I came across an article that was interesting. While the tone is a bit aggressive, it’s worthwhile to read this ……..
See Eco times article on LINK
Category: Investment Education
An Investor’s Checklist
I came across a Post in one of my Investor Groups: Unfaithful Banks and the Importance of Financial Literacy:
Large Bank loots Celebrity after big promises of 24% returns – See LINK
Now I’m not sure about this particular incident, but I have certainly come across a number of cases of Investors who have lost money after investing funds with well known brokers or banks.
I’d like to dedicate this post to this issue.
Many Investors have a fear or complex about finance and investments. Yet realize that their savings need to put aside carefully.
The larger the brand in financial services, the greater the trust people have in it. However many times this trust is usurped by these famous firms, and the savings are lost.
All investors need to realize that they themselves alone need to monitor their investments.
Investors Checklist
This simple 5 point set of questions should be asked by any customer before buying any investment product from a firm:
- Asset: Where is my money going to be invested – (like Equity, Debt, Govt securities, bonds, etc.) and in what proportion? Will the Firm switch Assets? And what are the returns I can expect?
- Timeline: What timeline is this investment for? When can I exit from this investment? Will there be a loss for me if I need the money and exit earlier? How much?
- Involvement: When are the funds going to be invested – Immediately; At Investment manager’s discretion; or with My permission? (Ask for your permission rather than handing over this decision to the firm)
- Transparency: When will the Firm be reporting to me on the performance of the Investment? Can I see it anytime?
- Risks: Every Asset class has a standard market risk attached to it. To sell you investment products, Firms underplay Risks at the time of purchase, and perhaps overplay them later, to justify losses :-). Ask the Seller (and find out independently) the Fair market Risks at the time of purchase. Do not invest unless you are comfortable with the Risks.
And for the investor:
- At the time of purchase, as a responsible investor you need to record the above answers. You should negotiate wherever possible for better transparency, reporting and involvement in the decision process, even if you do not know much about the asset. After all it is your money.
- The investor needs to set up a personal schedule to review the investments (perhaps monthly like your bank account) to see the performance.
The above generalized checklist is good for almost any investment, like FDs, insurance, PMS, Mutual Fund, ETF, Real Estate, etc.
Good Luck and Profitable Investing …..
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Disclaimer:
These reports and documents have been prepared by JainMatrix Investments Ltd. They are not to be copied, reused or made available to others without prior permission of JainMatrix Investments. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com
India’s Investment Rockstars
Poll Results on 22nd March
Thank you readers for your enthusiastic participation in this Poll.
The Winner of the Poll on India’s Investment Rockstars is – Madhusudan Kela.
Here is a graphic of the candidates – with one additional name from Reader suggestions.
India’s Investment Rockstars – Poll Results (Click to enlarge image)
Poll Article on March 7
I recently saw the Hindi movie, Rockstar. Its an interesting story of an unknown, young but talented singer. He dreams big, wants to become like the famous singing heros of the past. He does eventually :-), but the journey is interesting, including pain, penury and a rocky love life along the way.
A singing Rockstar is a somewhat new concept in India. Maybe A R Rehman and Remo Fernandes are two who are almost there. In the US there is a developed musical touring culture, and many budding artistes develop into very successful Rockstars.
What does this have to do with Investing, you may ask. Give me a few more minutes…..
What does a Rockstar do for listeners? He performs on stage, providing spectators an emotional connect and excitement. This effect even lasts after the live performance, on replaying the music.
Actor Rockstars: In India we do have a few Actor Rockstars, with Shah Rukh Khan, Hrithik Roshan, Aamir Khan and Katrina Kaif coming to mind.
They play roles on screen that entertain and amuse; they dance, sing and depict characters and actions that we like. If the movie has a strong message, then it can even inspire us, like Gandhi or maybe even a Rang De Basanti.
Do we have any Investment Rockstars in India?
Who is an Investment Rockstar? I would say he is one who is very good at investment, and has made many successful decisions. He should be a visible, high profile, believable expert. Importantly, he has to have shared his investment decisions with the public, so they have gained from his expertise. His advice should help viewers make decisions that guide them in their lifelong wealth building process.
Poll on Investment Rockstars
Please take part in this Poll on who would you rate as Investment Rockstars in India. This list can include foreigners, if they have invested / commented on Indian firms. You can choose upto 10 from this list, and also add some names. In alphabetical order here are 12 candidates (apologies for missing anyone :-)).
This Poll is open till 15/03. Please fill this only once. Check back on this website www.jainmatrix.com for results.
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Disclaimer:
These reports and documents have been prepared by JainMatrix Investments. They are not to be copied, reused or made available to others without prior permission of JainMatrix Investments. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com
For Long term investments start a direct market SIP
This article has been updated. Click on this link to see the latest version.
March 2016 – A Superior Investing Process – Do a DIP SIP
Jan 2011
- The market indices have fallen, and it seems like a good time to invest?
- But you’re not sure what to invest in? Should you choose just one or two stocks with good prospects, and invest a large sum?
- Or should you just choose a Mutual Fund, and invest in a lump sum, or even a SIP?
I have another idea for you. Invest in a direct market SIP !!
By this I mean, use your current Online Trading & Demat account to buy 5-6 shares yourself in a systematic manner every month.
Comparisons of direct market SIP with a Mutual Fund:
- Only initial charges of 0.5 to 0.75% which are the brokerage commissions + taxes, compared to 2.5% per annum, which are the normal Mutual Fund charges. This really adds up over the years.
- A quick look at equity MFs performance over 3 years (from Value Research) shows that only 15/57 MFs outperformed the Nifty’s 5% gains over the last 3 years.
- Instead of a decision on which MF, you have to only make an initial decision on the bunch of 5-6 stocks. I will help you through this also :-)
- Utilize your online trading account better, and gain control over your investments !!
Comparison of direct market SIP with a lump sum in 1-2 direct stocks:
- The market indices can fall further. A systematic investment every month will help you gain more from falls in the market
- Do not try to time the market. Instead by investing systematically, you can beat the Sensex in terms of returns !!
- Just one or two stocks for investing heavily – this may be too concentrated a portfolio. Even the largest and most stable stocks (think Reliance or DLF) can be victims of pockets of non performance, or worse, large unpredictable swings.
Comparison of direct market SIP and Brokerage Equity SIP:
- Several brokerages – ICICI direct and ShareKhan for sure – have introduced Equity SIP facility for customers.
- They can specify the stocks and purchase monthly of a specified Value (of portfolio) or specified quantity (of shares)
- Initial and recurring charges are identical
- There have been doubts expressed about the brokerage’s transaction – Bad Trade Execution/ buying into morning spike, etc. as expressed in this article – http://shabbir.in/why-no-stock-sip/
- My feel is a Do-It-Yourself approach removes these doubts and gives some satisfaction (while taking just 10 minutes a month).
- See fig 1 for a tabular comparison of above options
Fig 1 – Comparison of SIP purchase options (click image to enlarge)
Checklist for a direct market SIP:
- You will use your current Online Trading account/ broker relationship for this SIP. If you have to choose among your options, choose the one with lower brokerage. Could be ICICI securities, or Kotak securities, or whatever.
- Decide on the 5-6 stocks you will invest in. My help here – see next section – Choose your stocks.
- Decide on the amount you will invest every month – here I would suggest you fix an amount such as Rs 10,000 or 20,000 and keep up this amount every month.
- Create a small calculation excel for helping you decide the actual number of shares to be bought. See section – Here’s an example.
- Decide on a date for investing. If you are salaried, perhaps 2nd or 3rd every month is a good date as it is right after you have received your salary. Or any other convenient date. Keep a self reminder for this date.
Choose your stocks
This is an important first step. My key principles in choosing the stocks are:
- Choose large liquid blue chips. They should be Nifty/ Sensex stocks. You do not want too much volatility in your mutual fund.
- The 5-6 stocks should be from different sectors. Bad news in one stock / sector should not affect the other.
- These stocks should be solid businesses that are going strong even 10-15 years from now, as your SIP and asset building is for long term
My recommended stocks – choose only one per sector:
- Banking – HDFC Bank or SBI
- Automobiles – Tata Motors or Bajaj Auto
- Capital Goods & Engineering – L&T
- Information Technology – TCS or HCL Technologies
- Oil & Gas – ONGC or Petronet LNG
- Telecom – Bharti Airtel
- FMCG/ Food – Hindustan Lever or ITC
Returns from this approach.
- Lets say you chose 5 stocks for your SIP – HDFC Bank, Infosys, L&T, ONGC and Bharti Airtel.
- If you invested in these five on a monthly basis over the last 30 months, following above approach, you will get returns per fig 2
Figure 2 – Comparison of SIP Portfolio with Sensex
Here’s an example
- Choose your MF portfolio from above recommended stocks
- Next you have chosen Rs. 20,000 per month for your SIP.
- Create a small excel – which can help you calculate the number of shares to be bought every month. See fig 3. This will help do this easily in a few minutes
Fig 3 – Tool for SIP purchase
- Decide the date of the month you want to invest every month – say 2nd. Very important – stick to your monthly investing routine as far as possible.
- There you go – you are all ready.
- Happy Investing :-)
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