BasuNivesh moved to it’s own Domain “www.basunivesh.com” !!!

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I feel very happy to announce that “BasuNivesh” moved from this existing domain to new own domain www.basunivesh.com successfully. It is like moving from rental house to own house for me ūüôā

For readers- you will not loose any old contents but you feel some new changes in coming days. I am still working on the changes. All posts are available as it is in new domain. But I request all subscribes to do subscription once again to this new domain. You will receive mail regarding the same from official BasuNivesh mail soon.

I selected wordpress.org for creation of my new domain. I feel great freedom in all aspect than wordpress.com. I am thankful to all who helped me in this moving activity. Especially my brother, Abhinav, and BigRock team.

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Gold-10 interesting facts which you may not know.

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BasuNivesh now available in it’s own domain¬†www.basunivesh.com¬†from 22nd June 2012.

Below are the few interesting findings about gold which I think will surprise you or make you knowledgeable about gold related facts.

1) Southern states of India (Karnataka, Tamil Nadu, Andhra Pradesh and Kerala) constitutes around 40% of India’s gold demand. Western states constitutes around 25% to 30% , northern states around 20% to 25% and Eastern states around 10% to 15%.

2) 7%  of Indian household saving is in the form of Gold (RBI data 2009-10). But CMIE (Center for Monitoring Indian Economy) suggests around 36%.

3) 90% of the consumed gold in India is imported.

4) Gold and Jewellery constitutes around 30% to 50% of total marriage expenses.

5) Hence weddings generate around 50% of Indian gold demand. Gift range varies from 5 gram from poor families to 4-5 KG from affluent.

6) Despite this high demand, Indian gold jewellery consumption on per capita base is  (0.4 gram) below countries like USA and Italy (2009).

7) RBI’s 7% of total reserve is in the form of gold. Whereas USA have 72% and Europe have around 58% of gold as their reserve in their respective central banks (June 2010).

8) Currently India & China together account for approximately 25% of annual gold demand. But Indian above the ground gold stock is around 11% of global stock.

9) 40% to 50% of gold price movements since 2002 were dollar related.

10) Higher Real interest rate (Central Bank’s lending rate-Inflation) leads to lower demand in gold and lower Real Interest rate leads to higher demand in Gold. Equation suggests that a 100 basis points fall in real interest rate will result in an initial 1.5% rise in the price of gold.

When you need to come out from your equity investments?

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BasuNivesh now available in it’s own domain¬†www.basunivesh.com¬†from 22nd June 2012.

Every Financial Planner advise you to invest in Equity market to get good returns. Also it is proven thing that equity outperformed other asset classes over long run. But have you ever thought what will happen to your equity investments when you face the situation like 2008-09 recession exactly nearer to your financial goals? It is devastating effect on your investments. It may not¬†erode¬†your whole investments but to the extent it may harm your financial goals. Then what is need to be done? Is Equity worst investment? No…..But need cautious planning like when to enter equity and when to exit from it.

When you actually look at USA’s historical recessions, you notice that they took minimum from 6 months to maximum 4 years to recover. Same things may reflect over other countries too. So we can’t predict now the future recessions time span and when they can affect our economy. Instead if we plan our equity investments in a good way then we can atleast reduce the impact. Below are the few points to remember about entry and exit of equity market.

1) When to enter equity market-When you look at majority of investors who invested in equity related instruments, you will find that they lost more than profit making. Reasons are many. Few of them are-lack of knowledge, short term¬†strategy, based on hot tips, based on friends advise who told them to invest as that friend generated huge profit from equity investments, entering market when actually investors are booking their profits, based on TV shows (my next post will on these funny shows). So you need to enter market based on your goal’s time horizon. When your goal is long term like more than 5 yrs it is always best to park your investments in equity. Do your research like in what way you want to enter, either direct equity (if you are expert and time to manage them) else mutual funds route. Again while selecting direct equity or mutual funds you need to do lot of research or take the advise of well qualified adviser. Once you¬†finalized¬†the products then enter with SIP route. SIP is best proven method of entering into equity instead of one time investments. You may have noticed during bearish market trend that few news papers or media will publish data and shows you that SIP not worked well during the time frame they considered. But never judge the performance by merely looking at short term like 6 months to 1 year. Give enough time to equity and equity will¬†definitely¬†provide you a good returns.

2) When to exit equity market-As I told above, it is the timing of your exit from equity market will also make you easily achieve financial goals. It is common practice by most of financial planners that they recommend clients to invest for full term of their goal horizon into to equity. For example, suppose you have 1 year old kid and you are planning to start investment for your kid’s education, which you need to¬†accomplish at your kid’s age of 18 years. Then your adviser or planner will design you a plan where you need to invest for the all remaining 17 years into equity market through SIP route and they will not in contact with you or never look at your investments how they are doing during that 17 years period. But it is wrong what they are doing. Best practice is to evaluate your equity performance on regular bases like once in 3yrs or 5 yrs. Slowly try to reduce your equity exposure to debt. Suppose in the beginning of your investments if your equity exposure is 90% and debt 10% . But when you are about reach your goal then the exposure towards equity need to be 10% or less and debt 90% or more. Which will automatically protect your investments from such recessions or market down trend. ¬†This activity is called re-balancing of your portfolio. One more¬†strategy to secure your investment is, move your all equity investments to secured investment when you are about to reach your goals like 3 yrs to 4 yrs earlier.

Hope you got a few inputs like when you need to protect your equity investments. Happy investment !!! ūüôā

How you can achieve Financial Goals by small sacrifices?

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BasuNivesh now available in it’s own domain¬†www.basunivesh.com¬†from 22nd June 2012.

Starting this post with good news. BasuNivesh which started it’s journey on 9th December 2011, have crossed 10,000 hits within the span of 6 months !!!. Thanks for all who visited and encouraged me for this milestone. Hope you support me in future too.

It is often believed that to start for investing means first need to check your¬†affordability then start investing. That thinking and deciding process usually may takes from days to years. Which will automatically harm your financial goals. In simple terms “Investment” also called as¬†sacrificing¬†your current expenses for the better future expenses. For example, if you are living a lavishing life style (Which Financial Planners need to say because you never say you have lavishing life style :)) and need not thinking at this stage about your retirement, will automatically spoil your retirement life. Instead with few simple¬†sacrifices¬†of current expenses if you start to invest for your retirement at the earliest then you can enjoy planned and dignified retirement life without depending on others. So let us see few examples how with small sacrifices you can build your corpus for our financial goals.

1) Avoiding your weekly family dinner in Hotels-I consider you have family of four members where you, your spouse and two kids are staying together and usually enjoy your weekends by having dinner in hotels on every weekend. Approximately it may cost you around Rs.1,000 for each week (I am taking approximate cost vegetarian food as I am being veggie dont know the costs of non-vegetarian items :)) . What we can do by sacrificing dinner instead of every weekend to monthly once? You can approximately save around Rs.2,500 to Rs.3,000.  If you start to invest this Rs.2,500 in any normal equity oriented mutual fund which will fetch you around 12% CAGR for 25 years term then your accumulated amount will be Rs.  46,97,116 (Aprox half crore) !!!! I am not saying here to totally avoid your dinner outing. I am just giving you the figure, with just avoiding every weekend dinner in hotels if you plan for monthly then how much you can accumulate.

2) Quit Smoking-Smokers usually know the health risk attached with this habit. But unable to quit it as it became habit for them. But with strong commitments you can quit it and by this you can save your health as well as money. Let us take one example of person who’s daily expenses on smoking is around Rs.50, so monthly it will be around Rs.1,500. If you quit or started to lower your smoking habit and investing the same then you can accumulate around Rs.52,42,446 after 30 yrs with the approximate return of 12% CAGR. Half Crore ¬†within 30 years by quitting one of your bad habit !!! ūüôā

3) Using Bike instead of Car-For few people it became a necessary thing to use car even when they are travelling lone. It is imperative to go by car when you have few members with you. But when you are going lone and instead of using car if you use your bike or go by public transport then you are indirectly reducing the noise and air pollution of your city. Also indirectly you are saving few bucks which can atleast can be used your current educational expenses of your kids.

4) Avoiding unnecessary talk through phone-In today’s trend of mobile savvy world where you will get new versions of handsets each day, it became a habit to change your handsets like changing your clothes daily. But have you ever thought what will be the value when you sell the same handset next day?? It will depreciate instead¬†appreciation. It is not my recommendation to go with high featured handsets. But purchase the sets where you will get the features what you daily use. In this way you can save the wastage of money. Also by just avoiding few¬†unnecessary calls, monthly you can save few hundreds of rupees. With that saving you can easily take Term Insurance for you life and protect your family’s finance in the case of your untoward demise.

5) Electricity Saving-With using the electric power when you actually need and switching off the instruments when not in use, you not only save the electrical energy but also save few bucks which again make you think how you can utilize this saved amount.

I used the 4th and 5th example particularly for the people who argue Term Insurance is waste product as they can’t get returns during their life time. But with just simple saving techniques of your life you can easily cover your life.

Eventhough above examples which I mentioned looks like funny things but when you actually work out and follow the systematic saving and investing approach, you can easily accumulate the good amount of wealth. Hope from now onward you think twice and act. It is not my intention to make you “KANJOOS”, but just making you aware of easy steps of wealth creations. Also with above mentioned examples you not only creating few bucks of savings but also contributing to¬†society, environment and to your health.

What is “Investor Protection Fund” of BSE and NSE?

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BasuNivesh now available in it’s own domain¬†www.basunivesh.com¬†from 22nd June 2012.

What will happen to you when you will not receive securities you purchased or when you not receive payment towards your sale of securities from the Broker member of NSE or BSE, who is ¬†declared as defaulter or expelled his membership?? To protect the investors from such untoward incidents, NSE and BSE have set up the fund called “Investor Protection Fund”. Now let us look at it’s features.

1) Collection of Fund-The members of stock exchanges at present contribute to this Fund Re.0.15 per Rs.1 lakh of gross turnover, which is debited to their general charges account. The Stock Exchange contributes on a quarterly basis 2.5% of the listing fees collected by it. Also the entire interest earned by the Exchange on 1% security deposit kept with it by the companies making public/rights issues is credited to the Fund. As per the SEBI directive, auction proceeds in certain cases, where price manipulation / rigging was suspected, have been impounded and transferred to the Fund. Also, the surplus lying in the account of the defaulters after meeting their liabilities on the Exchange is released to them after transferring 5% of the surplus amount to this Fund.

2) Current Compensation available-Presently the maximum compensation available for investor is Rs.10,00,000 but it will be reviewed as and when so desire. For example compensation was Rs. 5,000 in the year of 1988 but now it stands to Rs.10,00,000.

3) Management of Fund-The Investors’ Protection Fund as above shall be held in trust and shall vest in the Exchange or any other entity or authority, as may be specified by the Relevant Authority from time to time. The Investors’ Protection Fund shall be managed by the Trustees appointed under the Trust Deed created and executed and in accordance with the provisions contained in the Trust Deed and the Rules, Bye-laws and Regulations of the Exchange. Interest earned on such fund may be utilized fully or partly according to the discretion relevant authority for the purpose of imparting education or training to investors, for creating awareness among investing community or for any research connected with this.

4) How claims settled-The arbitration award obtained by investors against defaulters are scrutinized by the Defaulters Committee, a Standing Committee constituted by the Exchange, to ascertain their genuineness, etc. Once the Defaulter Committee is satisfied about genuineness of the claim, it recommends to the Trustees of the Fund for release of the award amount or Rs.10.00 lacs, whichever is lower. After the approval of the Trustees of the Fund, the amount is disbursed to the clients of the defaulters from the Investor Protection Fund.

5) Few important things about settlement of claims- A) Claim will be settled after producing the relevant proof of transactions like payment or delivery. Hence proof of document is a must.

B) But for orders or trades recorded on the ATS of the Exchange, may also be treated as the proof of transactions and for which no other proof presentation is required.

C) Claims are settled for actual loss which includes any difference receivable by the claimant arising out of the transactions. But you will not receive any amount for the damage, interest or notional losses.

D) Claim must be furnished in the prescribed form which is available at the time of claiming.

E) Where a claim is not considered for compensation, whether in part or in full, the Relevant Authority may cause a notice to be served on the concerned claimant, stating details for such disallowance.

These are few important features of this fund. Hope it may be useful for you.

Meaning of Base Rate and Spread-Home Loans and Car Loans

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BasuNivesh now available in it’s own domain¬†www.basunivesh.com¬†from 22nd June 2012.

It is commonly believed that if Banks are offering you the home loan at 12% means it is the total interest they will collect and calculate on your loan. But it is not like that. Your interest on loan consists of two parts. One is Base Rate and another part is Spread. So let us look at each part and how each can affect your EMI.

1) Base Rate:-It is the new system of ¬†setting bank’s basic interest rate which was started from 1st July 2010. It replaced the old method of charging Benchmark Prime Lending Rate (BPLR). In simple words you may say that it is the minimum rate, below which Banks cant give you loan (exceptions are Agricultural Loan and Export Credit). It is reviewed on¬†quarterly base. But it is not mandatory that all banks must have same base rate.¬†Advantage of Base Rate over BPLR is¬†transparency. It is calculated considering the below factors. But¬†highest weightage¬†¬†is given to Cost of Deposits.

A) Cost of Deposits, B) Negative carry on CRR and SLR, C) Unallocatable  overhead costs, D) Average Return on Networth.

It is the benchmark for all floating rate loans except loans which have tenure of one year. RBI not made it mandatory to follow Base Rate for loans of below one year. But for this sub Base Rate loans too RBI put some strict ceilings.

2) Spread-This is your final rate of interest after adding some % to Base Rate. It is calculated based on the tenure risk, credit loss, profit requirement of bank, operating cost of the bank and risk assigned with individual customer. So each bank’s Base rate may be fixed for all customers. But remember that you may end up with either paying high interest rate or low based on the spread bank charges to each individual. Their is no cap on how much should be spread on and above Base Rate. But charged spread need to be¬†justifiable. Hence your banks may use this tool to charge you more by modifying spread as no regulation on this. Eventhough RBI says spread must be constant over the period of loan but remember to check it whenever the raise in your loan EMI. You need to¬†verify whether the raise in EMI is due to hike in Base Rate or Spread.

Hence while looking for loans always better to check two things from your bank, what is their base rate and spread rate. Also the guidelines Banks follow to calculate the spread and how often the possibility of change in spread. I am clarifying that even though base rate and spread are the part of other type of loans too, I wrote this post concentrating on home loan and car loan.

Difference between A Khata and B Khata-Bangalore Property

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BasuNivesh now available in it’s own domain¬†www.basunivesh.com¬†from 22nd June 2012.

Few days back I came across the question from one of my friend and client who is interested to purchase land and that land is of B Khata. He asked me is it good to have this property with B khata and what is the difference between A Khata and B Khata. So just thought to write up on this issue.

First let us look at what is meant by “Khata” according to BBMP (Bruhat Bangalore Mahanagara Palike). Khata is an account of assessment of a property, recording details about your property such as size, location, built up area and so on ¬†for the purpose of payment of property tax. It is also a kind of identification of the person who is primarily liable for payment of tax. ¬†It is required when you require a building license, trade licence or loan from banks or any other financial transactions. It is mandatory for all property owners to pay property tax, hence you need to have khata.

Now difference between Khata and Title Deed is, khata is an account of assessment of a property for payment of tax only. Hence khata will not confer ownership of property. Whereas Title Deed is the valid document which confer ownership on property.

Let us look at the reasons behind the origin of A Khata and B Khata lands.¬†In 2007, those under the seven City Municipal Councils (CMC)‚Äąof Bommanahalli, Dasarahalli, Krishnarajapuram, Raja Rajeshwari Nagar, Mahadevapura, Byatarayanapura, Yelahanka, one Town Municipal Council (TMC) of Kengeri and 110 villages, were brought under the fold of the Bangalore Mahanagara Palike (BMP).¬†Following this expansion and creation of the Bruhat Bangalore Mahanagara Palike (BBMP), those who did not have appropriate approval from the concerned land development authority and yet to come under the ambit of the Palike were issued an acknowledgment which was in common parlance known as ‚ÄėB‚Äô Khata.

However, in reality, ‚ÄėB‚Äô Khatha does not exist. Property identification numbers are entered into a register called as ¬†‚ÄėB‚Äô register stating that the civic agency has been paid its dues by the property owners.¬†For citizens in need of an approval from the appropriate land development authority but have a Deputy Commissioner (DC)‚Äąconversion, the BBMP re-introduced Betterment Charges which will entail people to take a Khata on their property. This is how B Khata originated in the mind of property owners but not legally ūüôā

Now the disadvantages of having B khata is that, you will not get building license, trade licence or loan from banks or any other financial transactions. Hence it is big hurdle to have B Khata land. Now what are the ways of converting B Khata land to A khata?

By paying betterment charges you can convert B Khata to A Khata. But you will face lot of hurdles, few of them are as below.

1) You should have DC converted property

2) Tax must be paid till date

3) Betterment charges for the conversion property need to paid to BBMP.

So the solution is to avoid purchasing B Khata properties and prefer A Khata to have comfortable position in dealing future financial transaction hurdles.

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