Rs. 150 Coins Will Be Here

On the occasion of  taxation in India being 150 years old , the finance ministry would be releasing a Rs.150 rupees coin .

This would be the first time that Rs.150 denominated coin would be released and only about 200 of such coins would be released

So in case you happen to lay your hands on one , make sure you do not spend it and hold on to it , as someday it may be worth a lot lot more.

As a tax payer not really sure if this is a occasion to celebrate , it could be,  if i could get hold of one of these new coins

MOAT

A MOAT is a deep, broad ditch, filled with water, that surrounds a castle and it would contain not just water , but there could be crocodiles and snakes in it too. The intent of having a moat was to keep away the enemy or to make sure that the enemy has to try really hard and has to encounter lot of casualty to reach the castle and wage a war against a empire.

In modern age there are no empires , just that , empires have been replaced by Business Empires .

Every modern day business dreams of creating a "MOAT" around it , so that

• It is not too easy for somebody else to start a similar business
• Even if somebody did start a similar business , they cannot price the product as profitably.

a MOAT can be any competitive advantage like

• A extremely well recognised and customer loyal Brand ( Nestle,TITAN )
• A Financially intensive business , which needs huge investments ( RIL )
• A massive distribution network ( ITC, HLL, GAIL )
• A High technology industry protected by Patents ( Bosch )

Look for companies like these ,because of the MOAT that they build around them , they can keep competitions away , and hence can have better profit margins.

And we have found that companies with MOAT do return phenomenal return , if investor has the patience and conviction to stay with them

 Image : FreeDigitalPhotos.net,Photographer: Nick Coombs

Chanakya ...On Governance

This is a amazing episode from Chanakya .Please do watch the entire episode .

Today were are confronted with very high levels of corruption in public life  and in this episode we see that a student of Political Science is asked question about governance

When asked "Whom should we protect wealth from ?"
The student answers "Wealth must be protected from Thieves and Nobel Men "  

Nobel men ...our current day politicians , ministers , chief ministers .

When the king, annoyed by his answers asks the student , "As per the scriptures , what is the position of a King ?" ... to the utter astonish of the king the student answers " King is nothing more than a salary drawing public servant "


These very same questions are something which current day people in power find it hard to come to terms with.

There is a saying "Power corrupts , and absolute power corrupts absolutely" to be in public life and maintain a high level of integrity is not a joke

I think another way for people in public life to be dispassionate , would be to be spiritual and keep reminding one self of these words from Adi Shankaracharya from his "Bhaja Govindham"

"maa kuru dhana jana yauvana garvam harathi nimEshaath kaala "

Meaning :
"Do not be proud of wealth, friends, relatives and youth,when your time( death ) comes you would lose all of this in a moment"

Our political would not have to look far to know this , death of AP chief minister Y.S.R is all that they would need to remember.

 In this age of greed , there is only one way to be happy ...
"Contentment is better than Riches"

Do we understand compounding

State Bank of India , is coming out with a Bond Issue and one of the Investment Option is a 15 Year bond with 9.95% interest rate . When I mentioned this to a friend of mine , his immediate reaction was , wow this is better than PPF ( 15year , 8% ) . This made me think , how little we understand compounding

These are how the SBI bond issue and PPF are different , I would be considering just the duration and Interest rate and keeping all other issues like tax superiority of PPF out of this article for now

• SBI Bond provides 9.95% interest and PPF provide 8%
• SBI Bonds provide simple interest , which means interest calculated each year would be returned to the investor , where as the PPF provides annually compounded interest  , which means interest calculated would be added to the principal and this new principal would be considered when calculating the interest for the next year 

So if you invest Rs.1,00,000 in the SBI bond , you would be earning Rs.9,950 each year so at the end of 15 years you would have earned Rs.1,49,250 ( 9,950 x 15 ) , so along with original invested amount , you would have Rs.2,49,250 

Now if the same Rs.1,00,000 was invested in a PPF , you would have Rs. 3,17,216.91 at the end of 15 years that is about Rs.68,000 more and this "more" is due to compounding . try the Calculator

Please also note that all returns from PPF is absolutely tax free and your initial Principal is also Tax Deductible under sec 80C , where as the entire return from the SBI bond issue is tax able.

This SBI issue is a good investment , i would recommend you to go ahead and invest , but please do not make the mistake of comparing the PPF with the SBI bond , as PPF is head and shoulder above all debt investment options that you have in the Indian market .

But also remember that compounding is double edged sword , that is, if you have a home loan, it is compounding that makes the amount you borrowed grow so quickly and by the time you close the loan you would have paid nearly twice or more the amount you had borrowed.

Compounding is something we learnt in class eight but, it may take us a lifetime to understand how powerful a tool this is .

In case you still did not understand how compounding works , try harder to understand it , make it your partner in investing and you would have no regrets.
Image : FreeDigitalPhotos.net,Photographer: graur razvan ionut

Provident Fund

Provident Fund is a blessing in disguise for people who struggle to save . It is a ideal case of  "Automated Investing" or what you say investing on "Auto Pilot" .

But the Provident Fund is not without its share of problems. Since it is to a great extend at the mercy of the government , it remains extremely non transparent .

My experience has been that it has nearly been four years since i got my Annual Statement from the PF office , this makes a subscriber like me, extremely uncomfortable . And when we finally get a statement I struggle to make sure that the amounts shown on the statements are correct

Now here is a solution , This is only for subscribers with PF accounts in Bangalore. The PF number in Karnataka has this format KN/Establishment Code/Employee No.

Find your PF amount

Use the link above and enter the details , you may most probably see the amount in your PF account.

I only wish PF

• Someday have a small exposure to equity, may be a Index Fund  
• Someday be like a online bank account into which i can login and check anytime
• Someday have a unique number which would not change with my employer.

Would this "Someday" ever come or will this just remain my wishfull Someday

Image: i owe credit to the photographer

Reliance mutual fund has launched "Reliance Gold Savings Fund". Since Gold ETFs were launched the uncertainty in purchase and sale of gold as a investment has been removed and investor could invest in gold without being concerned with the purity of gold, how to store the gold safely and also where to sell it finally.

But investing in gold ETF had certain drawbacks.

• Investor needs a Demat Account
• Investor needs to approach a broker to buy ETFs ,
• If the investor is not a regular stock investor , these would have just added to the investors overhead expenses.

 Now the investors have an alternative ."Reliance Gold Savings Fund". This is a fund of fund , which means it invests in other mutual funds. and this Reliance fund will invest only in Gold ETF

Pros

• Investor does not need a demat account
• Investor does not need to approach a broker
• Investor can start a SIP in gold investment

Cons

• Invests only in Reliance Gold ETF , though there are other Gold ETFs in the market
• Annual charges of ETF and Annual charges of "Reliance Gold Savings Fund" need to be borne by the investor

I would have liked if the "Reliance Gold Savings Fund" had kept its mandate open to invest in any Gold ETFs , but it has not done so . I'am not comfortable with this because , this means my investment is entirely concentrated with Reliance Mutual Fund and this fund house is currently not in pink of health

I would suggest investors to wait and watch , i'am sure other AMCs would come up with similar offerings , where the ETF invested into may be across different Mutual fund houses and not concentrated

Download "Reliance Gold Savings Fund" details here

Image : FreeDigitalPhotos.net,Photographer: dan

The illusive wealth

In Hindusim , the benevolent goddess of wealth is "Goddess Lakshmi" and every picture of the goddess you would come across would picture the goddess either standing or sitting on a Lotus , a symbolism for how carefully she needs to be taken care of .

Have read a lot about people who win lottery or who have come to suddenly inherit a fortune and have found them self unable to handle this sudden wealth and let it slip through , We also find with lots of celebrities from world of sport and music , they find them self simply incapable of handling wealth.

This is just not only with individuals but also about companies and businesses . Here is a list of companies in BSE Sensex 1986,

ACC, Bombay Dyeing, Ballarpur Industries, Ceat Tyres, Century Spinning, Food Specialities (now Nestle), Great Eastern Shipping, GSFC, Glaxo,Gwalior Rayon (now Grasim), Hindustan Aluminium (now Hindalco), Hindustan Lever(now Hindustan Unilever), Hindustan Motors, Indian Hotels, Indian Rayon, ITC, Kirloskar Cummins, Larsen & Toubro, Mahindra & Mahindra, Mukand, Pieco Electronics (now Philips), Premier Automobile, Reliance Industries, Siemens, TELCO (now Tata Motors), Tata Power, TataSteel, Voltas, Zenith.
This list was from here

These were cream of the stock market in 1986 and we find that in 25 years , we find that only 15 of those companies are still considered to be good investments .

This means that in about a generation 50% of the companies have not been able to generate wealth in a manner they were expected to or have lost wealth.

It is not just about individual companies , we find entire sectors have fail to generate wealth, like textile and totally new sectors, like IT have generated phenomenal wealth.

So challenge in wealth creation ,is not just about creation but also about sustaining wealth . and only thing that can help you to sustain wealth is "Knowledge"