Sunday, April 11, 2010

persinal Financial planing& investment in 2010 with special reference of of people of northeast

We welcomed, a month ago, the New Year with great enthusiasm. Let us hope the New Year would usher in, for all of us, peace, prosperity and happiness. We all have desires and goals to achieve in life. We need to earn for our decent livelihood. We also need to save for our children's education & marriage and need finance for building a dream home, to buy a car and plan for retirement. These are attainable goals, if planned from the beginning of career. However, at the mid-age years we may sometime wonder where has all our money vanished? Whether would it be at all possible for us to reach our goals in life? Regardless of our stage in life, income, or wealth, a personal financial plan helps, clarify and prioritize our goals and set objectives for reaching our targets. Actually for a secured, satisfied and purposeful life the meticulous financial planning is a must.
In Indian culture four tenants have been specified for a successful life on the earth for human being... Those are Dhrama, Artha, Kama and ultimately Muksho. For a peaceful and successfully life on earth these four things are most required. Very interestingly among all the important virtues "Artha" has been given an important place. Its place is just after the concept of "Dharma". Now what is "Dharma"? The Dharma is the expression of divinity in the human body and soul. The "Artha" is one of the basic requirements on earth to keep body and the soul together. Yet least importance is given to Artha or "money management” by most people of Northeast India. For a long time the importance of money was never used to be discussed in the family get together, as it was considered indecent to discuss money matters in front of the children by parents. This culture has changed of late and people have become conscious of importance money. Yet full power of money has not been realised as yet.

In fact, money does not have any strong intrinsic value of its own. It acquires value as it is handled by people. If coins are kept stored in a pitcher or in a box or in a locker for a few years it looses value. Once upon a time, during Sixties, people of Assam used to buy ten eggs for a rupee. With the same amount of money today even one egg is not available. If a person saved that one rupee in his box, today it would have become almost valueless. But if he would have saved that one rupee in a bank (earning ten percent interest) the value of that Re One would have become Rs128/- .With that money even in today's market he would been able to buy three dozens of eggs. So it is the human being who would have to be responsible to increase the value of money if he needs to survive even in today's market condition. How the value of money was increased in the instant case? It is the habit of saving and investment that generated the value of money. So in today's life whatever we earn should not be consumed during the month itself. A portion of earned income must be saved. Why? Because people can earn money only for thirty five to forty five years but they may survive up to eighty years of age. To keep their body and soul together they need to save and invest money. In to day’s situation earning money is not easy. But saving and investing money is still more difficult. So we need to make special efforts to save money and train our children to realise the importance of money as soon as they are ten years old.
What is Financial Planning?
Financial Planning is a process that
• Reviews our current financial position
• Sets goals for the future and
• Creates a plan to achieve those goals
To start the financial planning first steps need to be started as soon as career begins. Yet it is never too late to initiate financial planning later.

Let us Review our Finances
o We should begin with a review of our current financial position. Start with a top down approach .we need to find out what are assets and liabilities by adhering to following simple formula:
1. Total assets + Total savings – Total debt = our position
2. Monthly income – Monthly expenses = our cash flow

3. What is our expenditure?
 Where are we spending money?
 Food, fees, gas & electricity, Clothing, entertainment, eating out and travel etc

4. Identify opportunities to save money
 Eating out lesser could save you Rs 1000 per month. Avoiding smoking could save substantial sum. Planning travel expenses can save some money.

Let us set our Goals:
A. Identify our goals
 Buying a new car, buying a house, taking a vacation, educating your children etc after meeting our monthly domestic expenses.
B. Set clear targets and time frames to achieve our goals

 Saving Rs 2000 per month will help educate your children
 Saving Rs 1000 per month will help fund your vacation
We do not have to save and invest in a hurry. Slow and steady wins the race. Let us first draw up a plan as to how to go about.

Now, Draw A Financial Plan:
• Include a mix of short and long term goals
• Convert our goals into rupee amount and set a deadline to achieve them

Diversify our investments according to our risk profile
Look for ways to minimize tax
Don’t forget insurance
Start retirement planning
Get professional advice if required
Since we have drawn up a financial plan after lot of studies let us implement our plan today. Delay in implementation will deny the success.
Sometime let us review our plan:
Life is always changing, so it is important to review our plan if any of the following events occur:
• our circumstances change
 Through marriage, new dependants etc
• our rules change
 Through taxation etc
Investment climate changes
 Through market boom and busts

Tips To Stay On Track
• Stay focused on your lifestyle goals
• Don’t be distracted by fear or greed
• Diversify your investments according to your risk profile
• Keep a long term view
• Review your plan regularly
• Get advise from a professional

We should always try to invest for long term to reap higher benefit. We need not put all the eggs in the same basket. Investment in bank, ppf, debt fund and equity and mutual fund should be taken as per the individual risk profile.

The most investors are planning now as to how to go about investing in the New Year. A few of our readers conveyed us that the year 2009 brought luck to them. They invested wisely when market was down and could gain almost 28 % returns within a period of eleven months. Naturally they were happy and expressed their satisfaction. Actually they gained only for their own boldness and judicious decision making capacity. It was nice to hear that some of our readers could get satisfying returns during the last year. But it must be kept in mind that in short term generally equity market does not provide excellent returns. Perhaps an element of luck also helped our investors, beside their own strength. The 2009 was an unusually good year.( The investment of Rs. one lakh on First January gave a return of Rs 1,78,597 on BSE sensex, Rs. 1,29,953 on Gold, Rs 160,991 on silver, Rs 1,08,243 on Bank fixed deposit, Rs 1,22,027 in Debt oriented hybrid fund and Rs. 1,86,090 on equity Mutual fund, as on 28TH December 2009.) The highest return came from equity, followed by silver and Gold and the lowest was bank fixed deposit.

Everyone expect that in 2010 also such good returns would be available. According to our calculations year to year returns during the New Year may not be as alluring as it was during 2009. The inflation is getting higher every day. Though America and Europe is out of severe recession actually unemployment figures have not gone down. The banks are not giving enough loans as before. Under the circumstance market is expected to remain volatile. Unless FII invest in Indian share market stocks do not move steadily upward. Indian investors remain shy till market makes bold upward movements. There is a strong possibilities that Indian share market may move upward during first few months of the first quarter but as the year marches ahead THE CORRECTION MAY SET IN AND MARKET MAY GO DOWN AT-LEAST BY 20% PERCENT. Mark Faber predicts 30% correction from present high of 17,800 sensex. Everyone is asking now the following question:

What’s in store for us in 2010? The answer is: The recessions stemming from financial crises tend to be severe and are usually followed by relatively anemic economic recoveries. This time will be no exception, with one of the feeblest recoveries -- maybe 6% to 7% growth in GDP in 2010 – there could be a steep decline of market after a few months. But investors should not worry. In last ten years (from year 2000 to First January, 2010) the best return came from equity, (despite big crash of 2008) followed by gold, silver, real estate, debt oriented balance fund and lastly Bank Fixed Deposit. The equity is the king ion the long run .So younger investors should concentrate on equity, Mid aged investors on Balance fund and old investors on SCSS , PPF and bank.

The stock-market rally of 2009 had an artificial feel. It owed more to a sea of liquidity than to an improvement in the nation’s basic economic condition. Shadow of such depressing situation market may behave erratically. What should be done under such circumstances?

Our recommendation would be to stick to old faithful stocks so far as shares market is concerned. If you have to buy stock buy only promising shares of the emerging categories like communication, IT etc and shares of good old industrial products like steel, oils & chemical, banking and medicine. Investor could also rely more on ULIP and diversified Mutual Fund. During the year thematic funds should be avoided. It is a fact that all the investment should not be kept in single basket of equity only. For creation of wealth different asset class should be subscribed. What is the other asset class that could be relied upon? During past ten years only one asset class had surpassed the equity market- I.e. “ART “segment. But to buy art work investor must be knowledgeable. Art of Hussein or Ganesh Pain and Bikash Bhattachajee are real asset but those are very costly for common investors. The art work of new artists is available at reasonable cost. The silver, Gold and land are other two asset Classes that could be relied upon provided it can be kept protected. Gold ETF are easy to handle but realty sector have not inspired confidence. So the best bet for 2010 would be the Diversified equity and PPF for young investor and for senior citizen it could be balanced funds and SCSS. During the year of 2010 the market is sure to correct. That would be time to enter the market who can organize lump sum amount. My recommendation would be to take the route of SIP or STP from now onward for a period of two years. .If money could be kept invested atleast for four years from now there is a strong possibility of a high return by 2012. Making money is not easy. Many people broke down when their hard earned money, invested for children, became half almost, in 2008, but those persons reaped greatest benefit who kept the money invested throughout 2008 and 2009 and did not redeem despite great psychological pressure from family and friends.

The greatest virtue for the investors of 2010 would be Caution, Patience and Boldness. None need to invest who are weak heart. The year of 2010 would be going to be a landmark year for it would provide the base for a successful earning in 2012-2015. Investor should fix their vision judiciously, keeping in their earning capacity in mind, and wait for the opportunity to invest when opportunity knocks at the market door in 2010.
The investment and saving is not the only thing people need to take care. From time to time they need to take care of the security of their family through insurance. Take care of their old parents; protect their assets built up with their hard earned money .Ensure health care facility for self and for old parent. Every stages of life have specific responsibilities to be carried out. There are five stages of life for human being. Single, Married, Married with children, pre retirement and post retirement. Investment should be done in first three stages. During the fourth stage consolidation of assets should be done and in the fifth stage they need to relax, devote time in intellectual pursuit, and take care of health through walking, exercise, travel and social service for enjoyment of life. As a thumb rule investment should be done in the formula of “100 -Age = equity”, balance amount in Debt. After reaching Seventy five years no more investment should be done in equity. At that time we need to draw up our will and keep all the money in Bank. Always married couple should have bank account in both the persons name as a measure of security. We would be always happy, satisfied and secure sooner we make our financial plan in life.


We have received lots of mail from our readers asking us whether they can start investing now. This question has been raised for the simple reason that in our earlier article on investment it was recommended to hold on to the money in hand to enable them to invest after correction. The correction, as expected, has set in. By now the market has corrected around 17% from the high of January. It is possible some more correction may follow in due course of time. But investors can put their money from now onward provided they follow the systematic investment route. To be frank enough genuine investors should not try to time the market and should stick to long term investing. What is the meaning of long term? The investment horizon should be for a period of five years. Due to higher volatility of share market some time adequate returns are not delivered in short term, most of the time. Only rarely high returns are delivered in one years time. Last year(2009) was an exceptional year when market delivered a very high return within a year(almost 83%). This was unusual. Now the question arises what should investors of Northeast do?

The investors of Northeast are generally new investors. It would be prudent for them to be cautious. We have advised number of times that no equity investment should be made for short term .It would be prudent for investor with low risk appetite to keep away from the market. They can keep investment in Bank FD or at best in Short term Debt fund. Investors with moderate risk appetite should invest in MIP and Balanced fund for a period of five years. Only persons who can withstand volatility in the market should subscribe to Shares of the stock market or subscribe to diversified Mutual fund of four and five star rating by Value research.

I must admit that investors of today are lucky that the provision of Systematic investment plans have been introduced by most of the Fund houses. When in 1998 Templeton introduced SIP system most of the people took it to be a market gimmick.. But it proved to be a great plan. The return of investment in SIP for the same of money for the same period is much higher than lump sum investment for the same amount for the same period .For middle class and lower middle class it is always difficult to make Lump Sum payment. They can save slowly and steadily while they keep earning every month. Earlier
Systematic investment could be carried out annually , six monthly or weekly. But of late a few fund houses have introduced Daily “SIP” provision. This would be greatly beneficial to daily wage earners and for self employed people like Doctors , Advocate, Shop keepers who receive fees daily from their clients, but do not know how to account it for.

Many investors of northeast has kept themselves away from the share market for higher chances of losses. They kept money in Bank FD which hardly earns them anything. ultimately low return and higher inflation of food product make them frustrated. I would like to recommend highly now for such persons to invest in Diversified mutual on a daily SIP plan. This plan was not available earlier. In such plan it would be difficult to loose money if kept on investing for a period of four to five years .Rather it would provide an avenue for excellent return. Srikumar Bandyopadhyay, an investment analyst, calculated and showed that systematic monthly investment in reliance vision fund gave 32.44% return while lump sum amount gave annualized return of 26.14% compared to BSE Sensex’s benchmark return of 13.40% for a period of 10 years. Daily SIP plan is a recent phenomenon and at present ING, BharatiAXA, IDFC and Sahara have come up with Daily SIP. The Daily SIP is a better option compared to weekly and mothly option. The share market is known for its volatility but nobody knows on which days market would fall or rise. In daily SIP the investor would gain everyday when market fall because it would buy shares Cheaper. It would gain when ultimately market goes up.It should be clearly understood that share market do not remain static . It travels up and down.depend on the sentiment of the economy .The daily SIP is the only method when investors gain both the ways provided keep invested for longer time.

One of the expert mentioned that while investing Rs1000/- per day ,through daily SIP, from First January 2010 till Fourth February 2010 an investor gained Rs21,853 whereas the lump sum investment mode could have provided a return of Rs21,252 only. This difference would be stupendous over a period of Five to ten years. Not too many fund houses are offering daily SIP. But it can be organized by on line purchase daily by investors without any extra charge

My advice to our young investors would be to go ahead and invest through Daily
SIP. House wives would be able to take care of investment daily by saving some expenses of family. It is most ideal for Doctors and Advocate to park their daily income from their clients and get great return without any income tax.



After a period of long silence it is not only Government of India, but Pan Indian industrialists are having a re-look at the state of Assam. It is a courtship after a long spell. Last time industrialist came to the state, from out side Assam, and did set up industries was during 1960 ,during the regime of Kamakhya Prasad Tripathy, then Industries Minister of Assam. Slowly some of the industrial enterprises like Assam Hardboard, Associated industries, spinning Mills near Tezpur and some plywood plants closed down its shutters .A few survived like Steel Worth , India Carbon and Assam carbon who made the state their head quarters. Why industrialists stopped coming to Assam despite its great natural, mineral and weaving potential? Is it due to transport bottleneck or lack of indigenous entrepreneurial skills, financial shyness or lack of Political will? Perhaps all of those contributed to keep the state of Assam Industrially backward.
In 1947, just before the Indian independence, Assam was one of the most industrially developed states of the country. It contributed handsomely to the economic growth of the country. There was no debate on this fact. But as the time passed by Assam became one of the most laggard state in the country .Even Agriculture sector have become so bad that its negative growth have pulled down the total economic growth figure of the state. Successive Government tried to develop the state industrially but failed. Why? Is this connectivity from the mainland? Or Weak political thrust, Non availability of rich indigenous businessmen, Lack of business culture must have contributed to the poor growth. The state also suffered in earlier years, despite returning maximum number of MPS, from the state belonging to party in power in the center, for poor vocabulary of the representatives in Hindi and English and lack of dashing political personalities.Even during the regime of MoniulHoque Chaowdhury, (as Union Industries Minister), D.K. Barooah(as Union Petroleum Minister) and F. A. Ahmed ( as union Minister) could not really provide big boost for industrial development, of the state.

The picture is changing now with new breed of political personality who are suave, intelligent, and capable of calling spade and spade and having excellent communication skill. The recent meeting of the investment advisory board is the pointer to such a change. For the first time in the industrial history of Assam so May Industrial leaders of the country not only assembled in the state but signed MOUs and set up foundation stone. The top industrialist Ratan Tata felt the changes in the Assam’s horizon. He not only saw the potential but sniffed the fresh air of changing industrial climate. The state government, especially the Ministry of State industry must have done a very hard home work to organize such a meet. It deserve accolades from the people of Assam . I am sure the setting up of Five star facility would not only provide a place of stay from business people like Naraynamurthi and his team but to tourist from abroad.. The setting up of this facility would ensure visit of tourist from Italy , France and Japan who accept TAJ ‘s hospitality . The setting of Taj”s five start facility should not be considered merely as a Hotel businessmen.. But it would perhaps be a nucleus for development of tourism. (Even TCS could come over after sometime to set up their research centre next to IIT, Guwahati. The entire north Guwahati belt could be dedicated to knowledge city and research centres.) The tourist Group, sponsored through TAJ channel, generally visit Jaipur, Agra and Delhi , known as Golden triangle of North India . Now this triangle would form an alliance with North Eastern triangle with Guwahati, Kaziranga and Tawang. as the destinations. The visit of Mazuli’s Heritage site by foreign tourists Groups are in card. With Tatas showing interest in the state other industrial houses would sure to follow the path.. It is a proven fact that one third of IT specialists of Bangalore, are from NorthEast .With 30% capital subsidy and great tax holidays for five years were attracting industrialist to have look at the state of Assam. What they wanted was a Leader. For the first time the leadership has been provided for. Now there is a hope in the air.
The industries that played a major role to earn the state’s revenue are tea processing and petroleum refineries. The industrial development in Assam is mainly repressed by the state’s physical and political isolation. Assam is a landlocked state in the eastern periphery of India . It has connected to the mainland by narrow corridor, which is prone to floods and cyclones. Moreover, poor transportation infrastructure is another reason for its curtailment. Since Assam is a major producer of crude oil and natural gas in India , several oilfields are found in its upper region. But real revenues would now come from Tourism, IT sectors and engineering if Mahendra’s could be persuaded to set up an automobile CKD assembly plant for their vehicle including Boleros and Scorpios now which have a great market in northeast and across the border in Burma, Thailand and Bangladesh. Keshub Mahadra, the grand old man of Mahindra family had a vision to setup an automobile assembly unit in Assam long back. It was pushed back due to uncertainties during yester years. With Ananda Mahindra’s dynamism now this vision of his father may get revived, as I understood from the industries Minister of the state when I visited him during last week.

It is matter great satisfaction that Bang, chairman of Hindusthan Lever, which has a cosmetics plant (HLL) at Doom Doomdooma, reassured expansion of activities here. Sadly numerous industries are confronting loss because of poor infrastructure and arrogant and indiscipline labour force in a few industrial enterprise of the state.. It is not only the government but Assam Media have also a great role to play in ushering in industrial harmony and productivity. It is a matter of concern that despite grave unemployment situation in the state there are vast pool of unemployable persons. These segment need to be trained up. The petrochemical industries would be a great success provided the indigenous manpower is trained up now immediately so that as the project get completed these human resources get trained and employable. During my recent visit to Assam one of the established industrialist told me that he had set up a plant in Margherita but found that employable workmen are in short supply. The local Mafias are trying to push Child labour who are school drop out. Unless these problems are addressed the industrial development would remain a dream.