Art Investment in India for Dummies

Do you know that Art is the asset class? Owning an art is just like owning other assets like stocks, bonds, gold, Mutual funds, businesses, intellectual properties, web properties …etc..?

Well, yes. Art is not just the hobby anymore but it’s now the asset class in which investors invest for the huge capital gains. The Indian Art gives the 20-40% compounded annual return in the long run.

Indian art market is still in the nascent stage. In year 2004 it was just Rs.50 Crore market but today it is hundreds of crores of market. Here are the two possible ways by which you can invest in the Indian Art.

01) Direct Art Investment -

Here you buy an art from your money. You can buy a piece of art from eBay online or you can simply buy it from the art gallery or from the auction houses. Almost all the metro cities of India have several art galleries from which you can buy the art of your choice for the investment purpose. However, the main limitation of direct art investing is that, you MUST be expert in analyzing and valuing the art otherwise you will end up overpaying the art.

Most of the people have little to no knowledge about the art and that’s why they overpay for the art. And unfortunately, there are lots of scams in this market because the Indian art market is highly unregulated. So if you are an art expert than and only invest in art directly.

However, you can anytime hire some art expert or even an artist for helping you to take informed decision to buy the quality art at fair valuation.

02) Art Funds -

Art funds in India is the new concept. They are just like the traditional mutual funds. The only difference is that, here the underlying asset is an art. The fund manager of your art fund will invest your money on behalf of you to build the art portfolio and after 5 years or on maturity, your art fund will sell its art folio via auctions or directly to the other investors and distribute the profits among the investors.

This is the most convenient way to invest in the Indian art. Following 4 are the good art funds in India.

01) Copal Art

02) Edelweiss Securities

03) Crayon Capital

04) Osian’s Connoisseurs Art - (Also Read from Forbes India: Osian’s Art Fund – The Broken Paddle)

The only problem with the art funds is that, they have higher minimum investment amount. If you want to invest in any of the above art funds than the minimum entry price is Rs.10-15 lakhs. So this is a little bit costly for the average investors.

The another problem with art funds is that, we don’t have any proper valuation method for the art and that’s why sometimes the fund manager of your art fund may end up buying art at over priced value (However, these art fund managers are expert so chances of doing this are very less).

Another great problem with art funds is liquidity issue. You can not redeem your investments before its maturity and on maturity also, suppose if art fund fails to sell its portfolio, you will incur a loss.

Another great problem with art funds is – their NAV. I mean the Indian art market is so small that and we don’t have any worldwide acceptable valuation method for the art so what happens is – it’s next to impossible to determine the exact price of NAV of any art fund. Suppose if the NAV of some Art fund is Rs.135 per unit than what is the basis for this NAV? The art fund managers do valuations of their art on their own assumptions and past sales in the same segment of the art. And that’s why this method of calculating art funds NAV is not very accurate.

Thus, Indian art is a great asset class. But the only problem is that, you will need the expertise to invest in art funds as well as we need the proper valuation system for doing valuation of the art.

Pros and Cons of Art Funds

Art funds are the new investment vehicles in India. And since 2004, few Indian firms have launched their own art funds. Art has emerged as a new asset class. And that’s why it is very important to understand the pros and cons of this new asset class.

First of all, Read the Basics of Art Funds in India: Art Funds in India Review

Advantages (Pros) of Investing in Art Funds -

- The main advantage of investing in Art is – Diversification of your wealth. If you have already diversified your wealth among the traditional asset classes such as stocks, bonds, gold and real estate than it’s time to go for Art Investments.

- The Indian Art market has given 30-40% compounded annual returns in the past.

- Art funds provide you a professional management of your money. Your money is being invested by the professional art managers and thus, you can get maximum returns on your investments.

- Even if you don’t have expertise to invest in art, you can invest in art via art funds just like stock mutual funds.

Disadvantages (Cons) of Investing in Art Funds -

- The main limitation of investing in art is – The lack of proper valuation system for the art.

- Another disadvantage is small sized Indian art market.

- The art market in India is highly un regulated and lack of SEBI regulations.

- According to Forbes India, Osian’s Art fund of India is the biggest flop show because of several reasons. One reason was that, the fund manager of this fund Tuli has bought the art which was he thought that will be valuable in the future. But that day never come. This is the main limitation of investing in Art. Because of the lack of proper valuation methods, it is really unpredictable to do proper valuation of the art.

My Opinion -

In my opinion, you should only go for Art funds if your over all portfolio net worth is well above Rs.1 crore and you should never invest more than 10% of your total portfolio net worth in the art. Just follow this simple rule before investing in any art fund.

Remember that, Businesses (Stocks) are always more predictable in valuations than the art. So always give first priority to the equity.

Is Art Really a Good Investment?: Why You Must Invest in Art?

If I ask you that, Have you invested in Art? Than you may be surprised by my this question. This is because many of you may ask me that, How art is an Investment?

Well, Art is an asset class. It’s just like any other asset class in the world such as stocks, bonds, gold, real estate, mutual funds, businesses, web properties, intellectual properties…etc..

Owning an art means owning a valuable asset. And when you buy an art, you are not only buying it for your hobby purpose but actually you are investing your money in this valuable asset class.

You may not believe but the truth is that, Art can give you 30-40% Compounded annual return in the long run which is much more than the stock market and gold returns.

Which Art Funds available in India?

Read my Article, Art Funds in India review and you will get all the answers of your questions.

Following are the 4 best art funds of India

01) Copal Art

02) Edelweiss Securities

03) Crayon Capital

04) Osian’s Connoisseurs Art

The minimum investment amount in each art fund is around Rs.10-15 lakhs. What I advise investors is, you can invest 5-10% of your total portfolio in art.

But of course,for that your entire portfolio should be more than Rs.1 crore than and only you can enjoy investing in Art. In my opinion, if your overall portfolio net worth is not well above Rs.1 crore than don’t invest in art.

Art Funds in India Review

Art is the ancient asset class of India and rich people used to invest in Indian art since centuries. But well, Art funds is the entirely new concept in India.

What are the Art Funds and how they generate returns?

Well, Art funds are exactly same like the traditional mutual funds. But the only difference is that, here the underlying asset is Art rather than stocks, bonds and gold.

The art fund collects money from Investors and the fund manager of the art fund is expert in the valuations and analyzing the art. And they invest your money to buy art at very low price on behalf of you. The Art funds build and maintain an art portfolio for you and keep that portfolio for 5 years and later on sell that portfolio for huge capital gains and distributes this profit among the investors.

The funds sell units like any other mutual funds and can be bought with transactions which are the same as the transactions for stocks and shares. On buying, the units get listed as part of your portfolio and on selling them your account is debited of these units. However, some of these funds have a lock-in period during which you cannot trade the units. The net asset values (NAVs) of these funds can be monitored on any NSE terminal in India.

Advantages of the Art Funds

The main trouble in investing art is – lack of proper valuation methods of this asset class. For someone, one art may be worth of Rs.5 lakhs while for the other it may be just worth of Rs.10,000. And that’s why it requires a high level of expertise to choose an art to invest in.

Art funds have their own experts who are expert in buying valuable art at lower price.

Which are the Art Funds in India?

Following institutes of India have launched their own art funds.

01) Copal Art

02) Edelweiss Securities

03) Crayon Capital

04) Osian’s Connoisseurs Art

The above are the most successful art funds of India.

Most of these funds have attracted investments in the range of 2.5 billion USD. Examples of successful art funds in US which invested in Indian Art are the ones launched by Arts India, which have attracted investments ranging from USD 9.5 Million to USD 15 million, respectively.

What is the Unit price for Art Funds?

Consider the example of the “contemporary scheme 1” of the art fund launched by Osian’s Connoisseurs of Art in June, 2006. One unit of the fund was priced at USD 2.5 and the minimum investment limit was pegged at USD 24,400. The funds attracted investment worth USD 3 billion, which was utilized to buy art created by 112 artists. The list included names, such as Akbar Padamsee, V.S. Gaitonde, F.N. Souza, M.F. Hussain, Bikash Bhattacharjee, Tyeb Mehta, and Ramkumar amongst others.

What is the Minimum amount of Investment in Art?

It’s roughly between Rs.10-15 lakhs which is really attractive entry price to invest in Art funds.

Best Money Tips for NRIs

Are you NRI? And at the end of each month, do you you run out of money? Well, Than this article is for you. These are the tips on money by which you can track and manage your money well and in the end of the month or a year, send it to India.

1. Budgeting -

I know that Budgeting is a boring exercise but well, successful governments, businesses and households do this exercise regularly to stay rich and financially stable.

Take a paper and pencil and write down all of your possible monthly expenses. Each dollar you earn outside India should have a track record. Cut down your un necessary expenses.

2. Save Minimum 15-20% of your Monthly Income -

I know that in developed countries like USA, it is extremely difficult to do. But well, this is the only way to become financially free in the long run. If you can’t save and invest your money today than you can not be financially free in the future.

Many people argue that, but it’s not possible to save any money. Because at the end of month nothing left for the savings. Well, what you can do is, Start SIP in some good equity diversified mutual fund and every month when you receive a paycheck, make the arrangement that, some amount of money gets deducted from your bank account even before it reaches in your hand.

Initially you will find it very difficult to live on. But after 6 months, you will be adopted to do this. And Believe me, after few years, when you will see your wealth growing in your mutual funds, you will be motivated to save more.

3. Emergency Funds -

Always build the Emergency Fund before start investing. Emergency fund should be 3-6 months of monthly expenses. Emergency fund is for emergency purposes such as job loss, medical emergencies…etc.. The Emergency fund will protect your long term investments from getting liquidating in case of emergencies.

4. Cut Down your Credit Cards and replace them with Debit cards -

The commonest problem with developed countries is Credit system. The western countries of the world believe in “Buy today & Pay Tomorrow” mentality. And that’s why they scratch their credit cards like hell. Remember that, once you will become habitual to the credit cards, it is really difficult to control your emotions and bad expenses. So better to cut them down and replace them with credit cards.

5. Understand the Difference between Assets and Liabilities & Keep Buying Assets -

The main reason behind financial struggle is not understanding the difference between assets and liabilities. An Asset is something which puts money into your pocket by generating cashflow or appreciating in its price (Capital Gains).

Liability is something which will make recurring expenses and make you poor. So Always buy assets such as stocks, bonds, gold, real estate, mutual funds, businesses, web properties, art…etc….

Thus, the above are the top 5 money tips for NRIs.

Emmanuel Adebayor Net Worth

How Much Does Emmanuel Adebayor Make?

Emmaneuel Adebayor is a Togolese professional footballer who plays as a striker for Manchester City in the Premier League. He played in the same position for the Togo national team before he announced his retirement from international football on 12 April 2010. Adebayor previously played for Metz, AS Monaco and Arsenal, and was voted African Footballer of the Year for 2008.In January 2010, Adebayor was one of the players involved when the Togo national team's bus came under a gunfire attack on the way to the African Cup of Nations in Angola.

His Estimated Net Worth is US $ 25 Million.

Karim Benzema Net Worth

How Much Does Karim Benzema Make?

Karim Benzema is a French football player of Algerian heritage who currently plays as a striker for the La Liga club Real Madrid and internationally represents the French national football team.

Benzema came through the youth academy at Lyon and has been capped at senior level for France. He played in UEFA Euro 2008 and was the top goalscorer in Ligue 1 for the 2007–08 season, just three seasons after making his professional debut. This was also his breakthrough season which saw him earn many awards and a new contract which resulted in him becoming one of the highest-paid footballers in France. He signed for Real Madrid in July 2009, on a six year contract.

His Estimated Net Worth is US $ 22 Million.

Adriano Galliani Net Worth

How Much Does Adriano Galliani Make?

Adriano Galliani is an Italian entrepreneur who has been serving as vice-president and CEO of Italian Serie A club A.C. Milan since 1986.

His Estimated Net Worth is US $ 10 Million.

Thierry Henry Net Worth

How Much Does Thierry Henry Make?

Thierry Henry is a French professional footballer who plays for the New York Red Bulls in Major League Soccer.

Henry was born in Les Ulis, Essonne (a suburb of Paris) where he played for an array of local sides as a youngster and showed great promise as a goal-scorer. He was spotted by AS Monaco in 1990 and signed instantly, making his professional debut in 1994. Good form led to an international call-up in 1998, after which he signed for the Serie A defending champions Juventus. He had a disappointing season playing on the wing, before joining Arsenal for £10.5 million in 1999.

His Estimated Net Worth is US $ 60 Million.

Carlos Tevez Net Worth

How Much Does Carlos Tevez Make?

Carlos Tevez is an Argentine professional footballer who plays as a forward for English club Manchester City and is currently the team's captain. He has previously played for Boca Juniors, Corinthians, West Ham United and Manchester United. He transferred to Manchester City in the 2009–10 summer transfer window, becoming the first player to move between the two clubs since Terry Cooke in 1999.

His Estimated Net Worth is US $ 28 Million.

Frank Ribery Net Worth

How Much Does Frank Ribery Make?

Franck Ribery is a French football player who currently plays for Bundesliga club Bayern Munich. Ribéry primarily plays as a winger, preferably on the left side, and is known for "pace, energy, skill and precise passing."

Ribéry's career began in 1989 as a youth player for local hometown club Conti Boulogne. He left the club after seven years to join professional outfit Lille, but departed the club after three years after having difficulties adjusting. In 1999, Ribéry joined US Boulogne, where he played for two years. After spending two more years in the amateur divisions with two different clubs (Alès and Brest), in 2004, Ribéry earned a move to Ligue 1 club FC Metz.

His Estimated Net Worth is US $ 40 Million.

Daniele De Rossi Net Worth

How Much Does Daniele De Rossi Make?

Daniele De Rossi is an Italian World Cup-winning footballer who plays as a midfielder for Serie A club Roma and the Italian national team.

De Rossi joined the youth system of Roma from Ostiamare where he had played as a striker in 2000. He made his first-team debut on 10 October 2001 against Belgian side Anderlecht in the Champions League. He made his Serie A debut on 25 January 2003 against Como. His first Serie A start, and his first goal, came on 10 May 2003 against Torino.

His Estimated Net Worth is US $ 25 Million.

Fabio Grosso Net Worth

How Much Does Fabio Grosso Make?

Fabio Gross is an Italian World Cup-winning footballer who currently plays for Serie A club Juventus. Grosso is primarily a left back, but can also play on the left wing. He is also a free kick, penalty kick and corner kick specialist. He scored the decisive late first goal against Germany in the 2006 World Cup semi-final and also scored the winning penalty in the penalty shootout against France in the final that won the trophy for the Azzurri.

His Estimated Net Worth is US $ 15 Million.

Claudio Marchisio Net Worth

How Much Does Claudio Marchisio Make?

Claudio Marchisio is an Italian footballer who plays as a midfielder for Serie A club Juventus and the Italian national team. A product of the Juventus youth system, he has spent his whole career thus far at his hometown club, with the exception of a season-long loan spell at Empoli.

Since making his breakthrough in the 2008–09 season, Marchisio has often been compared to former Juventus and Italy midfielder Marco Tardelli by the Italian press for his tenacious style of play and good reading of the game. A hard-tackling, versatile midfielder, he prefers to play in centre midfield although he is able to play as a wide midfielder. Though predominantly right-footed, he possesses a powerful shot in both feet, hence his penchant for attempting shots on goal from outside the penalty box if given the chance.

His Estimated Net Worth is US $ 14 Million.

Andrea Pirlo Net Worth

How Much Does Andrea Pirlo Make?

Andrea Pirlo is an Italian World Cup winning footballer who plays for Serie A club Milan and the Italian national team. Praised for his inventive play, he is also a free-kick specialist.

Pirlo has played for the Italian youth teams U-15, U-18 and U-21, captaining and leading the latter to victory in the 2000 as the Golden Player and Top Scorer of the tournament. He joined the Italian senior side during the qualification round for World Cup 2002 and captained the national team to a bronze medal in the 2004 Olympics. Later, he was instrumental in their victory in the 2006 World Cup. He was named man of the match three times, including the final, more than any other player in the tournament, and ultimately won the Bronze Ball (third best player in tournament).

His Estimated Net Worth is US $ 30 Million.

Landon Donovan Net Worth

How Much Does Landon Donovan Make?

Landon Donovan is an American soccer player who plays for Los Angeles Galaxy in Major League Soccer. He plays usually as a withdrawn forward, and can also be used as an attacking midfielder on either wing.

His Estimated Net Worth is US $ 4 Million.

Clint Dempsey Net Worth

How Much Does Clint Dempsey Make?

Clint Dempsey nicknamed "Deuce", is a American soccer player who currently plays for English Premier League club Fulham and for the United States national team. A versatile attacking player known for his ball skills, he can be used on either wing or as a striker.

He is the second American to score goals in two different FIFA World Cup finals tournaments, in 2006 and 2010.

His Estimated Net Worth is US $ 8 Million.

DaMarcus Beasley Net Worth

How Much Does DaMarcus Beasley Make?

DaMarcus Beasley is an American soccer player who plays for Hannover 96. He plays mainly as a winger on the left side of the midfield, but has also been used as a forward and in defense. He recently launched his own brand of jewelery.

Beasley was one of the most prominent players in Major League Soccer (MLS) as a star with Chicago Fire and the national team, before being purchased during the 2004 season by Dutch team PSV Eindhoven. He was then loaned to Manchester City in 2006, later being signed by Rangers in June 2007 for £700,000. He has scored more goals in Europe's highest club competition, the UEFA Champions League, than any other American player.

His Estimated Net Worth is US $ 3.5 Million.

Ramires Net Worth

How Much Does Ramires Make?

Ramires is a Brazilian footballer who plays as a midfielder for Chelsea in the English Premier League. In 2008, he won a Bronze medal of XXIX Summer Olympic Games in Beijing, China.

His Estimated Net Worth is US $ 15 Million.

Martin Palermo Net Worth

How Much Does Martin Palermo Make?

Martin Palermo is an Argentine professional footballer currently playing for Boca Juniors of Argentina, and the Argentina national team. Nicknamed Loco (crazy) or Titán (titan), he has also played in Argentina for Estudiantes de La Plata as well as in Spain for Villarreal, Real Betis, and Alavés.

His Estimated Net Worth is US $ 30 Million.

Javier Mascherano Net Worth

How Much Does Javier Mascherano Make?

Javier Mascherano is an Argentine footballer who plays as a defensive midfielder for FC Barcelona. He is the captain of the Argentine national team.

Mascherano began his career at River Plate. He earned his first senior honours in 2003–04, winning the Primera División Argentina. He also won an Olympic gold medal with Argentina in the Athens Games and finished runner up in the Copa América 2004. He moved to Brazilian side Corinthians in 2005, winning the Brazilian Série A in his first season. Mascherano moved to Europe, signing for Premier League side West Ham United. However, unusual contract terms with Media Sports Investments blighted his brief time at the club and at the beginning of 2007 he joined Liverpool on loan.

His Estimated Net Worth is US $ 40 Million.

Peter Crouch Net Worth

How Much Does Peter Crouch Make?

Peter Crouch is an English international footballer who plays for Tottenham Hotspur. At 6 ft 7 in (2.01 m), he is the tallest man ever to play for the England national team, and was the tallest outfield player in the Premier League until Stefan Maierhofer signed for Wolves in August 2009. Beginning his career as a trainee with Tottenham, Crouch has played for five Premier League clubs — Tottenham Hotspur, Portsmouth, Aston Villa, Southampton and Liverpool — since the beginning of his career in 1998, before returning to Tottenham in 2009.

His Estimated Net Worth is US $ 15 Million.

Jermain Defoe Net Worth

How Much Does Jermain Defoe Make?

Jermain Defoe is an English footballer who plays as a striker for English Premier League club Tottenham Hotspur, and the England national football team.

Defoe began his career with Charlton Athletic, joining their youth team at age fourteen, before moving to West Ham United aged sixteen, and rising through the ranks. He made his professional debut for West Ham in 2000, and after a season-long loan spell at Bournemouth during the 2000–01 season, established himself in the West Ham lineup. A move to Tottenham in 2004 soon followed, and Defoe also spent a year at Portsmouth after he was deemed surplus to requirements at White Hart Lane. He has since returned to Tottenham in the January 2009 transfer window. Defoe made his England debut in 2004 and as of September 2010, has made 45 appearances, scoring 15 goals.

His Estimated Net Worth is US $ 20 Million.

Deco Net Worth

How Much Does Deco Make?

Deco is a Brazilian-born Portuguese professional footballer who currently plays for Fluminense.

Deco is one of the few players to have won the UEFA Champions League with two different clubs – Porto in 2004 and FC Barcelona in 2006. He was named UEFA Club Footballer of the Year and UEFA Best Midfielder in Porto's UEFA Champions League winning season and was named Man of the Match in the 2003–04 Champions League final. Deco was the first player to win the UEFA Best Midfielder Award with two different clubs (Porto and Barcelona). He was awarded the FIFA World Club Cup Golden Ball and the Man of the Match award in the final despite losing to Internacional. Deco made his 100th appearance in the UEFA Champions League while playing for Chelsea against Atlético Madrid joining a group of only 13 players to have achieved the same milestone.

His Estimated Net Worth is US $ 25 Million.

Tiago Mendes Net Worth

How Much Does Tiago Mendes Make?

Tiago Mendes simply Tiago, is a Portuguese professional footballer who plays for Atlético Madrid on loan from Juventus.

A versatile midfielder, adept as both a central or defensive unit and with good overall skills, he played professionally in four of Europe's major leagues: England, France, Italy and Spain.

His Estimated Net Worth is US $ 30 Million.

Tiago first came to prominence at Sporting de Braga, being cast into the Minho side's starting XI at the age of just 19, and helping with 27 games as it finished in 4th place in 2001, thus qualifying for the UEFA Cup.

In late December 2001, solid displays earned Tiago – and Braga teammates Armando Sá and Ricardo Rocha – a move to league giants Sport Lisboa e Benfica; in his first full season, he scored a career-best 13 goals, helping the Reds finish second in the league and, the following year, helped deny F.C. Porto a historic treble by winning the domestic cup.

Power Grid FPO Review

Power Grid Corporation of India is India’s leading Energy sector company. It’s core business is the transmission of power across the country.

It is already listed on the Indian Stock exchanges. But this time it is planning to raise more capital and that’s why coming with the FPO – Follow on Offer on 08th November 2010.

The issue size will be Rs.8000-9000 Crores.

Here are the Key Features about the Company

- It is the Public Sector Unit (PSU) of India

- Incorporated in 1989 for transmission of Electric Power across the country.

- Central Transmission Utility - Navaratna PSU - Asset of Rs. 47744 Crs  as on Sept 30,2010

- World's Leading Power Transmission Utility - 79556Ckt.Km line-132 Substations as on Sept 30,2010

- Technology Leader in EHVAC & HVDC Transmission.

- Carries 51% of Generated Power Accross Country.

- Telecom NLD with 20733 Km Optical Fibre Network & Internet Service Provider.

Recommendation:

This is a MUST fill IPO.

Indian PSU IPOs and FPOs in 2011

According to Economic Times, The Government of India is planning to launch 1 IPO/FPO every 16 days from now onwards for next 5 months for its various already listed PSUs (Public Sector Units).

FPO means Follow-on offers means the public issue of already listed companies.

Here is a List.of PSUs & the approximate size of the IPOs in Indian Rupees.

01) Manganese Ore India (MOIL) – Rs.3000 Crores

02) Power Grid Corporation – Rs. 8800 Crores

03) Hindustan Copper – Rs.8050 Crores

04) Oil & Natural Gas Corporation (ONGC) – Rs. 14,442 Crores

05) Steel Authority of India (SAIL) – Rs. 8922 Crores

06) Shipping Corporation of India – Rs. 1516 Crores

07) Indian Oil Corporation (IOC) – Rs.19,870 Crores

Power Grid is open for subscription on November 8 2010.

Thus, Year 2011 is really a great investment opportunity for the Indian citizens. All of these PSUs have past proven record of excellent performance.

And that’s why all the IPOs are investment worthy. I advise investors to save money for these future IPOs. Recently after a grand success of Coal India IPO, it is now clear that the government is willing to give shares of these PSUs at fair valuations.

The only problem with FPOs is that, these companies are already listed on the stock exchanges and that’s why the government will have to price these IPOs very carefully to avoid any problem. This ie because any major difference in the market price and the offer price will lead to the failure of that IPO.

In the past, the same thing had happened with NTPC and Miner NMDC which was bailed out by LIC and SBI.

Anyways…So let’s hope for the good new year…!!!

Investors – Save your money for these IPOs.

How Much Gold Allocation in Your Portfolio?

The gold price is making new heights everyday and I receive tons of queries from the readers that, How much gold allocation one should done in his/her portfolio?

Many people ask me that, Should they put 100% of their money in Gold by taking out all of their money from equities?

Well, I personally advise people to invest not more than 10% of their portfolio net worth in Gold. This is because we don’t have any proper valuation method for Gold.

According to RitHoltz,

When evaluating equities, one of the key metrics we use is Valuation. We can determine an approximate value based on earnings, dividend yield, discounted cash flow, etc.

That is not possible with Gold. People have tried to develop a model for the price of the precious metal (See Eddy’s attempt here), but it always is relative to something else — inflation, interest rates, Oil, Silver, etc. Indeed, an inability to objectively value Gold — other than what someone else is willing to pay for it — is why I am not enthusiastic about any more than a 5% position. With no objectively ability to value it, we are left with technicals, historical comparisons, and the Greater Fool theorem.

Let’s consider 3 different ways to contextualize the price of Gold:

1) Relative to the US Monetary Base;

2) Gold versus the SPX; and

3) On an Inflation adjusted basis. All three of these suggest Gold has more upside over the next few years. (Traders wanting to add should look for a pullback, rather than chasing momentum here).

The only problem with gold is that, it does not have any income/cashflow and that’s why it’s next to impossible to valuate the gold.

Businesses have cashflow/profits/income and that’s why we can accurately do the valuations of the businesses. But well, this is not true about gold.

And on the top of that, Gold does not have any utility like businesses. Right now the gold price is shooting up because the US Government is expanding its monetary base like hell. And this newly printed dollars ar diluting the purchasing power of the existing gold in the economy.

So remember that, Businesses (Stocks & Equity Mutual Funds and Equity related instruments) are more valuable than the gold and this is the reason why I advise people to invest most of their money in Equity/Businesses and just 5-10% of their total portfolio net worth in Gold.

Your portfolio should have 5-10% Allocation in Gold and rest should be in Equity, Debt and other asset classes. Never invest more than 10% of your total portfolio net worth in Gold.

India’s Best Money Transfer Services for NRIs

Are you NRI (Non-Resident Indian)? Than this article is definitely for you. In this Article, I have summarized many methods to transfer money to India. I hope that this article will be helpful to you.

ICICI Bank Money Transfer

HDFC Money Transfer

SBI Money Transfer

Citibank Money Transfer

Kotak Money Transfer

The above are the India’s best money transfer services for NRIs.

All of them have excellent past record of good performance. And their exchange rates and other money transfer fees are reasonable. If you are NRI and want to transfer money to India than use any one of the above services.

I will give all of the above money transfer services 5 stars out of 5 stars. Many of my NRI friends and relatives use one or more of the above services frequently to transfer money to India to their homes and their reviews about the above 5 services are Excellent.

If you have any good or bad experiences about the above services than comment on this post. I am waiting for your comments and suggestions for these services.

Gold is Still Cheap Against USD – ProfitScore

According to ProfitScore,

This next chart, on page 8 of the report, of the price of gold versus the monetary base (amount of money in circulation) shows that even at its current, rather lofty nominal price, gold is undervalued compared to the amount of printed money sloshing around the financial system.

Many people ask me that, Is Gold cheap right now or they should wait further to cool down the price of Gold?

Well, the gold is cheaper right now…!!!!

I know that, this will sound crazy to you. You will say that, what kind of insane statement above is? How can anyone in this world say that, the gold is cheaper right now?

But well, I have the evidence. Just see the above diagram. The above chart is the comparison of the US Monetary base with the Gold price. According to the chart, the gold is still cheap in comparison to the monetary expansion.

In comparison to the amount of money, the US Government has printed, the gold is really cheap right now. And I advise investors to buy more and more gold. This is because the US Government is devaluing its currency right now.

So I think Gold is still a cheap and you can invest in Gold at this level also…!!!

Will Gold Price increase in 2011?

The new year is coming and everyone has this query about the gold. Everyone in this world (Especially in India were people simply love to buy a Gold) today want to know the future of the gold price in 2011.

Well, nobody can tell you with exact accuracy that in the future what will be the gold price. But well, if we see the US Monetary base data since past 30 months, than we can surely predict the future price of the gold.

Remember that, the Gold price closely track the US Monetary base ( Money Supply). Total Money supply is all the money (Dollars) in the circulation plus bank reserves.

It was before 2008 just US $ 800 Billion and today in 2010, it is US $ 2 Trillion. This means that the more money US Government will print, the price of gold will go high that much.

You can see in the above diagram that, the gold is still cheap in comparison to the US Monetary base because the newly printed money is in the bank reserves mainly and has not entered the circulation.

And on the top of this, Yahoo Finance Said,

Atlanta Federal Reserve Bank President Dennis Lockhart said on Tuesday that further easing by the Fed has to be large enough to help boost demand, and purchases of $100 billion of securities a month would be a possibility.

"If we're going to pursue another round of quantitative easing, it has to be a large enough number to make a difference," Lockhart said in an interview on CNBC.

"As a monthly number ($100 billion) is fairly consistent with what we did before, and so I think it would certainly be in the range of numbers one might consider ... but if you were talking about $100 billion as simply the overall program, I think that's too small," he said.

So all of these factors are going to increase the Gold price in 2011. So if you want to invest in gold and hoping that the gold price will cool down further than simply forget it. The Gold price will touch the new highs. So start investing in gold now if you want to invest in gold.

Best Ways to Invest in Gold in India

Recently, many readers have asked me that, which are the various ways to invest in gold in India? And that’s why I thought that I should write a separate post on this topic. So that you can know that which are the various ways by which you can invest in gold in India?

So Here we go….

There are basically two broad ways to invest in Gold in India – Physical & Demat (Paper/ETF). Here are those two ways.

01) Physical Gold

The first and most ancient way to invest in physical gold is, physical gold. It’s as simple as you read it. I mean you buy a physical gold from someone and keep it in your custody.

Here are the various ways to buy a physical gold in India.

- Friends & Families

- Jewellers

- Banks (Banks like HDFC & ICICI sell physical gold coins and bars)

- Post-office (Well, once upon a time in many cities of India, the government post offices started selling physical gold)

The main advantage of physical gold is that, you feel its physical shininess and you can make ornaments from it.

The main disadvantage of physical gold are – Purity Issue and Safety issue.

If you want to buy a gold only for the investment purpose than safety of that gold will be the main issue. And of course the purity of that gold. However, with the certified gold coins and bars selling by the banks, it is becoming really easy to invest in physical gold.

02) Gold ETFs / Demat Gold

Since past few years, the new investment modality for gold has came in India which is known as Gold ETF also known as Exchange Traded Funds. They are just like the traditional mutual funds which invest in physical gold on your behalf rather than in stocks and bonds.

1 unit of such Gold ETFs closely track the price of 1 gram (or 1/2 gram) of gold.

The main advantages of Gold ETFs are,

- No purity issue

- No Security issue

- No Wealth tax as you are holding that gold in the demat/paper form.

So if your main purpose of buying gold is the investment purpose than you can go for Gold ETFs. Gold ETFs are listed on the stock exchanges so there is no problem of its liquidity. You can sell them anytime and cash out your money from it.

Thus, the above two are the basic two ways to invest in gold in India.

How Much You have Lost in the Indian Stock Market Rally?

This is October 2010 and since past 30 months means since January 2008, many people have stopped investing in the stock market. This is because they are afraid of the stock market fluctuations.

Many investors have become the conservative investors and simply stay away from the stock market.

But According to Economic Times,

Retail investors could have gained over $15 billion by investing just 5 percent of their savings in Indian capital markets in the past 30 months -- an opportunity that was tapped better by foreign funds, says a top fund manager.

"Retail investors lost an opportunity to earn $15 billion. Had they invested 10 percent of their savings in equity market they would have earned $30 billion," added Singhania, who has handled one of the largest corpus of funds in India worth $3.5 billion.”

Well, Yes. the retail investors have lost US $ 15 Billion in the past 30 months. If you had continue investing since January 2008 in the Indian stock market in any form say regular SIP or even regular direct stock investing than you would be more richer today than January 2008.

This is the basic nature of equity. It goes up and down. But well, in the long run, it gives you the excellent returns and make you financially free and rich.

After January 2008, many of my friends used to argue with me that, but the this time market is different. Previously there was no recession in the USA but today USA is passing through the phase of recession. And that’s why one should stay away from the stock markets now.

But well, again Equity has outperformed any other asset class in the past 30 months (Including Gold). Always remember that, when you invest in equity, you are not just investing in a piece of paper but basically you are investing in the underlying business which is very useful to the economy(If it’s the fundamentally strong company).

So still you are not late. If you have not started investing in equity yet than start investing in equity now and become on the path of financial freedom.

How to Use Your Credit Card Wisely?

Credit card is the worst type of debt ever. And many people argue proudly that, “I keep credit card for the emergency purpose only.” But well, the reality is that, you should have emergency fund for the emergency purpose and not the credit card.

On the other hand, many finance gurus and personal finance advisors say that, credit card is a bad debt and its next to control your psychological behaviour of using credit cards. So cut down your credit cards and always stay away from the credit cards.

But well, the truth is that, A Credit card is like a double edged sword. If used properly, it won’t harm you but if not used properly than it can make you bankrupt.

There are basically two types of debts – Good Debt & a Bad Debt.

A Good debt is one which is used to finance the assets while a bad debt is one which is used to finance the liabilities.

So if you use the credit card debt to finance the assets than its the good debt but if you use your credit card to finance the liabilities than it’s the bas debt.

I personally use credit cards for online transactions for my Internet Business. I do various expenses with my credit card for the various purpose of this blog business as well as my forum – Investta.com.

For the Emergency purpose, I have the Emergency Fund. I never use credit card as an emergency purpose. Rather than that I have my own emergency fund in my bank savings account for the rainy days.

Many of my friends keep credit cards for the emergency purpose and on the top of this, their emergencies are not defined very well. Weekend parties are also the emergency for them. Don’t use credit card in such a manner.

I use credit card to finance my Internet Business. And I make bullet payments of the entire credit card amount at a single shot. So use credit cards wisely.

SBI Saral Maha Anand Review

SEBI has banned all the ULIPs because the Investment component of ULIPs is highly unregulated and opaque. Followed by this, IRDA also has banned ULIPs because of its mis sellings.

The Insurance companies are hiding the information from its customers and the ULIPs used to give just 5 times the life insurance cover than its annual premium. But now, Insurance companies have started modifying ULIPs.

Recently, SBI has launched new ULIP scheme – Saral Maha Anand Policy.

This is a revolutionary scheme in the history of Indian Insurance cum investment products markets. Because this ULIP scheme has several changes than the traditional ULIP policies.

Key Features of the Policy:

- The minimum annual premium is Rs 15,000 and the maximum yearly premium is capped at Rs 29,000.

- The sum assured component ranges from 10-20 times of the annual premium and is restricted to a maximum of Rs 7.5 lakh.

- SBI Life Maha Anand is meant for investors in the age group of 18-55 years. The maturity age is up to 65 years. Like most other Ulips , policyholders can opt for a yearly, half-yearly, quarterly or monthly payments.

- The product offers customers four investment options depending on their risk profiles: Index, Equity, Balanced and Bond fund.

- It also offers partial withdrawal of up to 15% of the fund value after completion of five years. Investors can use this window to meet emergency liquidity needs.

- Charges: Premium allocation charge is 6.25% of the premium amount for the first year and it goes down to 3.75% between the second and fifth year, and from thereon, further to 3% until the 10th year of the policy. The policy administration charges are Rs 33.33 per month. The fund management charges are 1.25% for the index fund and balanced fund, 1.35% for the equity fund and 1% for the bond fund. Financial advisors say that the cost structure of this regular Ulip is still high despite the flexibility of low premium. Hence, if an investor wants to make the most out of this product, s/he has to invest for the maximum possible term and invest a higher amount to earn decent returns.

The two revolutionary changes in this ULIP are,

01) 10-20 times life insurance cover than the annual premium (Which was just 5 times previously)

02) Only 6.25% Premium allocation charges (Still high) which was previously 20-50% on First premium.

Thus, this shows that the ULIPs are changing. Indian Investors are now aware, more informed and financially smarter than before.

I am really happy to see such kind of positive changes in ULIPs.

Government Health Insurance Scheme: RSBY India

Many of you may not know about the Rashtriya Swasthya Bima Yojana.

Well, it is the health insurance scheme launched by government of India for people below the poverty line. This scheme offers up to Rs.30,000 of annual health insurance cover to people living below poverty line.

Up to now, 19 Million + RSBY cards has been distributed. And now, Government of India is planning to extend this health insurance policy among the people who are mathematically above the poverty line but still can’t afford the costly health care services in India.

According to Economic times,

The Union Cabinet will consider including the country’s four million-plus domestic workers into its flagship insurance scheme for the poor, rashtriya swasthya bima yojana (RSBY), after adding street vendors to the eligible categories last week.
Rickshaw pullers, taxi drivers, auto drivers and sanitary workers are next in queue, but it would take a while before these proposals are formalised, a government official has said.
“India’s domestic workers are not covered under any labour legislation and for the first time they are being made eligible for some social security cover,” a labour ministry official told ET.
The RSBY has, so far, extended free health care up to Rs 30,000 annually to below poverty line, or BPL, families. And starting with street vendors and now domestic workers, the government has plans of bringing all vulnerable sections of the society under the scheme gradually.

Indian Capital Market is Flourishing like anything…

After the grand success of Coal India IPO, it is clear that the India’s Capital markets more than come of age to meet growing domestic demand for Capital.

The Indian capital market is becoming matured day by day. Now, this is really a good news. More and more companies are going public to meet their capital needs.

In the future, we will see more great IPOs from government as well as private sector companies. Also the Indian bond market is growing. Recently, several companies have issued the infrastructure bonds to raise money for their various infrastructure projects.

L&T has recently launched tax saving infrastructure bonds. Previously the Indian capital market (Stocks & Bonds) was not mature enough but now it is growing day by day.

For huge capital demand, companies are preferring to list on Indian stock exchange rather than on foreign stock exchanges. India is one of the great emerging economy and good place to raise money for the companies.

Health insurance: Understand the Fine print of your Health Insurance

Many people have a misbelieve that, buying a health insurance is just like buying stocks, bonds, gold and mutual funds. Well, of course the Health Insurance is the investment of your money but well, before buying a health insurance it is better to read that fine print of your health insurance.

Here are the things that you should read carefully in your health insurance before buying it.

01) Exclusions: Read the exclusions of the health insurance policy in detail before buying it.

02) Past Baggage –Most policies cover expenses incurred for the treatment of pre-existing diseases only after a waiting period. Pre-existing diseases are defined as those which were diagnosed or treated during the 48 months prior to taking the policy.

03) Waiting Period - This is applicable to pre-existing diseases which are not admissible. It can vary from one to four years, depending on the policy and the insurance company.

04) Restrictions - It is important to know the illnesses that are not covered by your policy. But it is equally important to know how much you can spend on them.

05) Reasonable and Necessary -

06) Claiming the money -

07) Renewal Guarantee -

08) Protect Your interests - he unit-linked platform in the life insurance space has been widely regarded as a fertile ground for mis-selling, prompting the insurance regulator to take steps to limit charges and rein in insurance agents.

The Paper Money is Dying

According to many economists, it is now “The Death of the Paper Money”.

This is because of the money printing activity of central banks and governments from all around the world, the paper money is losing its purchasing power day by day and becoming worthless.

In past 2 years only the US Government has increased its monetary base from US $ 800 Billion to literally above $ 2 Trillion. Of course,the asset prices shoot up but the value of money is going down.

Take the example of 1920s – The German hyperinflation scenario. The German government has increased its money supply and almost after 2 years, people lose faith on the currency and the currency became worthless.

You can see in the above picture that the German woman is using bank currency notes instead of coal for heating purpose. This is the end result of printing enormous money out of thin air.

If USA won’t absorb this liquidity soon than sooner or later people will lose faith on the US Dollars and the US Dollar will become worthless.

This is the era of fiat money means the money without any gold back up. Before 1971, the money was used to be backed by the gold which really used to keep inflation under control. But today the situation is different. After 1971, when the President Nixon removed the Gold Standard, the money stop being money and became currency – a piece of paper without any intrinsic activity.

In short, the rules of money have been changed and you need the future generation real financial knowledge to get rich and financially free. You can not become rich and financially free by using the old rules of money.

Download my FREE eBook: My Journey To Billionaire Club and learn what the rich people teach their kids about money that poor and middle class don’t?

You will learn 6 basic new rules of money by which the modern rich play the game of money and become rich and financially free. So don’t wait and download my eBook and shoot up your Financial IQ by several folds.

Investment Tips for people in 20s

Are you in your early 20s? Than according to Suresh Sadagopan, here are the 3 best investment tips for you.

01) Start Investing in Equity/funds

02) Medical Insurance

03) Insurance Against Accident

However, I would like to add one more investment tip here. According to me, if you are in your early twenties than you should invest your time and money both in starting your own business.

This is because nothing in this world can give you more financial security than owning your own business. Your own business once grown can provide financial stability and security to your future generations also.

Let me give you the example of myself. I have started this blog business in March 2008 at the age of 25 years and today I am 28 years old (As of 2010) and this blog business is giving me good monthly income.

I have invested my time to develop this business and today this business is providing me the financial security and safety. My other friends still have to study in the medical schools to get those degrees and start earning money.

And this is the reason why I advise young generations to start their own businesses as early as possible in their lives means probably in early twenties.

Today because of the internet, the entrepreneurs can start their own online business also and target the entire world population. Today because of the internet even a high school going kid can also start his own business online and earn more money than his/her principle.

Anyways…So what I advise people in their twenties is, don’t waste your time behind un productive things. Rather than that invest your time, money and energy to build your own business empire.

Fixed Income Savings can burn your retirement…!!!

Most of the retired people in this world live on the Bank FDs, post-office savings schemes and other fixed income instruments. However, do you know that Higher rates can adversely affect your fixed income savings.?

Well, Yes. This is true. The main problem with the Fixed income instruments is that, when the interest rates go down, your bank won’t forget to lower it down immediately but when the interest rate will hike, it will take a long time to increase the interest rate.

Today the inflation is rising day by day and the returns from the fixed income instruments are the same. And that’s why for the people (Mainly retirees), it is becoming extremely difficult to live on a fixed deposit instruments.

So what to do in such kind of scenarios?

Well, one thing you can do is, go for floating rate interest rates such as floating rate mutual funds.

Another advise I give to young generation is, start your own business during your early life and by doing this, when you become retired, your business can afford your expenses.

Many smart people do this. However, for this you will have to start very very early in your life probably in your 20s. But well, starting your own business is worth it in the long run.

Today, it is becoming extremely difficult to live on the fixed income instruments especially the developed countries like USA and Japan are devaluing their currencies by doing huge quantitative easings.

And that’s why people who are living on the fixed income instruments or planning to live on the fixed income savings schemes after their retirement will be in trouble very soon.

Because the inflation will outgrown to their fixed income. So think of owning your own business or rental properties or web properties or something else like that for your peaceful retirement.

How MIPs are different from FDs?

MIPs means monthly income plans. They give you regular monthly income just like Fixed Deposits (FDs).

Many investors don’t know that MIPs are different financial products than the Bank Fixed Deposits. Basically MIPs are the type of mutual funds. They fall under the category of Hybrid Mutual Funds means they invest up to 25% of your money in Equity and up to 75% money in debt and debt related products.

The equity component of MIPs give you the growth of your money while debt gives you the regular income. The main advantage of MIPs over FDs is that, they can give you market driven returns.

If market is good, most of the MIPs will give you more return than the regular bank FDs.

MIP returns are market-driven. That means, the fund manager is under no obligation to declare a monthly dividend, though most fund houses try their level best to declare dividends regularly.
This is the main difference between MIPs and fixed deposits (FDs) that offer assured interests.
However, compared with FDs, MIPs are tax-efficient as dividends declared under MIPs are tax-free.

Who can go for MIPs?

Anyone who want to generate almost fixed returns from their investments more than the regular fixed deposits can invest in MIPs. If you are a retiree and already invested in Bank FDs than you can invest in MIPs also.

Many people argue that, equity is a risky investment so weather MIPs are really safe or not? Well, it is true that equity is the risky investment. But the equity exposure in MIP is low (maximum 25%) so in my opinion, you can go for it. There is no problem in it.

Save Tax with 80 CCF Infrastructure Bonds

Up to last year under section 80C, the investors can save tax on maximum Rs.1 lakh. Means if they fall in the highest tax bracket than they can save a tax of Rs.30,000 on this 1 lakh amount.

But now the new section is added in the clause and that is Section 80CCF.

Section 80 CCF is the most popular tax saving law right now in India after section 80C and the infrastructure bonds are in hottest gossips in all the cities.

Under Section 80 CCF, you can save a tax up to Rs.20,000 by investing in the infrastructure bonds.

Under Section 80CCF, the infrastructure companies can raise money from the investors for a lock-in period of up to 10 years. Up to now, the two most popular infrastructure bonds were available in the market.

01) ICICI

02) IDBI

But now, many other companies have also entered into the market. Recently, L&T launched Infrastructure bonds in the market.

Under the new section, an investor could claim deduction up to Rs 1 lakh by investing in any of the instruments. However, somehow infrastructure bonds did not figure in the list. Realising the increasing focus on infrastructure, the finance minister introduced infrastructure under Section 80CCF in his last budget.

Right now 3 other companies have launched the infrastructure bonds.

01) IDFC

02) IFCI

03) L&T Infra

Very soon following two companies will join the list of infrastructure bonds.

01) Power Finance Corporation (PFC)

02) Life Insurance Corporation (LIC)

Right now these bonds offer lucrative interest rates – 7.5%-8.0%.

However, The interest rates offered by these bonds are linked to the 10-year government of India bond, and cannot exceed that.

How to Apply for Tax Saving Infrastructure Bonds?

Applying for these infrastructure bonds is very easy. All one needs is a PAN card. You could hold the investment in physical certificates too, in case you do not have a demat account. “In case you do have a demat account, it makes sense to hold these bonds in the demat form, as it eliminates the risk of losing paper or misplacing it.

ING Prospering Life ULIP Review

ULIPs are the highly criticized financial products in India. ULIPs charge high premium allocation charges and that’s why they are criticized the most in India.

Recently, ING Life has launched a new ULIP scheme – Prospering Life Plan.

This is a ULIP Plan and it has following salient features.

- The ULIP has 5 fund options to choose from

- Automatic allocation and unlimited switches with partial withdrawal at free of charges (This is really a great change in ULIPs)

- The product offers an annualised premium ranging between rs 48,000 and rs 96,000 and is competitively priced against other long term investment options

- The sum assured is an amount 10 times the annual premium at inception for those below the age of 45 and 7 times the annual premium at inception for those above the age of 45.

Now, this is really a revolutionary change in the ULIP history. This is because up to now, all the ULIPs available in the markets offer only 5 times life cover than the annual premium. But this ULIP offers 10 times life insurance cover below age 45 and 7 times above the age of 45. This is really cool.

Now, this shows that the ULIPs are revolutionized. Previously ULIPs used to be very costly.

- 16-20 years of policy term

- Minimum top-up premium is Rs.50,000

I am really happy to know that ULIPs are changing. The Insurance companies are modifying this financial products in the benefits of the customers.

Hope to see more such kind of changes in the benefits of the customers in the future.

Narayana Murthy: Don’t Go to USA for IT Jobs

Narayana Murthy says that, Indians should not go to USA for IT jobs anymore. This is because there is a greater opportunity in Indian IT Industry right now than anywhere else abroad.

Right now people from India go to USA to get a good high paid job in IT Industry. But well, the next decade is of India and Indian IT Industry is growing like anything.

And the salaries in Indian IT Industry is also good. And this is the reason why Murthy advise young generation to stay in India.

Over the next decade, Indian IT Industry will flourish like anything and create lots of jobs in this sector.

Gold is still a Good Bet for Investors

The gold price is running record high. In past just 1 year (2010), The gold has appreciated 21%. And many people ask me that weather they should invest in gold at this level or is this just a bubble?

Well, it’s still not tool late to invest in gold if you have not invested in this precious asset class yet or want to invest more money in gold. This is because the US Government is weakening the US Dollar by quantitative easings.

And that’s why the value of dollars is decreasing day by day making gold the stronger asset class. In November 2010, The US Government will push more US $ 500 Billion of liquidity in the world economy which will further devalue the dollar.

And that’s why the gold can go up further from this level also. And that’s why there is no problem in investing gold at this level.

However, keep in mind that your gold allocation in your portfolio should not be more than 10% of your overall portfolio net worth. Many investors ask me that, weather they should take out all of their money from the stocks and invest in Gold?

Well, No. You should not do that. You should only invest maximum up to 10% in gold. Anyways…So this Diwali invest in Gold. The Gold can be a good bet in the near future.

L&T Infra Long Term Tax Saving Bonds

L&T introduces the long term infrastructure Bonds. The main advantage of these bonds is that apart from the Section 80C, you can save tax up to Rs.20,000 by investing in this bonds under section 80 CCF.

Infrastructure is a key element for every nation. And it is for India too. So Invest in infrastructure and grow your savings now.

Tax Benefits

In addition to interest, you get tax deductions of up to Rs. 20,000 by investing in these bonds, under Section 80 CCF of the Income Tax Act.
The bonds provide you an interest rate of 7.5% to 7.75% over its tenure of 10 years. This interest can either be paid to you every year, or can be compounded over the period of your tenure.

If you want to invest to save more in taxes than these bonds are the good bonds. L&T is also a good and reputed infrastructure company of India. And that’s why you can invest in these bonds hassle free.

Tax Exemption on Joint Housing Loan

Many people buy their lovely home by taking a home loan jointly. I mean if both husband and wife are working than it is a good idea to take a loan jointly.

Now, the question is that, what about the tax benefits on joint housing loan in India? Well, both of you can claim the tax benefits on the interest and principal repayment components of the housing loan EMI. Tax benefits will be in proportion to the contribution to the EMIs.

Well, if you don’t know than let me tell you that you can get a tax break on both the interest payment and principal of your housing loan.

Just refer to Section 80C and Section 24b.

Under Section 80C you can get a tax benefit on the principal of your home loan while under Section 24b, you can get a tax benefit on the interest payment of your home loan.

So understand these two sections carefully before taking a home loan.

SEBI increases Retail Investor limit for IPO Investment to Rs.2 Lakhs

Retail investors are elated as Securities and Exchange Board of India (SEBI) Chairman CB Bhave on Monday increased the investment limit in initial public offer (IPO) and follow-on offer (FPO) to Rs 2 lakh from current Rs 1 lakh.

Now, this is a good news for the retail investors. I mean up to now, you could invest maximum up to Rs.1 lakh but now you can invest up to Rs.2 lakhs in IPO.

I think this is really a good move by SEBI. This is because the inflation rate in India is rising in India year after year and that’s why just Rs.1 lakh of Investment is very low for the retail investors to invest in large IPOs like Coal India.

Indian Capital market is growing like anything and the new generation IPOs are very very huge in size and that’s why it is necessary to increase this limit for the retail investors.

Many retail investors earn lots of money only by subscribing the IPOs. And that’s why I am sure that SEBI’s this move will definitely make the retail investors happy.

US Social Security is becoming worthless day by day…!!!

The Expenses of the people rise even if Social Security Doesn’t – Wall Street Journal said in its article.

The people in the United States above the age of 65 years are mainly depending on their social security for their retirement. But well, the cost of living is increasing year after year because of the higher inflation in the United States and that’s why the retirement is becoming a dream for many people in their 50s.

Almost 90% of the people in their pre-retirement age group are fearing of running out of money during the time of their retirements.

This is because the cost of basic living is rising day by day and very soon for most of the people it will become next to impossible to retire on the social security schemes.

If you don’t want to become a victim of such kind of situation than don’t depend on your social security and 401(k) plan for your retirement. Rather than that build your own retirement corpus by yourself.

I personally advise young generations to start their own business as early as possible. This is because the business can give you financial stability after your retirement and also to your future generations.

I have seen lots of business owners who had worked very hard during their young life to build their own successful business and today their children are financially free than those who own a job.

Owning a job is the most stupid thing anyone can do. Never depend on your job. Rather than that depending on your business and investments for your financial future is much safer and secure than depending on the job income.

If you are in your pre-retirement age than also you can start your own business from your hard earned savings rather than putting that savings into the retirement funds.

Well, start your own business and hire people under your business to run it. Use other people’s time (Employees) to get richer rather than depending on the social security schemes.

Bernanke Liquidity Trap: What’s It?

Advisoryanalysts.com says,

"There is the possibility... that after the rate of interest has fallen to a certain level, liquidity preference is virtually absolute in the sense that almost everyone prefers cash to holding a debt at so low a rate of interest. In this event, the monetary authority would have lost effective control."

John Maynard Keynes, The General Theory

One of the many controversies regarding Keynesian economic theory centers around the idea of a "liquidity trap." Apart from suggesting the potential risk, Keynes himself did not focus much of his analysis on the idea, so much of what passes for debate is based on the ideas of economists other than Keynes, particularly Keynes' contemporary John Hicks. In the Hicksian interpretation of the liquidity trap, monetary policy transmits its effect on the real economy by way of interest rates. In that view, the loss of monetary control occurs because at some point, a further reduction of interest rates fails to stimulate additional demand for capital investment.

Many of you may not understand exactly what is it? But well, this is actually the side effect of printing excessive money (Known as Quantitative Easing in sophisticated language).

Usually during the time of the recession, the government increases its money supply by increasing bank reserves and reduce the interest rates so that investors and entrepreneurs borrow this money at low interest rates and invest in the economy to develop businesses and create new jobs thus reducing the unemployment rates.

But well, after certain level, the reduction in interest rates fail to stimulate the additional demand for this newly printed money and this is known as the liquidity trap.

The main aim behind reducing the interest rates is to motivate investors and entrepreneurs to borrow more money to create businesses and jobs in the economy.

NRI’s Tax Liability after Direct Tax Code (DTC):

The Following will be the tax liability of NRI’s after implementation of DTC in India (March 2012) according to The Economic Times.

Non-resident Indians (NRIs) visiting India, will need to be more vigilant, post the DTC regime. Under DTC, if their stay in India exceeds 60 days during a year and 365 days for the past four tax years, then they may be considered as residents of India.
Currently, they become residents only when their stay exceeds 182 days.
Once they become a resident, they may have to pay tax on their global income , if their stay in India for the past seven tax years exceeds 729 days and if they are residents in two out of the past 10 tax years. In a nutshell, NRIs run the risk of triggering worldwide taxation soon if they spend a significant time in India.
The DTC proposals relating to individual taxation have undergone significant change since the DTC was proposed in August 2009. One will really need to wait for the final bill, which will become operational from April 1, 2012.

Right now under section 80C, you can save up to 1 lakh of tax and if NRIs live more than 182 days in India than and only they are considered as residents of India.

But after DTC, only 2 months of stay will be eligible for considering as residents of India. This is really cool change.

However, we will need to wait until 1st April 2012 until the final bill is announced. The taxation laws under DTC will be more strict after for NRIs as well as Indian citizens after its implementations.

Another big limitation of DTC is that, it doesn’t include ELSS as a tax saving investment. ELSS are the tax heavens for many people in India and in past 5 years they are flourished like anything. But now, the ELSS will be history.

Rashtriya Swasthya Bima Yojana

Rashtriya Swasthya Bima Yojana (http://www.rsby.gov.in/) is the hugely successful public health insurance scheme for poor families.

Right now when I am writing this article, there are total 19 Million+ Smart Cards active under this scheme. RSBY is really a great health insurance scheme for poor families of India.

Here are the salient features of this Scheme. It’s really a great initiative by the Indian government for the poor families.

What is RSBY?

Ministry of Labour and Employment, Government of India has launched a health insurance scheme for BPL families which is called Rashtriya Swasthya Bima Yojana (RSBY).

Who is eligible?

The beneficiary is any Below Poverty Line (BPL) family, whose information is included in the district BPL list prepared by the State government. The eligible family needs to come to the enrollment station, and the identity of the household head needs to be confirmed by the authorized official.

What is the insurance coverage in RSBY?

Rashtriya Swasthya Bima Yojana provides cover for hospitalization expenses upto Rs. 30,000/- for a family of five on a floater basis. Transportation charges are also covered upto a maximum of Rs. 1,000/- with Rs. 100/- per visit.

What is the premium for RSBY?

The premium for RSBY is different in different set of districts. State Governments select insurance companies through open tendering process and technically qualified lowest bid is selected.

Who pays the premium for RSBY?

Government pays the premium for RSBY. Central Government pays 75% of the total premium (90% in case of Jammu & Kashmir and North east States) while State Government pays the remaining premium.

Will beneficiaries have to pay anything to get the policy?

Beneficiaries need to pay Rs. 30 per family at the time of enrollment.

Innovative Ways to Make Money From Mutual Funds

Many people don’t have any expertise to chose the right mutual funds. And well, this can be disastrous. I personally advise people to check the star ratings of the mutual funds from reputed fund rating websites like Valueresearchonline.com and choose 4/5 star rated mutual funds from it.

However, if you still don’t feel comfortable with this kind of investing than here are the two great ways to invest in mutual funds without any hassle.

01) Index Funds:

Well, yes. Index Funds. The Index funds have a portfolio that is mirror image of the underlying index. almost 60% of the actively managed mutual funds fail to beat the Sensex and give you the excellent returns. Than why not invest in Sensex itself, the bunch of largecap stocks from various industries?

In the long run, Index funds can give you excellent returns. One another advantage of index funds is – low fund management fees in comparison to the actively managed funds.

02) Fund of Funds (FoFs):

Now, many fund houses like ICICI offers FoF means these funds are the collection of carefully chosen other well managed mutual funds. If you don’t have any knowledge about how to choose a good mutual fund than simply put your money in FoF.

Thus, the above are the two great alternatives to invest in mutual funds if you don’t know how to select best mutual funds for you.

However, I personally advise people to increase their financial IQ. every week, give at least 4-5 hours to increase your financial IQ. One great way to boost your Financial IQ is, read my eBook – My Journey Billionaire Club.

In my eBook, I have explained 6 basic lessons and 10 commonest myths about money that rich teach their kids about money but the poor and middle class don’t.

You can download this eBook for FREE from the above link without any annoying registrations and boost your financial IQ by several folds.

Gujarat over the Sea dam

Gurajat is planning to build an over the sea dam in the northern portion of the Gulf of Khambat (Cambay) with an investment of over Rs 50,000 crore.
The 35-kilometre dam project named Kalpasar Dam Alignment would lead to a sweet water reservoir. Besides, it will also have a road and rail overbridge, which will reduce the distance between Bhavnagar and Surat by 200 kilometre.
While, the main dam help generate tidal power, the reservoir is expected to supply water for drinking and agricultural purposes.

Also know more about Dholera SIR in Gujarat.

Top 5 Investments for 2011

The year 2011 is coming and readers have started asking me that which are the best investments for the year 2011? Well, let me tell you in detail about the best investments in the year 2011.

Here are the best investments for 2011.

01) Stocks: Equity will be the best asset class in the future and will continue to generate highest profits in the future. Because of the quantitative easings by the US Government, more liquidity will be generated in the entire world and this liquidity will flow into the Indian markets.

02) Gold: Gold will continue to rise because the dollar is going to weaken. The US Government is going to weaken the US Dollar by printing more money out of thin air and that’s why this precious metal will appreciate over the time. However, keep in mind that your portfolio allocation in gold should not be more than 10% of your over all portfolio net worth.

03) Mutual Funds: Mutual Funds are one of the best financial product. This is because they are managed professionally. Mutual funds have their own fund managers who manage your money on behalf of you and generate excellent returns. In India, since the launch of mutual funds, they have managed to beat the Sensex and give the excellent returns.

04) Corporate Fixed Deposits: AA and AAA rated corporate fixed deposits are the best fixed income instruments. This is because they offer 2% higher returns than the regular bank deposits. So investors can invest in company fixed deposits to generate higher returns.

05) Start Your own Business: This is my favourite investment. I mean I simply love to invest my time and money both in my own business. Well, if you have never think of starting your own business than think it in 2011. This is because people who own their own business are financially more safe and secure than those who don’t own their own business.

Many people argue that, business is risky. But well, the truth is that, owning a job is risky if you know how to read the financial statements.

So the above are the top 5 investments of the year 2011. So What are you waiting for? Start vigorously investing in the above investments to get rich and financially free in the year 2011.