Sunday, October 26, 2008


The last Friday saw bloodbath on bourses all over the world. The fear of loosing out has brought down the Indian market to pre 2006 level. Naturally investors panicked .It is even difficult for RBI to revive the market. The steps taken by RBI would ensure that liquidity improves and inflation drops. The repo rate cut would ensure financial stability only. According to me RBI might take further steps on Repo rate after sometime to ensure growth of economy.
I was pleasantly surprised to receive a call from a lady executive from Digboi asking which are the shares she can buy with such a fall. It appears lady investor of Assam has matured She bought shares of BHEL, Reliance industries a few days back and wants to buy now more. She also invested only fifty percent of saved money in equity that too in a systematic way. Yes, It is always prudent to keep the investment horizon simple especially for investors of Northeast as they have entered the arena recently. Of course the mutual fund companies also would try to attract investors under various new names and brands. But do not always depend on the brokers. Talk to a financial advisor of your choice with an open heart. He would advice you what to do with the newly launched funds. Try to do your own homework. Study investment MAGAZINES AND BOOKS WORTH THE NAME AND DECIDE YOURSELF WHAT YOU WANT TO DO. People earn money with great efforts .They have the responsibility to protect the hard earned money. If investors do not care for their money no one would manage it well for them. Long back Kautilaya explained that it was not enough just to earn money. It was necessary to save it for future. But still more important was to protect the hard earned wealth. This dictum of protection of past must be followed by every investor at all cost even now. Share market directly or indirectly reflect the state of economy. This is a difficult time. Everyone should think twice before investing. Investors can invest only if he or she can spare money for not less than five years. Indian market would come up only slowly. Unless investors can take calculated risk no investment be made. But keep it in mind that this is one of the best time for investment.

Recently Raja Deka (named changed) wrote to me that he has invested at least in sixteen mutual funds .But lost money in all of them except in two funds . HE WANTED T O KNOW WHAT IS TO BE DONE? He also bought the share of Himachal futuristic and lost enormous amount of money. He wanted to know how he can recover the loss. I was very sorry to study his portfolios. It is almost impossible to retrieve the situation. It was a real bad situation. I however advised him that some of the funds which were subscribed by him were good. H e would be able to get back not only lost money but be able to make a decent profit in due course of time. He needs to be patient. But some of the shares and funds are beyond retrieval. Either he can continue to carry his baggage till a decent up turn take place or he can retire the loss now and enter into large cap shares like L &T, reliance industry or buy nifty index and diversified mutual fund like HSBC Equity, DSPML equity 100 etc.

It is proven beyond doubt that the money management now a days depended on the level financial literacy. Monika Halan, executive editor of Money had made a bold statement in her recent article that financial literacy would soon be the buzz word in India. It was interesting to note that financial product manufacturers, regulators and stock exchanges had identified the lack of financial literacy as a key road block in conversion of savings into investment. This trend is more pronounced in North-East India where people have high small saving money but still unaware as to how it should be converted into asset class of equity. I strongly recommend to all educated persons to read the article in the “last note” of Money Magazine of10thSeptember. ( issue.
I have written on Fixed Maturity Plan sometime before. The Mutual Fund houses now aggressively introduce fixed maturity plan...

Equity linked FMP, in turn, invest primarily in equity linked debentures and securitized debt instrument. These are highly sophisticated yet complex structured product. Our investors are new and need not be exposed to complex product. If they are beaten once at this moment people would shy away from investment horizon itself. That would be unfortunate. They should be helped in choosing simple investment tools, like PPF, Diversified Mutual fund, ELSS, liquid fund, arbitrage fund and bank fixed deposit. Let them mature slowly and graduate to complex product of their own later.

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