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Money Thread

Discussion in 'Hangout' started by Bala, Sep 23, 2010.

  1. theblack

    theblack Esperto

    PPF is a very cunning invenstment plan and if you dont read between the line then you will never make the money you thought you will, 15 years from now.

    The trick in PPF investment (which can be either a BANK or post office) is to invest how much you plan to invest for that financial year in one shot.
    If one shot is not possible then you can try with 2 months or so but not later.

    The thing with PPF is that the interest is calculated on 5th of every month against the "Lowest balance" on that date.
    So if you dont really think it through there is a good chance you will lose money.
    2 people like this.
  2. Bala

    Bala Esperto

    Took your advice guys and started a PPF yesterday, deposited Rs.30000.
    Am going to reach that maximum slab of Rs one lakh with in the first 3 months of every financial year.
    Hope it would be handy after 15 years.
    2 people like this.
  3. theblack

    theblack Esperto

    Continue to invest more annually..
    It will pay a good return.
    And after 3 years I think you can even take a loan on your PPf.

    But be aware of how to invest as that's the key

    Sent from my Q1000 using Tapatalk 2
  4. Bala

    Bala Esperto

    I think I can't invest more in PPF,1 lakh rupee is the maximum slab.
    Be aware of how to invest? , I didn't get it, can you please elaborate?
    Am a novice.
  5. Aanand

    Aanand Amatore

    I came across this short story on “Real Estate V/S Sensex”.

    1. Film actor Rajesh Khanna bought a bungalow in iconic Carter Road in Mumbai for Rs.3.5 lakhs in 1970.
    His heirs sold it recently for Rs.85 crores.
    The property has multiplied by 2428 times or an annualized return of 19.38% over 44 years.

    2. Samudhra Mahal in Mumbai is another expensive property.
    A flat purchased in 1970 at Rs.700 per sq.ft was sold at Rs.1,18,000 per sq.ft in 2013.
    Money multiplied by 168 times in 43 years.
    This works out to an annualized return of 12.66%

    3. In 1963, Godrej paid Rs.1 lakh to buy his first house, a 2916 sq.feet apartment at Usha Kiran, Carmicheal road, in tony South Mumbai.
    In 2011 he sold it for Rs.25 crore.
    Money multiplied by 2500 times over 48 years or an annualized return of 17.70%

    4. In Dalal Street, Mumbai a sq.feet was Rs.100 in 1980.
    After 34 years, it sells at Rs.27,000 per sq.ft.
    Money multiplied by 270 times in 33 years.
    This works out to an annualized return of 17.90%.

    The first three properties can be bought and owned by cream or elite of the society who are worth at least tens of crores, mostly hundreds of crores.

    The last property in Dalal street; your father could have bought with whatever money available at his disposal.
    You can buy it even now.
    Your son or daughter would be able to buy it even 20 years down the line.

    This last property is the Sensex.
    A sq.feet is a metaphor for one unit.
    If dividend yield is also included (assuming 2% CAGR), Sensex would have delivered 20% annualized returns over last 34 years, higher than the most expensive prime properties in the country.

    Good mutual funds and many stocks have delivered returns far superior to Sensex itself.

    Power of equity is least understood in this country.

    If you can withstand notional loss (i.e. you don’t book profits/losses) in portfolio during bear markets, not worry about daily price movements, it is possible to make much better money than what can be made out of best of real estate.

    Give at least the same importance to equity as you give to real estate.
    You don’t mind holding real estate for 20 or 30 years.
    Please do the same for equity ignoring bull and bear markets, notional profits and losses.

    Many of you have been investing for last couple of years.
    Stay the course for at least another 15 to 20 years completely ignoring market fluctuations.
    You would be amazed at the fortune created for your retirement or to pass on to your children.
    Add to this, a comparison of:
    1. Taxation.
    2. Transaction costs.
    3. Liquidity.
    4. Security of possession.That should make the case for equity stronger.
    rsinfo, ramjn, bharath and 2 others like this.
  6. ghodlur

    ghodlur Esperto

    Anybody invested in Non Convertible Debentures (NCD)? The interest rate offered is tempting enough but the risk or catch isnt clear. How is the returns taxed? All I could understand is that these NCD's are ranked by rating agencies based on the risk and higher the rating more safer is your money.
  7. asimpleson

    asimpleson Esperto

    Linea 1.3
    @Aanand, very good advice Sir, on similar lines, if you remember a few years back and I don't mean Harshad Mehta or Ketan Parikh times, but very recently every earning person a few years into job or business invested in market with a notion to create good money. I too invested some money and used to track stock on daily basis and try to learn about markets etc. but I did not understand 90% of what the pundits spoke. Till a good friend of mine advised about some sound business investors and traders and their policy, those who watch the market carefully, but don't panic at every movement. The key line for people like us he said (for people who could not understand the bigger games of the markets and their fluctuations, the sudden influx of money in market, sudden rise of a bullish market) was to buy low and save money and allocate a part of investment into buying good share, CAT A or B depending on our risk appetite. He said never book profits or take losses, just stay invested and buy more and more as prices drop to new lows. Not everyone will agree to this, but this is how the most intelligent investors in business seem to have accumulated good shares which have grown in worth and given handsome returns. The choice of investment is equally important here, be it plain equity or mutual funds linked to debt funds.

    Also, a bit paradoxical it may sound to above advice, but it happened so, that the two out of three small portfolio I was handling at home, I was advised by another close friend to sell-off all shares at a particular point. Believe it or not within 10 days market was panic selling and there was utter massacre of money of 'just born investors' who lost a lot of money at that point never to see so many of those shares giving quick returns, not coming back to even 50% levels even in a bullish market at a later date. I was saved by someone else's advice purely by luck but some others even in family and friends were not so lucky I would say. They chose to stay put and some companies still have no prospects whatsoever to recover again. The money is pretty much down the drain.
  8. Ravi

    Ravi Staff Member Janitor

    Grande Punto 1.3
    Not quite correct advise, profit booking is must. But one need to decide when to book it, depending to investment horizon.
    Lucky you :).
    But keep in mind, if you are 'investor' (very different from Trader), you should buy good stocks (check some Indexes, like Sensex or Nifty). These will recover in good time (exception will be there).
    But if you buy some penny stocks, based on someone else advice, be ready for risk.
    asimpleson likes this.
  9. asimpleson

    asimpleson Esperto

    Linea 1.3
    Well, he suggested if say share is hovering at 1100 Rs. per, and if the new low is 900 for eg. the 52week high being 1500 and also being a company good in market cap, overall standing with investors, with exceptional fundamentals (the likes of L&T or TCS etc.) then it is best to stay invested in long term before one needs the money to invest or use for some important purpose such as education expenditure or home or capital business expenditure etc. What he meant is not to scatter around investment for quick returns because for ordinary individuals this advice of right time entry and exit is hard to come by and going from examples around me, I have seen people turn their back on equity for good, some have very bad experience with Mutual funds also. :)
    Last edited: Sep 18, 2014
  10. Aanand

    Aanand Amatore

    @asimpleson. Thanks for your appreciation.
    Only it's the advice of the story teller - not mine.
    So, the credit goes to him/her.
    The following is what some friends added after reading the short story at post 145.
    Sadly, with very less education on investments most people consider Property and Gold as one of the best investments which is far from true.
    There are so many attached disadvantages of real estate investments viz;
    a) Property when sold in distress fetches a losing price
    b) Property needs lump sum money or EMIs increase the costs many folds depending on tenure
    c) Property, more often than not, cannot be sold in pieces
    d) One can't eat bricks when in need of cash urgently, as Property takes long time to get a right buyer
    e) Nearly 70% court cases relate to Property disputes
    f) Zar, Joroo and Zameen have been the cause of most disputes since time immemorial

    Is there any evidence that Warren Buffet, the Financial Guru has invested in buying houses/property

    On the other hand, Gold is only a Hedge between inflation and investment
    i) Security of gold is a problem
    ii) If in ornament form, the KHOT (mixing of copper etc to strengthen the ornaments) causes losses to the degree of nearly 30%. Also cost of 'making charges' is lost.
    None realizes these factor
    Much more can be written but still our friends will not budge and learn

    Additionally, we need to note that in India, Real Estate is an unregulated industry.
    So, anything goes.
    Not to mention the (alleged) nexus between builders, developers, politicians, corrupt bureaucracy, unscrupulous lawyers and, of course, the underworld.
    Also, people forget the following costs while calculating returns when they invest in real estate:
    1) Long term capital gains tax – which is 20% post indexation
    2) Charges of real estate broker, (1% or 2% of transaction amount depending on value of property)
    3) If you have bought flat on loan, then interest which you paid on loan amount
    4) Expenses which you incur for maintenance
    5) Expenses for painting, furniture etc. – which do not have any value at time of selling.
    6) Municipal Tax / Property Tax
    ramjn and asimpleson like this.

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