2016 will be different

The domestic stock market has reacted negatively to demonetisation and opened lower after digesting the intense social media heat both for and against demonetisation. However, the market gained sanity later and reacted calmly by the close of the week. 

Much has been said about demonetisation but no one denies the pragmatic outcome of the same. Banks have started reducing interest rates and some of the private lenders have already reduced rates by 15 to 20 bps. The stock market is altogether an independent animal with has scant regard to demonetisation, if any. However, such moves should bring a positive shift towards a cashless economy. Combined with GST, it would possibly help tame corruption and a new era of meritorious society should emerge. 

In the stock market, open interests in index futures have fallen sharply and are running on the lower side of the annual averages. Volatility, too, is cooling down slowly, which is good for the health of the market. 

Stocks that are banned in the derivative segment stand at a negligible level, indicating a moderation in leveraged positions. Normalcy is creeping back into both the stock market and the economy. 

The stock market is limping back to normalcy. Greed and fear seem to have abated and all the external macro-factors have almost been discounted. 

The massive fall in stock prices on fears of a slowdown seems to be overblown from market’s perspective. It is well known that the market is a six-monthly forward discounting machine. 

Any negative event, whose effects are to be felt within one or two quarters, is almost always discounted. Thus, there is nothing that investors must worry about regarding the effects of demonetising high-value notes, as it has already been discounted by the market. 

The recent fall, therefore, creates a compelling opportunity to buy great businesses. 

Investors should take the opportunity and start purchasing Equity Mutual Fund for long-term portfolio.

views and recommendations expressed in this section are personal. Please consult your financial advisor before taking any position. 

Principle of Wealth Building 5 of 5

If you thought building wealth was about how much you make then you would be wrong: it's about how much you keep. 

The single biggest expense standing between your earnings and savings is (drum roll, please)... taxes. 

Nothing else comes close. 

When you add together all taxes on items like income and consumption, factor in the pass through of all other taxes like corporate taxes, import duties, etc., you quickly see what an extraordinary burden taxes have become regardless of your income level. 

That's why legally controlling this expense is the 5th essential wealth building principle. You must learn how to keep more of what you make. 

The key point is how your government (in it's infinite "wisdom") has decided to favor certain financial practices through tax incentives. 

How does this all fit together? Well, remember a few emails back when I taught you the 3 Principle of Wealth Building - paper assets, real estate, and business? 

At the time, I explained how paper assets were a wealth parking vehicle, but real estate and owning your own business were wealth building vehicles. This critical distinction surprised a lot of readers. 

While the stats make this claim indisputable, I wanted to give you two reasons why it's true. 

The first reason was contained in the last lesson - leverage. Few leverage opportunities exist in paper assets (and all carry significant risk and cost). However, business ownership and real estate offer maximum leverage opportunities (many without increasing risk or cost - some even lower costs). 

Now you're learning a second reason these two asset classes are favored wealth building vehicles - tax advantages. Real estate and business ownership offer tax advantages not available to Salary earners or paper asset investors. 

(Yes, I know I'm using India-centric terminology; however, similar laws and principles apply in most common law countries for my readers outside India) 

The government has decided to make these two asset classes the most tax-favored wealth building vehicles available. 

For example, it's entirely possible to own real estate that puts cash in your pocket every month while providing valuable tax deductions that give you a bigger tax refund at the end of the year as well. You can't do that with earned income from your job or capital gains from stocks and bonds... without going to jail. 

Similarly, when you own a business many expenses are paid partially by the government as legal tax deductions. This can put more money in your pocket for any given level of income. 

Now, it's beyond this brief email instruction to give detailed analysis of all the deductions available or how they work. There are too many countries, too many rules, and everyone's situation is unique. You'll need to learn the details from one of the many books focused exclusively on this topic or consult with a competent tax professional. 

Instead, what is important for this lesson is to understand how real estate and owning your own business are two wealth building vehicles that afford both valuable tax deductions and leverage opportunities. 

The leverage and tax advantages can dramatically affect your rate of compound growth which will shorten the amount of time it takes to achieve wealth. In short, these two principles allow you to create more wealth with fewer resources - both time and money. You can't apply these two principles to paper assets. 

It's why more people build wealth through real estate and business entrepreneurship than any other asset classes. It's also why paper assets are generally used to park and preserve wealth built elsewhere. 

Sure, you can still achieve financial security the traditional way with aFixed Deposits and savings plan invested in paper assets (which we will cover in detail in the next several lessons). This strategy works (without leverage or tax advantages) if you have the time and discipline to make it work. 

It is well-proven financial path that is governed by strict mathematical limitations. 

However, many people want to turbo charge their results. They want financial security in 10-15 years instead of taking a lifetime. If you're one of those people then there is no getting around the necessity for leverage and tax advantages. 

Your homework from this lesson is to develop a working knowledge of the various tax strategies that apply to your chosen path to wealth. Develop this knowledge or find a professional to help you because it will pay you dividends for a lifetime. 

I know it has for me. That's why it's your 5th wealth building principle. 

I hope you've enjoyed these first 5 principles to wealth Building. Yes, there are many more wealth principles. Course on wealth Building teaches you everything required in carefully structured, step-by-step, learning modules so you walk away with your own personal plan for wealth. You can learn more about it.

In the next blog in I'll share more ideas explaining exactly how the traditional passive investment approach using paper assets can be applied in your wealth plan, and I'll show you the two essential factors required to make it work. This is important material since nearly everyone applies this strategy - for at least a portion of their wealth - me included. 

Thanks for your support, and I'll see you in few days...

Principle of Wealth Building 4 of 5

Dear Customer,

Unfortunately, other tasks require prioritization right now, and I'm not willing to rush the writing and sacrifice quality. Principle of Wealth Building. 

In other words, Principle of Wealth Building 4 and 5 lesson delayed. 

If you are disappointed then that is a good thing because it means I've been delivering value to you. 

Principle of Wealth Building 4

Why? You have limited time and capital resources. 

Time and money spent one place cannot be used elsewhere. At some point your financial growth hits a wall because it's limited by your personal resources. 

However, the world has unlimited time and unlimited resources. Your financial growth is literally limitless when you leverage other people's resources. It's how all fortunes - large and small - are built. 

Leverage is your 4th wealth building principle because it multiplies your results for any given expenditure of effort. It must be a part of any properly designed wealth plan. 

However, leverage can make the good times great and the bad times unbearable (if you apply it incorrectly). 

In other words, a common myth about leverage is it increases risk. This is only true for certain types of leverage such as financial leverage. 

Other types of leverage can actually increase results while reducing risk. 

Surprising... but true. 

For example, I'm using technology leverage to deliver this message to you. I write these lessons (knowledge leverage) once and leverage technology to build relationship and add value to thousands of people's lives. 

No risk - unlimited reward. 

Understanding leverage's many aspects at a very deep level is one of the most important principles in your wealth building plan. 

It's another make-or-break issue (like so many others... that is why so few people succeed financially. Each one of these principles is critical to your financial success.) 

Using my own life as an example, I became uncomfortable with the dangers inherent in financial leverage in late 2000. I sold all my holdings prior to the huge decline to eliminate financial leverage. As a replacement, I consciously chose to increase my knowledge and technology leverage instead by focusing on this business. 

None of that was by chance, yet it has been worth millions. It was the conscious matching of an appropriate leverage strategy to the current market environment that resulted in eliminating risky leverage because it was inappropriate. This is an essential wealth building principle that you would be wise to emulate. 

Your homework for this lesson is to look at your wealth plan. Where are you including leverage? Where could you add leverage without increasing risk? What changes would you have to make to open new potential for increased leverage and results? 

The answers to these questions can make-or-break your wealth. 

In a few days I will send you the 5th wealth building principle as part of this base education for developing a proper wealth plan.

I hope you are enjoying these insights. My goal is to help you break from ordinary thinking so you can produce extraordinary results. 

See you in a few days with the 5th principle...

Principle of Wealth Building 3 of 5

I know this principle is stupidly obvious... but very few people actually do it. 

In other words, you already know the 3rd wealth building principle, but odds are very high you aren't walking-the-talk. 

To know and not do is to not know at all. 

So at the risk of irritating you with the obvious, here is wealth building principle #3... 

You must produce more income than you spend and invest the difference. 

That's it! Like I said, this isn't rocket science. 

The problem is almost nobody does it. If they did then they would be wealthy over time. It is just simple math. 

Why? Wealth is a form of deferred gratification. When you save money you are building a small army of soldiers that self-duplicate into additional soldiers that grow until you have a massive army that supports you for a lifetime. 

However, when you spend money you not only slaughter that one soldier but you also eliminate every soldier he would have duplicated into over your lifetime. It is a multiplicative effect. 

Earning more than you spend and saving the difference is one of those principles that is "easy to understand but hard to live". 

I know from first-hand experience how violating this obvious principle can hurt. I've blown it myself and it literally cost me lac's. I've coached countless clients who have made similar mistakes. 

It is a really common problem. It is why most people never achieve wealth. 

Yet, if you want financial security then you must obey this principle. That is not my opinion. It is simple, inviolable, math. 

Your homework is to look at your own savings rate. How much of your earnings is growing into wealth? Is this consistent with your values and goals? 

In the next lesson we will continue with the fourth wealth building principle in this series. 

Finally, if you're liking these principles of wealth building then you'll love module 5 in my course teaching you how to design your own wealth plan.

See you in a few days with the 4th principle...

Principle of Wealth Building 2 of 5

Have you ever noticed how the wealth plans provided by traditional financial advisers just sit on the shelf and collect dust?

Who really uses them?

The problem is they aren't wealth plans. They are investment plans... and that is the crux of the problem.

These "investment plans" are nothing more than a computer simulation that applies historical return assumptions to a static portfolio mix.

No wonder they sit on the shelf and collect dust - there is nothing for you to do except save the money and send it to your broker to invest. It is passive. It is not a working document that governs how you'll build wealth.

That's because traditional financial advisers are in the business of managing the wealth you already built. They are not in the business of helping you build the wealth in the first place.

Shocking... but true.

If you aren't completely clear on this fact just try and get a financial adviser to return your phone call after you tell him you have no money to invest. (It will be a long wait.)

What you need is a plan to build the wealth in the first place. Not a plan to park the wealth you built elsewhere.

An essential principle to this plan is that it must be based on your unique values, skills, interests, goals, and resources in order to produce results. It must harvest your unique competitive advantage and be an expression of your life today as well as where you want to be in the future.

Generic, cookie-cutter, computer simulation, "wealth plans" won't work. It must be unique to you and an expression of your life.

For example, I have one client building wealth through single family homes because his wife is a realtor with great "deal flow". 

The area he lives in offers positive cash-flow at retail pricing (not to mention the great deals he gets through his wife).

The key point to notice is how this plan specifically capitalizes on the unique skills and competitive advantages this client enjoys. 

It harvests the low hanging fruit... and your plan should do the same.

Continuing with examples, another client is building wealth by growing his law practice and parking that high income in both paper assets and the commercial building that houses his law practice.

The key attribute to this client's situation is the high earning capacity of his law career. He won't improve his earnings by diverting attention elsewhere so the focus of the plan is to better maximize his already strong income into optimal asset growth. Again, notice how each client is harvesting his competitive advantage. You must do the same. Your homework is to figure out your competitive advantage. Where is the low hanging fruit in your life that can be developed into a wealth plan? Identifying these strengths is the key to designing your unique wealth plan that will actually work.

It's why no two coaching clients of mine have identical wealth plans. Every plan is different because each client is different... yet they all obey similar principles.

In the course on designing your wealth plan (where these lessons are excerpted from) the entire first Module is dedicated to developing your competitive advantage by connecting those personal attributes into your wealth plan. There's even a cool 3 part series of lessons in Module 1 called "You Inc." showing you how to efficiently organize your life activities for life balance and efficient wealth growth - both at the same time!

In your next lesson of this course we'll continue with the 3rd in this 5 part series of essential principles that must be included in your wealth plan.

See you in a few days...

Ritesh.Sheth CWM^®

CHARTERED WEALTH MANAGER

              Helping you invest better...  

Allaudin Bldg Shop No 1,Manchubhai Road,Malad East,Mumbai - 400097.Shop No.9,Param Ratan Bldg,Jakaria Road,Malad West,Mumbai - 400064.Tel:28891775/28816101/28828756/28823279. CELL:9930444099  www.tejasconsultancy.co.in | E-mail Us: ritesh@tejasconsultancy.co.inGo Green...Save a tree. Don't print this e-mail unless it's really necessary

Disclaimer:This blog is addressed to and intended for the investors of Ritesh Sheth & Tejas Consultancy only. You are advised to contact Ritesh Sheth & Tejas Consultancy to clarify any issue that you may have with regards to any information contained in this emailer. The views are personal. Ritesh Sheth & Family or Tejas Consultancy does not guarantee the accuracy, adequacy or completeness of any information in this blog and is not responsible for any errors or omissions or for results obtained from the use of such information. Investopedia definitions are used for educational purpose. Ritesh Sheth & Family or Tejas Consultancy does not have any liability to any person on account of the use of information provided herein and the said information is provided on a best effort basis only for educating investor. In case of investments in any of our schemes, please read the offer documents carefully before investing. 

Principle of Wealth Building 1 of 5

The first principle of wealth building is there are only three paths to choose from in this journey... 

1. Paper assets (stocks, bonds, etc.)
2. Investment real estate (not your home) 
3. Owning your own business 

Your wealth plan should include at least two of the three paths and occasionally will include all three (depending on personal circumstances). This increases safety and certainty in the outcome. 

Surprisingly, paper assets are rarely a wealth building vehicle despite the avalanche of media propaganda leading you to believe otherwise. They are typically a parking place for preserving and growing the purchasing power of wealth earned elsewhere. 

The reason this is true is because of strict mathematical limitations to paper asset growth. It is the only asset class out of the three that is governed by these limitations. 

(Side note: Did you notice the irony that paper assets are not really a wealth building vehicle when that is the only thing included in a traditional adviser's financial plan? That may not make sense until you realize that financial advisers are in the business of helping you manage the wealth you already created. They are not in the business of helping you build wealth in the first place.) 

In other words, there are really two steps to the wealth process (but most people only think in terms of one). The first step is to create wealth and the second step is preserve and grow that wealth through investing. 

So how do most people create wealth in the first place? 

Statistically, the answer is real estate and owning your own business. Why this is true will be explained in wealth plan principles 3 and 4 over the next few weeks. These reasons are an important part of your plan. 

A small proportion of the population can save their way to wealth by applying frugality and deferring earned income (wealth earned elsewhere) to wealth vehicles 1 & 2 (real estate and paper assets). 

However, saving your way to wealth is less common because it ignores wealth plan principles 3 & 4 and because it requires discipline, persistence and starting early enough in life to allow compound growth to work its magic. Yes, it is a workable strategy, but not many people fit this profile. 

Your homework from this lesson is to start thinking about which of the three paths to wealth you would like to include in your wealth plan. 

In your next lesson I will explain how to match the various paths to wealth with your unique life situation to begin formulating your personalised wealth plan. This is critically important to actually reaching your goal. 

There are many ways to achieve wealth, but only one path that will uniquely fit you. I will explain how that works in your next lesson. 

Finally, if you're liking this series, consider taking it to the next level with my course on designing your wealth plan. In Module 2 - Lesson 4 of that course I show you exactly how mathematical limitations to asset growth get integrated into your wealth plan design, and I provide the necessary resources showing you realistic rates of growth for each of the assets in your plan. Also, in Module 4 of the course, I explain the principles underlying each of the 3 asset classes so that you know how to properly utilize each asset class in your wealth plan.  

Okay, see you in a few days with your next lesson from this course... which will be wealth plan principle #2 of 5. 

See you then...

Ritesh.Sheth CWM^®

CHARTERED WEALTH MANAGER

              Helping you invest better...  

Allaudin Bldg Shop No 1,Manchubhai Road,Malad East,Mumbai - 400097.Shop No.9,Param Ratan Bldg,Jakaria Road,Malad West,Mumbai - 400064.Tel:28891775/28816101/28828756/28823279. CELL:9930444099  www.tejasconsultancy.co.in | E-mail Us: ritesh@tejasconsultancy.co.inGo Green...Save a tree. Don't print this e-mail unless it's really necessary

Disclaimer:This blog is addressed to and intended for the investors of Ritesh Sheth & Tejas Consultancy only. You are advised to contact Ritesh Sheth & Tejas Consultancy to clarify any issue that you may have with regards to any information contained in this emailer. The views are personal. Ritesh Sheth & Family or Tejas Consultancy does not guarantee the accuracy, adequacy or completeness of any information in this blog and is not responsible for any errors or omissions or for results obtained from the use of such information. Investopedia definitions are used for educational purpose. Ritesh Sheth & Family or Tejas Consultancy does not have any liability to any person on account of the use of information provided herein and the said information is provided on a best effort basis only for educating investor. In case of investments in any of our schemes, please read the offer documents carefully before investing. 

Need steady income ? Think of Mutual Funds Monthly income plans

Monthly Income Plan invests in government securities, corporate debt and money market instruments as well as a small portion in equity. The equity portion is invested across market stocks.

Key Benefit

Monthly Income Plan fits in nicely between a bond fund and a balanced fund. It has the advantage of choosing among sovereign, corporate and money market instruments while the flexibility to invest upto 15% to 25% of the portfolio in equity.

Tax Efficiency

• Choosing a SWP on MIP with growth option is a tax efficient way of enjoying the benefits of the investment. Dividend income from MIP is subject to dividend distribution tax at 28. 84% (for individuals/HUF). However investors opting for SWP from growth option are subjected to pay short term capital gains tax or long term capital gains tax depending on the period of their investments. One of the efficient strategies is to start SWP after 3 years from the investment date. This ensures that the withdrawals are only subjected to long term capital gains tax. Long term capital gains on debt funds are taxed much lower at 20% with indexation benefit.
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Long term capital appreciation and current income Investment in equity and equity related instruments as well as fixed income securities (debt and money market securities).

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Call me to know more on such products. 

"What's next?"

Dear Investor,

The budget was wholly aimed at improving the infrastructure of the country, especially in road sector. With monsoon not being adequate for last two consecutive years, the rural economy is under pressure, and hence, the budget had many provisions addressing the rural segment of the economy.

Meanwhile, there was also driving force on entrepreneurship and rationalisation of tax structure for start-ups and new setups in the manufacturing sector.

Valuations getting better across the board,focus on themes like 7th pay commission, Focused Government reforms, Digital India this all beneficiaries could benefit your portfolio significantly.

Macroeconomic stability is fundamental to ensuring that there is further scope for monetary policy easing. Govt's Assurance of abiding by its fiscal deficit target at 3.5% of GDP in FY 16-17 has been able to provide room for easing of key policy rates by RBI.

As global volatility stabilizes, expect FII flows to resume in India. Time in the market more important than timing the market – volatility in markets to remain elevated.

Inspiring quotes: 

"The four most dangerous words in investing are: 'this time it's different.'" - Sir John TempletonFollow market trends and history. Don't speculate that this particular time will be any different. For example, a major key to investing in a particular stock or bond fund is its performance over five years. Nothing shorter.

"Every once in a while, the market does something so stupid it takes your breath away." - Jim CramerThere are no sure bets in the world of investing; there is risk in everything. Be prepared for the ups and downs. 

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." - Warren BuffettBe prepared to invest in a down market and to "get out" in a soaring market.

So, The world of investing can be cold and hard. But if you do thorough research and keep your head on straight, your chances of long-term success are good. 

Recommend regular and disciplined investment in equities – Investors should look at a mix of large and midcap funds for 3-5 years horizon on systematic investment basis.

Please feel free to call us for more detailed discussion.

-- 

Regards,

Ritesh.Sheth CWM^®

CHARTERED WEALTH MANAGER

              Helping you invest better...  

Allaudin Bldg Shop No 1,Manchubhai Road,Malad East,Mumbai - 400097.
Shop No.9,Param Ratan Bldg,Jakaria Road,Malad West,Mumbai - 400064.
Tel:28891775/28816101/28828756/28823279. CELL:9930444099  www.tejasconsultancy.co.in | E-mail Us: ritesh@tejasconsultancy.co.in

Go Green...Save a tree. Don't print this e-mail unless it's really necessary

Disclaimer:
This emailer or Social Media feeds is addressed to and intended for the investors of Ritesh Sheth & Tejas Consultancy only and is not spam. You are advised to contact Ritesh Sheth & Tejas Consultancy to clarify any issue that you may have with regards to any information contained in this emailer.The views are personal. Ritesh Sheth & Family or Tejas Consultancy does not guarantee the accuracy, adequacy or completeness of any information in this emailer and is not responsible for any errors or omissions or for results obtained from the use of such information. Ritesh Sheth & Family or Tejas Consultancy does not have any liability to any person on account of the use of information provided herein and the said information is provided on a best effort basis. In case of investments in any of our schemes, please read the offer documents carefully before investing.
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let's make money using common sense: Things to Know About Investing Your Money

let's make money using common sense: Things to Know About Investing Your Money: Investing is easy. Just watch  “The Wolf of Wall Street.”  All you do is get some buddies together, pool your money, buy low, sell high an...

Things to Know About Investing Your Money

Investing is easy. Just watch “The Wolf of Wall Street.” All you do is get some buddies together, pool your money, buy low, sell high and then find a place big enough for your private jet and sports cars.

Investing doesn’t work like that in real life — and you probably won’t get super-rich in a short time. But by learning the basics of how to invest your money through a long-term approach, you can safely and securely grow your money over time.

1. Do I need a lot to start investing?

It is natural to think that investing is for people with throwaway money, but over time, pennies turn into Rupee. “Being a financial adviser for over 27 years, it amazes me how some people are able to accumulate so much money even if they don’t have huge incomes.” 

“It is a systematic approach, and over time, by investing small amounts on a regular basis, people are able to accumulate large nest eggs.”

Why you care: Start now with whatever you have. Time is a greater asset than money.

2. What about risk?

The first rule of investing is that the potential for gain comes with the potential for loss. The higher the potential payout, the bigger the risk of losing money. Conservative investments like bonds are far less dangerous than highly risky investments such as penny stocks, but they don’t have nearly the potential for a big windfall. There is no such thing as a safe bet.

Why you care: If someone pitches an investment as “guaranteed,” “risk-free” or “can’t lose,” walk away. All investments come with risk — without exception.

3. What’s the value in diversification?

The old adage “don’t put all your eggs in one basket” was never more true than it is for investing. By spreading your money around different investments, you hedge your bets and protect yourself against a singular, catastrophic loss.

If you put all of your money in Abc Co, and Abc co goes under, you go under with it. If abc co is just part of a larger blend of investments, you can absorb the loss and move on.

Why you care: It is important to create a portfolio with a wide variety of investments. Diversification is your greatest protection against risk.

4. Are a few stocks enough for diversification? 

“Avoid individual stocks and invest in a low-cost, diversified Equity fund's over time.”

“Warren Buffet would tell you the same thing. If you’re a us, this is just glorified gambling and likely to cost you a lot more than it will make you.”

Why you care: Beginner investors are often intimidated by the market and simply choose to buy stock in a company they like or that someone tipped them off about. Don’t pick individual stocks — that’s the opposite of diversification.

5. What is the stock market?

The stock market is a marketplace in which shares of publicly traded companies are issued and traded. This enables companies to raise vital capital, and it gives investors like you the chance to make money by buying into these companies — and to benefit from their financial achievement. 

Why you care: The stock market is crucial to the national and global economy, and it is one of the best ways to invest money.

6. What are stock exchanges?

The stock market consists of individual stock exchanges, which exist to ensure fair and accurate trading. Stock exchanges exist all over the world. They are the physical marketplaces that make up the concept of the “stock market.” Among the most famous exchanges in the world are the New York Stock Exchange and Nasdaq.

Why you care: These marketplaces are where some of your most important investments will be bought and sold.

7. What are indexes? 

Indexes are a crucial component of measuring the health of the stock market. Indexes are imaginary portfolios of securities, each of which uses its own method of calculation.The S&P BSE Sensex is a “index of 30 well-established and financially sound companies listed on Bombay Stock Exchange" OR NSE's flagship index, the CNX Nifty,the 50 stock index, is used extensively by investors in India and around the world as a barometer of the Indian capital markets and is commonly used as a benchmark for the entire stock market.

Why you care: Indexes reflect the health of the overall market.

8. What are securities?

Security refer to financial instruments with some kind of financial value. Securities can be stocks, bonds or the rights to ownership, which are called options. Securities are generally either debt securities, which represent money owed, and equities, like stocks.

Why you care: If you decide to invest, you will almost certainly purchase securities 

9. What are stocks?

Stocks, also called “equities,” are securities that represent partial ownership in a company. Companies sell stock to raise money or to pay off debt. People purchase them for capital appreciation, which means that when the value of a company grows, so does your stock price. Some stocks pay dividends 

Why you care: Many funds available to you contain stocks purchased on the stock market.

10. What are bonds?

Bonds are debt securities, like IOUs (IOU' An informal document that acknowledges a debt owed. IOU is an abbreviation, in phonetic terms, of "I owe you." The debt owed does not necessarily involve a monetary value but can also involve other product) . Governments and corporations issue bonds to raise money. Unlike stocks, in which the investor is buying into the company, a bond represent a loan that is to be repaid with interest. Bonds are safe and predictable and — if allowed to mature — preserve the initial capital. Bonds are often included in funds to mitigate riskier investments.

Why you care: Bonds are among the most common investments and will likely be a part of any fund you buy.

11. What is the difference between corporate and government bonds?

Bonds are issued by both private and public sector entities. Earnings on GOVT. PSU bonds aren’t taxed, but the rates of return are lower. Corporate bonds pay higher returns, but the investor must pay taxes on earned interest.

Why you care: Your income tax rate will decide which kind of bond is right for you.

12. What are mutual funds?

Mutual funds pool money from many investors to be housed in one large portfolio. Mutual funds are diversified and may contain stocks, bonds or other securities. Investors like them because they are managed by professionals who do research and execute trades. Those managers take a fee, making mutual funds more costly than passively managed funds like index funds.

Why you care: Mutual funds are a common choice for beginning investors.

13. What are index funds?

Unlike mutual funds, which are actively managed, index funds are passively managed portfolios designed to mirror the performance of a specific index, like the Dow Jones or the S&P 500. Index funds are popular because they provide instant diversification.

Why you care: Unlike mutual funds, index funds are not actively managed because they simply mirror an index. Therefore, they have very low fees

14. What are exchange-traded funds?

Exchange-traded funds (ETFs) are like mutual funds in allowing investors to pool their money in a large fund. But they are bought and sold in shares during regular trading hours on stock exchanges, hence the name. ETFs are not mutual funds. They can only be bought and sold in market transactions and cannot be sold retail directly to investors. Many different kinds of funds, including index funds, can be bought as ETFs.

Why you care: ETFs are very popular because they allow average investors to purchase shares of funds in small amounts.

15. What are hedge funds?

Hedge funds are yet another way to for groups of people to pool their money to purchase a large portfolio. Hedge funds, however, are not regulated nearly as heavily as mutual funds, and they generally are open only to accredited investors. Accredited investors are generally wealthier with high incomes and significant capital and assets. If you are a beginning investor, you will probably not be investing in a hedge fund. 

Why you care: Anyone asking a beginning investor with modest resources to invest in a hedge fund could be running a scam. 

16. What are penny stocks?

Penny stocks are low-priced stocks, sometimes trading for just a few pennies a share, and never for more than Rs.5. The lure of penny stocks is that many giant, global companies started out as penny stocks, and investors who bought thousands of shares in the beginning when the stock traded for just few Rupee made enormous returns. The downside is that most penny stock companies will never amount to anything.

Why you care: Penny stocks are incredibly risky. Many penny stock traders target our investors. Avoid them until you are competent and confident that you can decipher the often-foggy reporting that comes with penny stock investing.

17. How do I buy securities?

Although some companies allow direct purchasing, the overwhelming majority of stocks have to be purchased through a licensed broker. You tell your stockbroker how much of a given stock you want to buy, and he or she executes the trade.

Why you care: You need a broker to invest in the stock market.

18. What is the difference between a discount broker and a full-service broker?

Full-service stockbrokers give advice and tips to their clients, but they take a hefty fee. Discount brokers operate online and only execute trades, for just a few Rupee a trade.

Why you care:  Some investors have long-term relationships with their brokers. Other people will never meet or even speak to the people who execute their trades. This depends on whether you employ a discount broker or a full-service broker.

19. If I’m just starting out, don’t I need advice from a full-service broker?

It may seem counter intuitive, but full-service brokers often handle more experienced clients with more complicated investment needs. Our investors often invest in simpler vehicles, like mutual funds. In these scenarios, investors often choose to save money on trades by picking a fund.

Why you care: You need to decide if the advice from a full-service broker is worth paying for.

20. What is Rupee-cost averaging?

Rupee-cost averaging is a strategy where investors contribute the same amount of money consistently over time. If you invest, say Rs.5000 a month, in an Diversified fund without regard to the fluctuating price of the stock, you’ll wind up buying more of it when it is cheaper and less of it when it is more expensive.

Why you care: Emotions are important for long-term investing. “If the market rises after your initial investment, you can feel good about how your portfolio has performed and how smart you were for not delaying investing".
“If, on the other hand, the market has fallen, you can feel good about the opportunity to now buy at lower prices and how smart you were for not putting all of your money in at one time. Either way, you win from a psychological perspective.”

21. Will I be paid dividends?

Dividends are a portion of company earnings paid back to investors, through a Rupee amount or a percentage of market price, called “dividend yields.” 

Why you care: Not all companies pay dividends.

22. Who regulates Indian's investment world?

The Securities and Exchange Board of India . 

Why you care: This branch of the government exists to protect investors and maintain fair, orderly markets.

23. What do I do if I think I’ve been scammed?

Contact the http://scores.gov.in/ right away if you think a person or company misrepresented a security or any other investment.

Why you care: Anytime money changes hands, unscrupulous people will try to take advantage for profit — especially when it comes to us.

24. Should I consider day trading?

Day traders seek fast, short-term gains by buying and selling in high volume throughout the trading day.

Why you care:  Often glamorized as a fast path to big money, day trading is actually quite risky. The Sebi warns against the practice.

25. Is short selling right for beginners?

Short selling, which involves betting against a stock, involves the selling of a security the investor doesn’t own. A broker loans the investor shares of stock out of his or her own inventory. Eventually, you have to “close” the short by buying those shares back to return to the broker. If the stock loses value after you borrowed it, you can buy it back cheaper and keep the profits.

Why you care: Short selling is a popular form of investing you may want to try once you master the basics. 

26. What is foreign exchange?

Foreign exchange involves investing in, buying, selling or trading different kinds of international currency.

Why you care: The global foreign exchange market is by far the largest market in the world.

27. What are commodities?

Commodities are physical goods that are basically the same no matter who produces them, such as oil or gold.

Why you care: Commodities markets are among the most lucrative and heavily traded in the world.

28. What is futures trading?

Futures are contracts that obligate an investor to purchase goods like commodities at a later date. This strategy is often used to hedge or speculate.

Why you care: Futures trading allows you to bid on a range of goods for both long and short investments. 

29. What’s the difference between options and futures?

They are very similar, but options are contracts that give investors the opportunity to buy instead of obligating them.

Why you care: Managers often use options to hedge or to speculate, which could lower or increase the risk associated with your fund.

Ritesh.Sheth CWM^®

CHARTERED WEALTH MANAGER

              Helping you invest better...  

Allaudin Bldg Shop No 1,Manchubhai Road,Malad East,Mumbai - 400097.
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