Year: 2019

Realistic and Simple ways to save money for buying your dream home

Having a home of your own is one of the greatest achievements in an ordinary person’s life.

Well, somewhere we all are fascinated about buying our dream home at our dream location. Isn’t it? Whenever any of the interior decor posts on social media comes in front of you, we silently think I wish I could have it or could afford it, but we got stuck when money comes into the role and why not?

Afterall considerable investment is required to buy a home, but don’t worry, I have the realistic and simple ways to save and grow money which will surely help you to buy home within a few years.

However, I would suggest you before you begin saving, you first have to know how much you’ll need to save. Plan to sit down with a mortgage lender who will let you know how much of a mortgage you can qualify for.

So, be proactive, and here are the Best Ways to Save Money for Buying a House:

  • Invest In Mutual Fund SIPs or FDs

You must have heard and seen many times about invest in Mutual funds and get your money double. Many of you doubt that we will lose our money, but it is not valid.

In the present time, Mutual fund SIPs are a reliable and easy way to generate money from your invested capital. One can set apart a portion of their income and invest it towards Mutual Fund investments through Systematic Investment Plan. This will help you to make Home Loan down payment quickly as your ultimate goal.

You can understand it with an example like if you start investing Rs. Fifteen thousand a month in SIP, with a reasonable return of 12%, you can build sufficient fund of around Rs.12.40 lakhs in just five years.

Similarly, Fixed Deposits (FDs) also help you to build a good wealth within a few years.

  • Start early savings

It is a fact “when it comes to saving money for investments, the earlier you start, the better it is for you.” Therefore, It is always recommended to start saving in your 20s itself

If you start investing while you are still in your 20s, you can enjoy the power of compounding to multiply your savings, thus having sufficient funds by the time you plan to purchase a home. This will help you in making your home loan EMIs, thereby reducing your Home Loan burden.

Your early strong financial position will also help the bank to put trust in you and will ensure approval of your Home Loan application.

  • Cut down unnecessary expenses

For reducing the unnecessary costs, the first step is always to make monthly expenditure budget. A budget doesn’t stop you from spending money, but it will help you to figure out where your money is going so you can check out and cut off the expenses which are not required.

  • Create a second income for yourself

It’s the era of Digital India with many proven ways of earning money with the help of a laptop and the Internet; you can quickly start earning and saving. Start doing side hustles, utilize your time, and make more money. There are many side incomes you can generate like if you work as a writer, you could do freelance writing on the side, if you work as an accountant you could help people with their tax returns, or you can also work with someone on a commission basis.

Keep exploring beyond your imagination as there are many sites which provide you assignments or side projects to generate passive income.

  • Lower the Rent You Are Currently Paying and Save The Difference

If you are living in a rented property which has higher rent you can look for another cheap rented property and save the difference of rent. Currently, it does not seem to be nice but what you can do is to invest that difference amount in FDs, MFs or Gold, etc. which will help you to generate another income source from the savings.

“Buying a house is a massive investment; some of us call it a lifetime investment. You have to look for every aspect.”

Investment Evaluation Ratios for Stock Investors

Stock market investment is different from acquiring a business. Investors are interested more in the reasonableness of the stock market valuation of their shares.

Finance Minsters Package Washed Out

A few days ago, traders and investors in the stock market were waiting for a package from the Finance Minister to boost the Indian markets. The financial package did come, and that day, we witnessed a rally of 600 points on the BSE Sensex. The budget proposals of taxing the FPI and additional surcharge were removed. However, after a three-day rally, we are again back to square one.

The slowdown in the world economy and also our unemployment problems, inflation, and more importantly, the fall of the rupee against the US dollar has taken a toll on the stock markets.

The United States President, Donald Trump, is changing his statements every day on a trade war. The date of imposing additional duty and percentage etc. on China and other countries has changed many times. This has resulted in no confidence in the market.

We have one other significant threat of war with Pakistan, which has created a lot of nervousness in the market. The negative factors are more compared to the positive ones. This is the reason for more downside risks against the upside in the Indian stock markets.

In the recent sessions, the precious metals and commodities markets have given better returns compared to the stock markets. The auto sector is in the doldrums, and the finance minister said no more packages would be offered for the auto industry. Tata Motors went down below Rs.110, and leading car manufacturer Maruti asked 10000 workers to leave.  The shares of TVS Motors, which were doing reasonably better also went down from Rs. 380 to Rs. 350.

Not just the auto sector, even the biscuit giants like Parle and Brittania expressed concern about their sales projections.

In the package, the Finance Minister also seemed to ignore the NBFC companies, and no bailout was announced. Dewan Housing went down by 80%, and the company is facing difficulty in paying quarterly interest. Indiabulls Housing Finance is falling every day.

One hope for the economy is that the RBI gave a vast amount to the government  as dividends, which was much higher than expected. How amount will be utilized is not announced, the finance minister even told at the press conference that it is not decided on where these funds will be used.

The monsoon this year has been erratic, with some regions received excess rainfall, which is likely to destroy the crops. The inflation is expected to go up, and the GDP has come in at 5%, much below the market expectations of 5.7%.

On Thursday the NIFTY went below the psychological mark of 11000. However, it did recover on Friday to a certain extent. Considering that the GDP numbers were disappointing and no good news coming from the Finance ministry, expect the stock markets to continue with the current bearish scenario.

Time to Accumulate India

The mega economic cycle that started in 2003 is well and genuinely reaching an end (from the looks of it).

2003 was a critical time in history –
1. The US had entered Iraq and was pouring money into two wars
2. China was added into WTO
3. Enron, 9/11, Worldcom, Dotcom and Asian crisis had ensured the bottom was well and truly made
4. Banks were giving away cheap loans to the subprime customer to create MBS

The global cycle turned, and we started probably the most significant wealth creation cycle in human history. From 2003 to 2019, the world trade multiplied several times. The world has been the most peaceful ever in these 15odd years with no major wars or conflicts (other than the Middle East but that too has been contained)

We saw some blips, but the recovery was fast and almost V shape (2008,2012 and a few more here and there).

2019 appears like the end of this cycle –

1. Trade wars are hitting global trade numbers
2. EU is breaking apart without a deal
3. China is facing a debt problem along with an over capacity
4. India is slowing down considerably
5. The next growth theme is missing

Maybe we will have to wait out just like between 1997-2003 before another cycle can start.

However, let us take a moment to see what India achieved in this cycle. There are these stories of how Bangladesh and Vietnam are doing so well, and India is not. It is almost painful to see such news articles. In this cycle, India jumped from $400B to $2.8T country. The kind of investment in infra and tech is mind-boggling. Yes, the problem remains, but it is no time to sell India. It is probably time to accumulate India.

Gold Investing

Gold investing is growing in popularity every day. Why is gold such a hot investment? Why has the price of gold risen so drastically in the last few years? And what is the real reason that so many investors are buying gold in various forms right now? This article attempts to answer those questions and provide a starting point for further research on the topic of gold investing in general.

First, you should understand that many investors do not purchase gold to earn a profit. The traditional buy low and sell high concept holds for many short term gold investors, but this is not the real reason for gold’s popularity today as an investment. This may surprise you and may fly in the face of your understanding of gold investment.

The truth is that gold investing is an excellent hedge against other investments. Gold is heavily connected to currency, particularly the dollar, and provides a hedge against other investments. Traditionally, when the dollar goes down the price of gold increases. When the dollar goes down, it simply takes more of them to buy an ounce of gold, the value of gold hasn’t increased, the dollar has lost value.

The rise and fall in gold prices have less to do with supply and demand than it does with its value in comparison to other assets and currency.

Gold serves as viable protection against the collapse of financial markets and the stability of the paper currency. This collapse can be caused by economic problems like recessions and depression or due to government instability as well as many other factors occurring in various markets. Gold investments also protect against inflation. Just as outlined above, it takes more paper currency to buy products and goods during times of inflation; gold offers a buffer against that.

Possession of physical gold is the best investment in terms of providing a hedge against falling currency values, recession, inflation, and economic turmoil. While a variety of other methods of gold investment exist today including futures contracts, electronic funds, investment in gold mining stocks and others, these are all essentially paper contracts that do not hold the same security and value as a hedge as physical gold possession, and in fact may be as volatile and unpredictable as currency trading is today.

Avoid Banking Stocks – Buy Sectorial Funds Instead

Why you should be careful while buying a bank stock and prefer to buy only sectoral mutual funds.

Yes, I know HDFC is the best stock ever. A perpetual multi-bagger. But check this post.

Banks are a beast. This is one industry that makes money out of money, is highly regulated and yet they break the rules often, and is super complicated. Banks make money by four main ways –
1. Loans
2. Trading of securities
3. Taking deposits
4. Commissions
Almost all the other sources of revenues are some variant of the above.

So why not to buy banking stock?

A lot of people confuse banking stocks with other stocks; PE ratio, customer service quality, management quality, and blah blah. But remember, a bank must be judged only on its balance sheet and never on its income statement. Because reading the balance sheet of a bank is tough, I always ask people not to invest in bank stocks.

Why balance sheet only?

There are several reasons, and the main ones are-
a. Provisions- Bank knows that they won’t get their money back on most of the loans they give away. So they make provisions from their income every year to cover those losses. A bank can “manage provisions “ any year to alter its income statement significantly. This means there can be a huge profit when the bank is F****d

b. HFT- Banks keep Held-For-Trading bonds on their balance sheet. Every time interest rate and inflation moves, the value of this line item changes. Any decrease in this line item will mean the bank will have cut its exposure, and that will significantly affect the bank’s performance

c. Concentration Risk- A bank may be conservative, but its books may be focussed on one particular sector or division. Like HDFC is heavy on retail banking or IDFC on infra sector. This Concentration in exposure is good till the time is good, then the tide turns, the bank is destroyed.

Eventually, ratios like profit ratios, PE, PEG, EBITDA, Margins don’t work. We investors are wired to look for profit and YoY growth. We don’t have understanding or time to analyze the balance sheet plus the terminology is entirely different in banking.

Best is to buy the Banking Index fund or sector fund as a Fund manager will understand these things better. The guru mantra is – If you don’t understand the business, don’t invest in it.

HDFC –

I am very concerned about HDFC. It has continued to rise without a stop in the last 10yrs. It may be the first instance in the world where an FI has not been affected by industry-wise rout, mostly because banks are linked to each other and when one goes down, it takes the other one with it. Betting against history is too big a risk. Either HDFC is a black swan event or iska time bhi aayega!

Don’t ever think that retail banking moves the needle in the banking industry. Very few banks have a retail portfolio that can move the needle. HDFC and ICICI are two major ones. We know what happened to ICICI. The Subprime crisis was a typical case of a bank going overboard on one asset class. Banks were not foolish to give loans to anyone. They gave subprime loans so that they can make Mortgage-Back-Securities (MBS) and sell it off. The expectations were MBS gains will offset defaults in subprime lending. Unfortunately, they ended up multiplying their exposure to MBS without understating the base of the security, so the income statement kept looking wonderful while the balance sheet was destroyed. And then one day the music stopped

Primary Reasons to Investing in Stocks

Stock is the share of ownership of to company. When you buy stocks, you became a co-owner of the company you purchased. Stocks are being bought and sold in a stock exchange or stock market wherein there you will buy and sell shares. You should have a stockbroker prior you can buy or sell stocks in a stock market. There you will enroll an online stock trading account so that you can buy or sell stocks personally.

I encountered the word “stock” six years ago when I worked in a manufacturing firm in the Philippines. It was provided to me by the company because it is one of the privileges of all the workers. The number of stocks disposed to meet depends on the job function. That stock aid is without a doubt a big help for my loved ones and me in terms of our financial demands in those time.

Investing in stock is a good investment you can ever make if you only learn when and how to invest in stocks. You should also have knowledge, discipline, and perseverance in managing your portfolio in order to have an excellent profit from stocks. Remember that you can only lose money in stocks in two actions: when you buy and sell it.

In addition, one good thing about investing in stock is that it will give you higher earnings in the long term than other investment methods available presently. Long term investing in stocks means you will buy shares regularly to selected stocks greater than five years.

In the Philippines, blue chips are those stocks comprised in PSE Composite Index (PSEi). According to on the fac tots from PSE and BSP, the shares invested in blue chips will give you a 14% average annual total return according to on the past behavior of Philippine stock market from January 1989 to August 2009.

Moreover, for the last 20 years, investing in stocks gives you higher average annual total profit compared to Treasury bills (T-Bills) and savings account with 11.0% and 2.3% average annual total returns, respectively.

Therefore, investing in stocks, particularly blue-chip stocks, is the best technique to earn a more significant profit in stocks.

Myths About Investing in the Forex Market

Many people are just plain fearful of investing their hard-earned money in the Forex market. Most of these fears are the result of hearing inaccurate or incomplete information. In other words, prevalent myths about the currency markets keep many people from investing. Don’t fall into this trap. Read on about several myths being dispelled.

You, Will, Get Rich Quick In The Forex Market

Far too many people fall into the trap of thinking they can take their money, invest it into a few prime forex pairs, and then sit back and watch the wealth roll in. While this may happen occasionally, it is the exception to the rule.

Very few people ever build wealth by investing in the forex market. And becoming rich is not necessarily the best reason for trading currency. Instead, considering your investment as a nest egg or retirement funding is a much better way to think about the forex market.

Knowledge Equals Success in the Forex Market

While it is commendable to want to increase your understanding of the forex market, it does not guarantee success. Too many investors feel invincible after taking a workshop and delve into trading currency pairs too quickly. The truth is, being informed of the risks does not reduce them.

Listen to the Forex Experts

It is not hard to find people who claim to be experts in trading on the forex market. It is hard, however, to determine what parts of their advice might work best for your own needs. These “experts” do not know everything, and at times, they can be downright wrong. Know when to follow a good tip and when to step back and listen to your intuition.

A Forex Market “Hobby” Can Make You Successful

Treating your investments as a weekend hobby will never make you wealthy. If it were that easy, more of us would be laughing all the way to the bank. There is no easy way to make a profit through forex market investment; only time and skill will produce real wealth.

Keep these common myths in mind as you begin investing. Don’t expect positive results overnight. Do your homework and take others’ advice with a grain of salt. As long as you are aware of the realities of investing, you need not fear the Forex Market myths.

Exchange Traded Funds

Exchange-Traded Funds allow investors to trade index portfolios just as they do shares of stock. Exchange-Traded Funds can be sold throughout the day, unlike open-ended mutual funds which can be traded only at the end of the day when net asset value is calculated. Moreover, the Exchange Traded Funds can be sold short or purchased on margin.

Exchange-Traded Funds also offer potential tax advantage over mutual funds. The capital gains tax that results when the fund sells securities to meet the redemptions made by investors are passed through to the remaining investors of the mutual fund. In the case of Exchange Traded Funds, investors sell their shares to other investors. Therefore the fund need not sell securities. Hence there will be no capital gains tax incurred by the fund.

Large investors can redeem Exchange Traded Funds for a portfolio of stocks comprising the index or exchange a portfolio of stocks for shares in the corresponding Exchange Traded Funds. This ensures that the price of an Exchange Traded fund will be close to the net asset value of that portfolio. Any significant discrepancy would offer arbitrage opportunities for these large traders, which would quickly eliminate the disparity.

Exchange-Traded Funds are also cheaper than mutual funds. Investors who buy Exchange Traded Funds do so through brokers rather than buying directly from the fund. Therefore, the fund saves the cost of marketing itself directly to small investors. This reduction in expenses results in lower management fees.

There are some disadvantages to Exchange Traded Funds, however.

  1. Because they trade as securities, there is the possibility that their prices can depart by small amounts from net asset value. As noted, this discrepancy cannot be too large without giving rise to arbitrage opportunities for large traders, but even minor differences can easily swamp the cost advantage of Exchange Traded Funds over mutual funds.
  2. While mutual funds can be bought at no expense from no-load funds, Exchange Traded Funds must be purchased from brokers for a fee.

What to Invest In

Australian investors are incredibly fortunate to have a wide variety of options available in terms of investment strategies. However, the questions often arise, what to invest in? Most financial advisors and experts agree that holding a variety of investments is a sage idea. However, in today’s economic climate knowing which investments are sound ideas and which might be best left alone can be confusing. The following article describes several of the best investments ideas in Australia for 2019 through 2020 and the coming years.

Gold

Investments in gold are much safer than other investment options available today. Whether you choose to take physical possession of gold in the form of coins or bullion or you decide to use any of the several online gold purchasing options to trade gold on paper, it is essential to research gold purchasing in-depth before investing. Gold investment can be an excellent method of diversifying your portfolio. Traditionally gold is negatively correlated to stocks and can make a reliable hedge against stocks in your portfolio.

Commodities

By and large, commodities have been one of the best investments of 2019. While the commodity market involves a great deal of volatility, the potential for high returns attracts many investors. In recent years commodities prices have outperformed stocks and bonds. One reason is that the demand for commodities from developing countries is increasing Commodities also move up when stocks go down. Commodities are real assets, unlike stocks and bonds, and they react differently to changing economic conditions. Again adding commodities to your portfolio is a very sound method of diversifying your portfolio.

Mutual Funds

Mutual funds are another excellent investment option in 2019 and 2020. Investing in mutual funds can help you avoid risks associated with direct stock trading. Most mutual fund companies provide the opportunity for investors to invest in companies with substantial capital and earnings in addition to small companies experiencing high returns. Fund managers closely watch global markets and trends and adjust their strategies based on changes in the market. The result is that many mutual find investors realize a steady return on investment as their portfolio

Property Investment

Property and real estate are still considered one of the best investment option in Australia. Both commercials, residential and rental features as well as property situated in popular tourism areas all provide a healthy return on investment for those in the market today. Both capital growth from real estate investment and recurring income from rentals make property investment an attractive proposition to many Australians today and one of the most lucrative asset class investments available today.

While these investments are predicted to provide stable returns in the coming years, they are by no means the only forms of investment that you should consider. Consult with a professional financial or investment adviser to help diversify and build your portfolio and as always steer clear of investment strategies that sound too good to be true.