Categories: Financial Cocktail Samosas


Practice these investment asanas

‘International Day of Yoga’ is celebrated on 21 June every year, since the United Nations General Assembly has declared the day as the special day dedicated to Yoga in 2014. The decision came after considering the proposal made by Prime Minister Narendra Modi for the same.

We all know that Yoga is as ancient as India. The basic tenets of Yoga include concentration, discipline, setting up goals and regular practice to achieve those goals. These tenets, when applied to investing can help you achieve your financial goals and during the journey, can assist you tide over the market fluctuations, and restrain you from making reckless decisions or diverting from the path. If done right, yoga can positively impact your life as well as financial fitness. As Yoga needs to be practiced on a regular basis, even if you can spare just little time for it, similarly you should make a habit of investing regularly, even if you save a little.

Floating rate savings bonds

Usually, bonds offer a fixed rate of interest to the investors. However, as the name of Floating Rate Savings Bonds (FRSB) suggests, interest rate on these bonds may fluctuate. The popular 7.75% savings (taxable) bonds (‘RBI Bonds’) that the government withdrew on 28 May 2020 have been replaced by this new series of bonds. FRSB has been made available for investment from 1st July and is currently offering an interest rate of 7.15% per annum, with a maturity period of 7 years. The interest will be paid on a half-yearly basis on January 1 and July 1 each year. The interest rates on these new bonds will be reset every six months and it will be linked to the then prevailing rate of interest on National Saving Certificate (NSC). Interest rate on FRSB will be 0.35% above the interest rate of NSC.

The sovereign (government) guarantee on these bonds reduces the risk of default. A floating rate is also positive for investors as we could be near the end of the lower interest rate cycle at present. It also helps bond holders to get higher returns than prevailing inflation.

Beware of online fraudsters

The spread of Covid-19 has made large sections of the society more sensitive towards hygiene. Anecdotally, we have all observed the increased use of digital modes of payments. Not just merchants, but even consumers are now preferring digital payments to avoiding handling of cash. However, there is also a flip side to it. Many people are not aware of the possible misuse of these systems.

Unfortunately, fraudsters have decided to encash on this and have come up with innovative methods to con users who are new in this digital payment space. It could be in the garb of sending you money by clicking on a link and putting your OTP received there, deceptive UPI handles, posing as bank officials and ask for OTP or PIN etc. It is important to know that you need to provide an authentication by entering your PIN or OTP only while sending or paying money, and not while receiving money. Also, no one should share their PIN or OTP with any other person. Banks, RBI, insurance companies would never call and ask you for this information. In fact, anytime you receive a call that promises you money in the name of cashbacks or offers, you should become very alert and not share any information with the caller.

July 8th, 2020

Is Inflation just a number or affects you too?

Diesel and petrol prices are increasing on a daily basis and this will result in inflation. Besides increase in logistics and transportation costs related to essential items, inflation also burns a hole in the common man’s pocket by bringing down real return from investments. Typically, most investors only look at the numbers (% of return) that investment products show and have a lack of understanding or ignore factoring in the impact of tax and inflation.

While income tax is charged on the return from different products differently, inflation basically reduces the value of money or purchasing power. Real returns can be far lower than what the product shows after considering tax and inflation, but it is the actual benefit that you get.

For instance: Bank FDs are currently offering around 5.1% interest per annum. If an individual falls under the highest tax bracket of 31.2% (including cess of 4%), post tax return is reduced to 3.50% per annum. Further, if we assume inflation of say 5% per annum, net return will translate into a negative figure of -1.50% (3.5% – 5%). In the long term, your savings and investments will shrink instead of growing. Ideally, it makes sense to invest in a product only when real returns from it are likely to be positive.

Where is the Stock Market going to?

The stock market crash of March 2020 had erased a lot of gains from investors’ portfolios, especially those having more exposure to direct equity or equity oriented mutual funds. But, then against popular perception and opinion, the reversal started to happen. After falling about 40% from January highs, the share market has gained back nearly 30% from its low!

Some of the factors behind recovery in the market include — steps taken by government and the RBI to infuse liquidity across sectors and support extended to small and medium enterprises, coupled with comeback of economic activities and relaxation in lockdown.

However, the near-term prospects don’t seem to be as rosy as it appears, as the number of Covid-19 cases are increasing by the day. Besides that, quarterly results of companies are due next month and probably most will reveal losses. We may see a downfall in the share market once again.

The Joys of Being Debt-Free

India’s richest person and chairman of Reliance Group of Industries, Mukesh Ambani, recently announced that Reliance has become a net debt-free company. In these difficult times, when most corporates are struggling to manage their cash flows, money is flowing in for Reliance, not only from the domestic market but even from large international investors. In a short span of two months, the company raised about Rs 1.7 lakh crore from investors and shareholders. One of the biggest investors includes Facebook, which bought around 10% stake in Jio worth Rs 43,500 crore.

According to experts, considering the investors’ profile, it seems that Reliance’s ‘zero-debt’ strategy involving leading technology companies is part of a long term plan that is underway—something based or related to technology and can help the company to expand in future and achieve further high.

Like in a company, the joy of being debt-free at individual level also calls for celebration!

July 1st, 2020

An investment portfolio is like a cricket team put in to bat in a test match. In cricket, the selectors pick up individual players based on their past performance and the need to make a balanced team. Similarly, for preparing a good portfolio, we need to put in funds that have different characteristics and perform in different market conditions and scenarios. One can either make a portfolio by self through self-study and monitor it regularly with knowledge or take the advice of a qualified investment advisory company, which selects the best combination of funds out of the hundreds available and keeps guiding and balancing to enhance the chances of posting a good score on the scoreboard.

A portfolio, like a cricket team, takes time to settle down and start scoring – depending on the way it is structured. Consistent focus and review of strategies definitely deliver in the long run, even though there could be reverses in the short run.

Vinay Kumar, Humfauji Gurgaon

February 28th, 2020