Investing in Indian Stock Markets - Is India headed into a recession? - The 5 Minute Wrapup - Equitymaster.com

Investing in Indian Stock Markets - Is India headed into a recession? - The 5 Minute Wrapup - Equitymaster.com

Markets

A bull market in equities has never been smooth. It is always marked by many corrections, all of which provide investors opportunities to buy into stocks. Especially those that they missed out on the previous rally. And this same logic applies to gold as well. The status of the US dollar and the paper currencies in general has increasingly been questioned in the wake of dubious monetary policies by governments of the developed world. Against this backdrop, gold will continue to evince considerable interest. Hence, the fundamentals supporting the rally in gold look strong. And a correction in this yellow metal should be looked upon by investors as an opportunity to lap up more of this precious metal. Do you think that the gold rally is showing signs of slowing down?

"A business or stock is not an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling. Unfortunately, Bertrand Russell's observation about life in general applies with unusual force in the financial world: 'Most men would rather die than think. Many do." - Warren Buffett.
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Value Investing

India, China both boast of huge populations, running into billions. Despite the favorable demographics, the question is whether the working population is actually talented? Well, as today's chart of the day shows, the BRIC nations feature very dismally in the Economist Intelligence Unit's Global Talent Index. China and India are ranked no. 33 and no. 35 respectively. No other nation in the world is growing as quickly as these two countries. Multinational companies looking to set up shop are frantically looking for talent. But, an adequate pipeline of employees equipped to step into the breach is just not available. The US on the other hand takes the no. 1 spot on account of its top universities. One in three colleges, in the US is ranked in the top 500 globally. These colleges churn out graduates who are well prepared to take on the world.
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Compensation Concept

CONCEPT OF FAIR WAGES:

Fair wages is the wage which is above the minimum wage but below the living wage. Obviously the lower limit of the fair wage is the minimum wage and the upper limit is set by the ability of the industry to pay. Between these two limits, fair wages should depend on the factors like –

1.    Prevailing rates of wages in the same occupation

2.    Prevailing rates of wages in the same region or neighbouring areas

3.    Employers ability to pay

4.    Level of national income and its distribution

5.    Productivity of labour

6.    Status enjoyed by the industry in the economy

               Hence it can be said that fair wages are determined on industry cum region basis.  When fair wages are paid employees enjoy higher standard of living. It is accepted fact that wages must be fair and reasonable. Wages is fair when the employee is able to meet its essential needs and enjoy reasonable standard of living.  ”Equal pay for equal work” serves as base of fair wage.

                According to Encyclopaedia of social science,”Fair wages are equal to those received by the workers performing work of equal skill, difficulty or unpleasantness.”

How to manage Risk

While one cannot completely avoid market risks, one can take a number of steps to manage and minimize them.

• Diversify:

As in the case of business risks, market risks can be mitigated to a certain extent by diversification - not just at the product or sector level, but also in terms of region (domestic and foreign) and length of holdings (short- and long-term). One can spread his international risk by diversifying his investment over several different countries or regions.

• Research:

Learn about the forces that can impact your investment. Stay abreast of global economic trends and developments. If you are considering investing in a particular sector, for example, aerospace, read about the future of the aerospace industry. If you are thinking about investing in foreign securities, learn as much as you can about the market history and volatility, socio-political stability, trading practices, market and regulatory structure, arbitration and mediation forums, restrictions on international investing and repatriation of investment.

Learn more about the various types of investments options available to you and their risk levels. Inflation risk can be managed by holding products that provide purchasing power protection, such as inflation-linked bonds. 

HOW DOES ASSET ALLOCATION WORK

Asset allocation planning can range from the relatively simple to the complex. It can range from generic recommendations that have no relevance to your specific needs (dangerous) to recommendations based on sophisticated computer techniques (very reliable although far from perfect). Between these extremes, it can include recommendations based only on your time horizon (still risky) or on your time horizon adjusted for your risk tolerance (less risky) or any combination of factors.

Computerized asset allocations are based on a questionnaire you fill out. Your answers provide the information the computer needs to become familiar with your unique circumstances. From the questionnaire will be determined:

• Your investment time horizon (mainly, your age and retirement objectives).
• Your risk threshold (how much of your capital you are willing to lose during a given time frame), and
• Your financial situation (your wealth, income, expenses, tax bracket, liquidity needs, etc.).
• Your goals (the financial goals you and your family want to achieve).

The goal of the computer analysis is to determine the best blend of asset classes, in the right percentages, that will match your particular financial profile.

At this point, the "efficient frontier" concept comes into play. It may sound complex, but it is a key to investment success.

Alternative way for Retirement Planning....

Reverse mortgage is proving to be a boon for senior citizens who are finally able to leverage the power of their property, 

At 80, retired Professional Vipul Trivedi had no other option but to survive on the Rs4600 pension that he received every month. Single, having never married, his only asset was the 2-bhk flat in the western suburb of Malad in Mumbai.

“Groceries, bills, maids, festivals and birthdays of relatives; at the end of the month I am left with nothing,” he says. Trivedi, however, has seen a new option emerge in the last few months — one that revolves around his 550 sq ft flat but doesn’t involve selling it.

Banks call it reverse mortgage and it was Finance Minister P Chidambaram’s brainchild. Reverse mortgage is aimed at senior citizens like Trivedi, who don’t want to exercise the option of an outright sale but still want to encash the value their properties have acquired over the years. “I have made enquires with the Punjab 

National Bank (PNB) for the scheme. As per my calculations I should get about Rs 11000 every month from the scheme. Then I could even save some money,” says Trivedi, whose flat has been valued at Rs 50 Lakhs.

What exactly is reverse mortgage and how is it different from a mortgage? S Sridhar, chairman and managing director of National Housing Bank (NHB), explains it thus:

“Reverse Mortgage Loan (RML) seeks to enable house owning senior citizens, who are above 60 years, to meet their financial needs without selling their property. The reverse mortgage is so named because the payment stream is “reversed” i.e. instead of the borrower making monthly payments to a lender (as in a conventional mortgage), a lender makes payments to the borrower.”

Currently offered by only Dewan Housing Finance Ltd, a housing finance company, and Punjab National Bank, the main aim behind launching reverse mortgage in India was the need to financially empower the 76,622,321 senior citizens of the country, who as per the 2001 census would form more than 10 per cent of India’s population by 2016.