maybe you could add this money to the house down payment saving fund that you have been working towards.

5. Invest the money for your child's educational fund.

6. Invest in some tax saving scheme to meet that deduction limit.

7. Pay of a loan that you have been paying slowly by EMI 's (maybe a car loan or personal Loan).

I have not put this in any particular order so please make your own order.

Warren Buffet's interview to the CNBC

I found this transcript of Warren Buffet's interview with CNBC held on 03/03/08. Its worth reading this legendary investor is really the best and its worthwhile to read anything on him. Anyways heres the complete interview....

Tax Alert impacting individual and Employer

Why am i still talking about the budget? Well i am not i found this Ernst and Young report that tells all about the budget implications on both the individuals and the employer. I thought it could be useful to many of us either way, so i have uploaded in it in the link here, its a direct download so no waiting.

Highlights of the Budget that effect You and Me

Well i am listing down some of the highlights of the budget that effect me or might effect me or atleast i think it effects the common man.....

- Personal income tax exemption hiked to Rs 1.5 lakh

- Senior citizens threshold tax limit increased from Rs 1,95,000 to Rs 2,25,000

- Tax exemption for women increased to Rs 1.8 lakh

- No excise duty on refrigerating equipments

- Small cars to become cheaper

- Reduced excise duty on two, three wheelers

- Excise duty on hybrid cars cut from 24 pct to 14 pct

- Sixth Pay Commission report by March 2008

- 22 Sainik schools get Rs 44 crore

- PAN sole identification in securities market

- Duty reduced on life saving drugs

- Short term capital gains to be taxed at 15%

- Money changers and people running gains of chance and tour operators to be brought under service tax net

- Custom duty on steel scrapped

- Set-top boxes to become cheaper

- 3 IITs to be set up in Bihar, AP, Rajasthan

- 16 Central universities to be set up

- Inflation will be kept under check

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Compare New and Old Income Tax Slabs

How would you like to compare your old tax liabilities and new tax liabilities. Click on the Image below to see full image....

What is P/E Ratio

Have you heard of P/E (Price/Earnings Ratio)? It is one of the Oldest and most used term when it comes to value of shares. And you know although i heard it several times and also knew what it meant but was never able to figure out how to use it to find out the value of the shares that i was planning to buy.

Any ways i have found some useful information on Price/earning ratio which i am planning to put to good use now. It actually means ratio of the price of a share by the earnings per share. All you need to do to find out the P/E ratio is to divide the price of the stock by the Earnings per Share(EPS). The earning per share is usually for the past four quarters.

Whenever a company is making losses the P/E ratio is negative or sometimes said to be zero. Price/earning ratio tells us how much an investor is willing to pay for the per rupee earning of the share. For example a P/E ratio of 18, the investor is willing to pay Rs.30/- for every 1 Re. earning that the company generates. If a company has a higher P/E ratio it means that the market is generally expecting a good growth in the companies earnings. Stock prices reflect, what the market expects the companies growth to be.

Lets take an example, if everything else being equal and a stock worth Rs.10/- and a P/E ratio of 75 is probably more expensive then a Rs.100/- stock with a Price/earning ratio of 20. Hence we can say that the P/E ratio is much better indicator of the value of the stock then its market price.
Price/Earning ratio is usually lower during the times of inflation. You should never base your buy or sell decisions solely on this ratio.

I have tried to explain in a way i can and the way i found it but is case of any doubts please do get in touch.

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Cash or Finance for buying a Car

Thinking of buying a new Car, Cant make up your mind whether to get it financed or pay by cash for the entire car, cash which is lying in fixed deposits/mutual funds/wherever....

Well to anyone casually looking would suggest that paying by cash would have been a better option, the smart thing to do, this way you wont have to pay the interest. So if your car costs Rs. XX/-, you will end up paying Rs. xx/- and the cars yours. But why do people forget that the worth of money is much more to you today then it will be after 3 years or maybe even 5 years. And What about the earning potential of the money that is lying in your bank.

Lets See how this works out if you pay cash...
  • Cash paid: Rs. 400000/-
  • Car loan interest costs: Rs. 0/-
  • Interest lost on cash (48 months @ 9% interest on FD): Rs. 144000/- ( Maybe even more if you invest in Stocks or some other form of investment like property)
  • Total cost of the car: Rs. 544000/-
Lets Now See if you were to get the car financed

  • Cash paid: Rs. 0/-
  • Car loan interest costs @11%: Rs. 176000/-
  • Interest earned on cash (48 months @ 9% interest on FD): Rs. 144000/- ( Maybe even more if you invest in Stocks or some other form of investment like property)
  • Total cost of the car: Rs. 432000/-
First thing i know everyones asking is that why cash paid is being considered as zero, well i am assuming that cost of the car is Rs. 500000/- And that you have to pay One Lakh additional in each case. Especially 1 lakh as down payment in the last case.

Anyways i guess you are getting my point, but then some people would dispute the above by, that paying cash has some psychological advantages, like not worrying about the constant debt, monthly EMI and the likes. But i guess its more of a point of view.

There is of course a flaw in the above calculation but i really didn't want to mention it earlier but the thing is that the entire amount of Rs. 400000/- should be available for the entire period for earning the interest but then we haven't taken the Compounding of interest either so i guess we should be even.

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Some Good Stocks

In continuation, with my last post on best stocks if we see th over all prospective, and the way the market is headed south, it is a good opportunity to invest in some really good stocks. Some Stocks which can give returns if kept over a long time, atleast i feel these are really good stocks.
But please as a disclaimer don't take my word for it please do be careful while investing and let me also know what you think...

1. Reliance Petroleum : One stock which is definitely give some really good results in the near future with its refinery coming up.

2. Tata Steel : Corus aquisition and low cost producer makes it a very good pick in the steel industry and probably will give better results although a little down nowadays.

3. DLF : Its a bog name in real estate and some really good projects under its belt. So lets hope for the best.

4. ICICI Bank : Its got a great model and is taking advantage of the Goverment banks shortcomings, it has the greatest reach among all other banks and my salary is deposited every month in it so its certainly a good bank.

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Life's Goals

Have you ever wondered what your real goals in life are? What are your priorities in life?

Well these are important questions one should ask himself/herself. Frankly when ever this question is put to me i would probably answer..

1. Find the highest paying job. Work long hours(which i already am working and i guess all of us are) but still work just for the money.
2. Live a lifestyle like a ancient warrior, with as little luxury as i can always just thinking about money.
3. If i am still alive by the time i am 65, suddenly retire one day, stop working and try to enjoy life or whatever is left of it.

Are these your goals as well, are you thinking otherwise. I have now started to believe it should be something else....

1. Try to find a job that you love. We shouldn't work at a place where we even dread getting out of bed every weekday. Maybe its difficult, Maybe you might have to take some risks but do something you enjoy. I have been thinking for so long to do the same but have never been able to draw up the courage to do so. But now i am planning to take a dive and lets see what happens.

2. Try to do less work and start getting more of a life. Start playing with your kids. Try to get involved in there upbringing. Start writing a blog like i have done, just to pass time. Maybe do something for the community. Don't end up looking back at your life and just remember working for all your life and never just living it.

3. Retirement : Retire doesn't necessarily means at the age of 65, i have not put any date on my retirement. i just want to make it one day. And retirement for me doesnt mean just sitting at home and taking care of grandkids. It means something more like working for who i want and when i want and enjoying life with it.

You are probably thinking why this kind of an article on a money blog. Well i just wanted to tell everybody that not everything we do should be for money only it should also be about life. About living the way we want to live. So please LIVE LIFE NOT WORK LIFE

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Best Stocks

The top stocks and the kind of stocks to retire with or just save for your child's future according to a research conducted by rediff are some names that normally a person like you and me couldn't even start to pin point are not infosys or reliance but some other names :

1. ITC : Advantages
a. Strong Brand
b. Huge Distribution Network.
c. Profitable Business
d. Diversification Underway.

This stock could do wonders and i am just getting into this one for the long run. Its got an advantage that its cash cow business i.e cigarettes, it has 75% market share and very little opportunity for new players to enter.

2. ZEE Tele Films : Advantages
a. Strong Distribution Network
b. Its Subscription revenue is rising
c. Better ground with Advertisers
d. Good Margins
e. Brand loyalty

Its bit costlier stock but if revenues do pick up its one stock that you would want to have in your portfolio as a top Stock.

3. Pantaloon Retail : Advantages
a. Biggest retail Chain
b. Very Popular retailing Chains
c. Major Diversification Underway.

Retail stocks are always given a step child kind of a treatment in the Stock Market. The best part is as they open more branches their brand recognition increases and also since they have the early starter.

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How to Invest in the Stock Market

Or Should i say what not to do while investing in stock market's.....

There are some common mistakes that individual investors like myself always tend to do while investing in the stock market and as i did once, i dont want anyone else doing the same. So here are a few points to be careful about.

1. Some stock brokers talk about "TIMING", buy low and sell high, its not possible to predict the market so accurately, so its best to stop trying to. Someone you know might have made some money out of this technique but in the long run it could give you losses.

2. Don't try to be a "FOLLOWER", Don't "COPY" someone, just because someone you know from somewhere made some money on some stock he bought cheap, it doesn't mean you will be able to replicate the same performance. If you don't know how to do it just don't do it.

3. Don't invest everything in One stock, be careful, do your research, get to know the company before actually making an investment in it. It would be foolish to invest all the money in one stock. You might win some but then you ave an equal chance of losing everything.

4. "TIPS", stay absolutely clear of them, just dont invest cause someone tipped you about some stock, it could be for any reason maybe some broker trying to increase the price by word of mouth so that he can sell of his stocks. Its risky and not worth the effort.

5. "OBSCURE" Stocks are stocks which no one has noticed, and if you decide on investing in them just for the reason of them being obscure, it would be foolish. There probably is a reason for them being obscure. so be careful.

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Income Tax Calculation Form

For all those people who have started to worry about their Income tax, about how much to pay, how to calculate and the likes i am herewith attaching a IT calculation sheet that i found, it is usefull and works in Excel so even more beneficial.

Here's the Link....

So now Calculate your income tax and start to buy all those ELSS, LIC, FD's and the likes to save your money.

The Indian Middle Class

The above image is how the average Indian has been and will be spending his money. As per McKinsey, the average middle class indian wants to spend money on better living standards. They say that "Even India’s most affluent consumers will outnumber not only the comparable segment in China but also the entire current population of Australia" They go on to say that "Above all, consumers will increase the amounts they spend to improve their economic prospects and quality of life—for better health, education, transport, and communications."

This shows the how well the India is progressing so three cheers to Indian Society and get ready for the King of Good times.

Portfolio Management and Investment Analysis

Just on my usual rounds of the internet and i came across this link where they have shared a couple of e books. They seem to be good and worth anyone's while who would be interested. Their is one particular book on Investment Analysis and Portfolio management that i really liked, Although i haven't been able to read it completely yet but it seems very useful.

And of course the credit for these books goes to the original up loader, although i cannot comment on the legality of uploading these books and one more thing the up loader does say that these are solely for academic purpose and not to be used for any commercial uses so please keep the same in mind.

The link is here.

Income Tax returns, PF and RTI

Does the government Owe you money like PF, Income tax returns, Pensions??
No one seems to be able to tell you when and how you will get this money.......

Well there seems to be some good news and the good news is in the form of "RIGHT TO INFORMATION ACT".

What is RTI?

Well in the supreme courts words ""The “right to information” is defined in sec. 2(j) as a right to information accessible under the Act which is held by or under the control of any public authority and includes a right to (i) inspection of work, documents, records, (ii) taking notes, extracts or certified copies of documents or records, (iii) taking separate samples of material, (iv) obtaining information in the form of diskettes, floppies, tapes, video cassettes or in any other electronic mode or through printouts where such information is stored in a computer or in any other device.""

It basically means that the government Babu who earlier denied giving you any information about the whereabouts of your money has to now give you the same in written. That is the power of the RTI act.

Not many of us are aware of how to utilize this to our benefit and especially when there is money involved. Well i will try to explain in a few paras below...

1. Any application for the same needs to be submitted, although there is no format for the same but you can use a format prescribed by the State of Maharashtra as it is much more clear and cons ice.

2. The language of communication can be Hindi, English or any local language.

3. You need to file this application with Public Information Officer of the Government body, which they have to appoint as a compulsory thing.

4. You need to add a Rs. 10 Postal order stamp on the application.

5. Dont forget to add a photocopy of the necessary documents like the ITR form in case you are looking for your Income tax returns or a copy of the PF application in case of PF accounts or maybe just the PF number.

6. Always keep a copy of the application with you for records.

7. Never use complicated words or misleading words always try to keep your language as simple as possible and to the point.

After filing the application the PIO is bound to give you a reply within 30 days of filing the application. If you do not get your reply you can first send him a reminder and then escalate this issue to the CIC (Chief Information Commissioner). Also if the PIO is not able to justify the delay in giving response to your application or giving wrong information the CIC can fine him for Rs.250/ day.

I found this example of an application on the net maybe it can help

The Public Information Officer
Recognised Provident Fund Commissioner
New Delhi.
No. SV ghsds Road

Subject: Pending of provident fund transfer

Description of the information required: I had applied for transfer of my PF from account number xxx with company

abc to account number yyy in company pqr. Company abc tells me that the amount has been paid to you vide cheque
number 12345 dated 5th May 2007. However, the transfer has not been effected into my account number yyy. I want
the following information:
a. What is the progress of the file?
b. Which officer dealt with this file and with whom is the file pending?
Place: Delhi


I was checking out the net and have come across these great calculators which are very handy. Although most of them show the unit of Currency as Dollar ($) but if you mentally substitute $ with Rs. they are very handy in their way

1. Inflation Calculator : You need to know what the cost of any item will be after a specified number of years, for example, how much would be the cost of a Rs. 100/- medicine after say 5 years or 20 years. Well heres a calculator that does just that, just type the amount and the rate of Inflation (I would recommend the expected inflation rate be kept at 5.5%). And see how much it will cost of after 5, 10,15,20,25 etc years. Inflation Calculator

2. Reaching Your Goal : How much time will it take for you to reach. Have you planned that by the time you retire you should have 1 crore in your bank, well see how much you need to invest in how many years, will you reach your goal. Reaching your Goal

3. Cost Of waiting : What would it cost you after retirement if you wait before you started saving some really good amount of money. So just check it out its a real eye opener and tell you to start saving as soon as possible. Cost Of waiting

4. Loan balance Calculator : Well this is the one i really like, i always wanted to know what is the amount remaining on my car loan, and this really tells me that. Its really worth visiting, and dont forget to substitute $ with Rs. Loan Balance Calculator

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Happy Republic Day

A Very Happy Republic Day to All Of You

Contingency Fund

A lot of times during the course of this blog i have spoken about the Contingency fund and even if you see my New Year Resolutions i have planned to start one, but frankly i haven't been able to get myself to start one yet but now i have laid out a plan for myself and i don't know if it could be useful to anyone of you but its certainly workable for me as far as i can see......

1. Small Starting : I am going to put aside small amounts as soon as possible. Anytime i have any change left over in my pocket even if it is just Rs. 10/-, I am going to put it in my piggy bank.

2. Auto Deduction : From hereon i am going to request my bank to deduct a small amount from my account as soon as the salary is transferred to my account on a monthly basis. Maybe open a recurring deposit account.

3. Fund to be treated as a bill : This Contingency fund that i plan to make will be treated as a bill to which come what may i have to make a payment just like any other bill eg. Credit Card, Electricity, telephone. This will make me spend only what is left over for other expenses.

4. Reduce an Expense : I plan to reduce my personal telephone bill, and put that amount into my savings, this way i will not have to put in an extra amount and i can make a saving.

5. Reduce outings : I plan to reduce my weekend trips out for lunch or dinner to only twice monthly instead of every weekend and save that amount.

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Doubling your Money

How many of you wonder how financial professionals can so quickly mentally calculate how much money you’ll have in 30 years based on an return on the investment? Well, the magic can be easily attributed to the Rule of 72.

In order to use the Rule of 72, all you need to know is how to divide various numbers into 72. For example, 9 divides into 72 8 times. 10 divides into 72 7.2 times. Etc.

Once you have become the master in the basic division tables for 72, you can start to apply this k to calculations like investment returns. Divide the annual rate of return (percentage) into 72, and the answer will be the number of years it will take to double your money.

For example, if you assume your investment is earning 8%/year every year (and 8 divides into 72 9 times), then your money will double every 9 years. If you are earning 4%/year, your money will double every 18 years (72 divided by 4 equals 18).

This is an easy technique to quickly estimate what your net worth will be down the road given a certain rate of return. It may even help you decide what sort of investments to choose, based on their risk to reward ratios.

If you have Rs. 10,000 invested at 3%/year for example, it will become Rs. 20,000 in 24 years (72 divided by 3 equals 24), and Rs. 40,000 in 48 years (24 times 2).

If instead you invest the same Rs. 10,000 at 6%, it will become Rs. 20,000 in 12 years, Rs.40,000 in 24 years, and Rs. 80,000 in 48 years. A small change in percentage can make a huge difference.

The downside of this calculation method, is that rarely do investments give the same return year after year. You can achieve an average annual rate of return of “x”%, but in the end the total calculations won’t entirely work out with your Rule of 72 plan.

So all in all it’s not a very accurate method of planning your finances, but a useful tip for on-the-fly calculations, and maybe even a party trick.

In the End since this week has been so about markets a graphical view of how happy the markets looked today...

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Reasons For Market Crash

Why Did the Markets Crash?? I am listing below some of the reason that i understand

1. Relent less selling by the FII's.

2. Lot of Investors turning into traders and taking long positions in the futures Market.

3. Overall Change in the Global Investment Climate

4. Fear of the US Economy headed towards a recession.

5. Commodities Market Being Very Volatile.

6. Increasing Presence of Hedge funds across all asset classes increases chances of volatility.

It is expected the markets might fall another 10% before recovering So gear Up.

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What's happening to the Markets

If the Markets keep going down like this on a daily basis, very soon most of the money that people like me thought we had, would have eroded to nothing. And then we keep hearing on the News that this is just a reaction to the Overseas markets. My Question is why is our market dropping more then anyone else's. We have lost about 10 - 12 % while no other market seems to have lost 10%. Its very surprising, that our markets are losing so much money. And to top it all up i got a mail today, giving me the chills that the Reliance Power IPO is not "POWER ON now Its Power Gone". As i had written in my earlier POST , that i had applied all the money i had in the IPO and now I am losing sleep over it. Any ways i read this really nice article on Money Control by their editor, the LINK is here, its a good read and gets your hope high as well.

The fundamentals of our market are really very strong and we need to be optimistic, so keep your fingers crossed and if you have the money start investing in those stocks that you really wanted to invest in and do it fast before they go back up.

Crashing Market





Need i say more

Go look for the whys, wheres and how your self. I am in mourning

Where Are the Markets Headed

Came across this article on the net on where the markets are headed in the near future...., its based on the Fibonacci series(Its a mathematical sequence of numbers). I think i did see a similar article in one of the news paper but this one is well written so do go through it, its worth a read and let me know what you think.

Lower interest rates

Well its the equity markets season and i am talking about loans, some would wonder why. Well it so happens that i know for a fact with the market running low and very little oppurtunity to sell, not everyone is in a good shape right now and are wondering about taking loans to spend money or maybe loan to just buy into the market. And the first think when that comes in your mind when you think of loans is the interest rate.

Home Loans are most probably going to go down by at least 50-75 basis points. And that seems good news for all the people thinking of buying a roof over their heads. The RBI is planning to cut these rates. And as i have pointed out earlier as well, property is a good investment.

Personal Loan, well with such high interest rates and so low a demand, banks are thinking of lowering the interest rates in order to increase demand for them. Their is a very big market for personal loans just for the fact that they can be used for anything like investing, partying, marriages and whatever and are relatively easier to get, especially for salaried individuals.

The Auto Loan industry doesn't seem to be going anywhere, with the market for 2 wheeler market at a low(The Nano effect i guess) and the car loan market at a very satisfactory level banks don't seem to want to decrease this kind of a loan in the near future at least.

Over all its best to wait for sometime now if you are planning on taking any type of loan since you could end up saving some money on account of lower interest rates very soon.


Thanks to Moneycontrol for the image

Equity Markets Falling and falling so hard its starting to hurt. Everything falling head first and please do note that this was not just the Indian Markets but a worldwide fall. And everyone was so very optimistic about the Indian Market. To top it all up people seem to have invested whatever money they had in the Reliance IPO, so should we start to feel scared and fear losing all our money.

Well personally i don't think so, firstly this could be just a reaction to the overseas markets and the market will recover in the next few days. And that come what may you could probably make at least some listing gain. As i told earlier as well, Reliance does not give losses to its investors, so i am keeping my fingers crossed and hoping for the best.

Anyways, no one can so accurately predict the market, so sit tight and in the long run you will gain, so don't panic and start selling.

Hey Everyone

Hey Everyone,
I Didn't Die after all these days. I have been busy doing some really good things for the blog. First thing you must have of course noted is the change in the layout design. I hope it looks good cause i wouldn't want it any other way. Second and something very important to me is the change in the domain name, that is if you see your address bar you will now be seeing . I have now shifted to this new domain name, although this will in no way effect if you are still coming through the old link, it will automatically forward to this new location.

I am hoping now to be more regular with everything in place, of course the blog is still hosted on blogger. You can now also subscribe to my posts through feedburner. I am now hoping to become a professional blogger and would really like to see some number of readers.

Guys and for a fact about something i really want to inform everyone, i have applied for the Reliance Power IPO, although i didn't have enough money to apply for the complete allocation of a single individual investor but i did apply a few. You know personally i feel that Reliance has never let down a single share holder and i am hoping they wont do the same this time as well. I would also like to point out that Reliance Power as on date has no real plants actually generating power but they hope to start producing some very soon. And hence you cant really calculate the returns on your investment but the market seems very optimistic.

I do invest in equities and have a small portfolio which i am trying to build up and as on date my portfolio is on a positive side by 60% and i hope to keep it the same. Its not that all my shares have risen some shares that i own are also in the negative but overall portfolio is very positive. Any ways will write more tomorrow. And sorry for not being able to write for so long, but please do keep reading.