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Union Bank of India announced the launch of Wealth Management Services to its High Net worth Clients at Hyderabad today. The Bank has tied up with Wealth Advisors (India) Pvt Ltd; one of the leading companies in the Wealth Management space and Headquartered at Chennai for this initiative. With this offering the Bank plans to offer a wider range of solutions to its customers.

With the rapid economic growth the number of customers who look for Wealth Management services is constantly on the rise. In fact, India is one of countries in the world where the growth in the High Net worth Population is in double digits and it is expected to grow at around 15% per annum for the next decade. As per World Wealth Report published by Capgemini & Merrill Lynch, India has 123,000 people with a net worth of $1 million and registered a growth of 22.7% over the previous financial year. The Bank launched its Wealth Management Services offering to its clients at Bangalore on the 18th of August 2008.

Mr. M.V. Nair, Chairman & Managing Director, Union Bank of India said, “At present the bank has more than 500 HNI clients at Hyderabad and expect the number to grow multi-fold due to various transformations that have been initiated in its system. As a part of our re-branding strategy under a new logo, we have promised our customers to deliver value for money. The Launch of Wealth Management Service is a step towards fulfillment of this promise. The bank is moving towards being a “ Financial Super Market”. In this initiative Union Bank has tied up with an established partner like WAI in the field to offer financial solutions to our customers.

The Wealth Management service in India is at a nascent stage and provides ample opportunity for growth in the coming years. This initiative will go a long way in establishing Union Bank as a provider of total financial solutions to its customers.” The customers will be provided with entire spectrum of Wealth Management Services. The solutions proposed will integrate Income & Asset Protection (Insurance) as well as Wealth Creation and Preservation (Financial Planning, Asset allocation & Investment Management), which will ultimately facilitate in growing, preserving and transferring their wealth.

Here’s a problem of plenty! What do you do when you find that you have fifty odd Mutual Fund schemes that you have invested in and are not able to keep track.

It must have been really tough to keep track of all these schemes on a weekly or monthly basis.

There was a time when people would throng to NFOs, confusing them with initial public offer (IPOs) of companies. They assumed that since the share which gets listed on IPO price mostly zoom to new highs in no time, the same would happen with mutual fund NFOs, too.

But mostly people have figured out that it wouldn’t happen in the case of mutual fund schemes. This is because the scheme is collecting money to invest and its net asset value (price of a mutual fund unit) will go up only after the appreciation of investments.

However, some of us are quick to clarify that they invest in NFOs mainly because of their interesting themes. For example, we finds global gold scheme or a commodity scheme very attractive. However, this is permitted only if a small percentage of the corpus is used for this purpose. Otherwise, it could lead to complications. 

Also, without realising we take a large exposure to the particular sector, say infrastructure sector.
Our expert was finding it difficult in deciding which schemes to get rid of because of the presence of many schemes with very little track record.

According to financial advisors, this is not a rare problem. To begin with, they say, an investor should try to invest in a diversified scheme with a performance record of at least five years. After that, they can invest a small portion of their corpus to sectors like commodity, infrastructure, pharma and so on. However, they should remember that a sector is a risky investment option as it may go t h ro u g h p h a s e s of high and low. Lastly, under no circumstances you should have more than six schemes in your portfolio.

Otherwise, monitoring them could be a problem.

The Long- Short strategy involves taking simultaneous long and short positions on two related stocks. When we say related stocks, it means that both the stocks belong to the same sector and there is an evident correlation in the price movement of the two stocks observed over a period of time. An adequate period of time would be a year or more while determining the correlation. The stock prices of two companies might reflect a correlation for a reason. For instance the share prices of two companies belonging to the same industry might trade in the proportion of their book values, which is quite likely in case of ‘value’ stocks. There are other relevant reasons for share prices of two companies to have a correlation. 

Let’s take an example for a clearer understanding of the concept. Our research team recently (1^st July’08) gave a long- short strategy based recommendation to investors involving Bank of India and Axis Bank. The details of the strategy are mentioned in table below

The above strategy entails going long on Bank of India futures (3 lots) and going short on Axis Bank futures (4 lots). It leads to an almost equivalent exposure on long and short futures positions, which is Rs 547200 and Rs 531000 respectively.  

Figure 2 above reflects the ratio between the share prices of Bank of India and Axis bank over a one year period. It can be observed that the ratio has been in the range of 2.5 and 3.  There has been a retracement every time the ratio breached the mark of 3 times on the upward side.

In the above example, the ratio of prices of the two stocks as indicated in figure 1 has moved to 3.07. This means that if one is to follow the past trend, the ratio is likely to once again come down below the 3 times mark assuming that there hasn’t been any material change in the fundamentals of both the companies. If this is to happen, then the spread between the share prices of the two stocks would reduce implying that the price of Axis Bank would fall and that of Bank of India would rise. The target ratio is 2.90. When the spread reduces to an extent that the price ratio becomes 2.90, then the investor would earn a sum of more than Rs 30,000 from the strategy.

The above strategy was actually recommended on 1^st July’08. On tracking the prices as on 15^th July’08, the strategy has reaped handsome returns for investors with the ratio between the prices of the two stocks well below 2.7 times, in the process even meeting profit target 2 mentioned in the strategy. Axis Bank and Bank of India closed at Rs 598 and Rs 231 on the NSE as on 15^th July’08.  

Risk involved

It is assumed that the historical relationship will hold good in future. However, any significant fundamental changes could lead to adverse results.  

The strategy should preferably be initiated at extreme levels of the spread. In spite of this, if there is any further increase in spread in the short term, it may result in marked to market losses.

Finance Minister, during his speech while inaugurating the Currency Futures Trading made a pertinent point.

Financial markets have continued to produce a multitude of new products including many new forms of derivatives, alternative risk transfer products, exchange traded funds and variants of equity. We in India have adopted all these slowly, some of these products but with considerable success. However, I may note that many years after these ideas were mooted we had to wait. For example, stock index futures took 5 years to be offered to investors after it was first conceived; exchange traded funds for Gold took 4 years to become a reality; interest rate derivatives though launched in 2003 have not taken off. These experiences highlight the risky environment that financial innovation faces in this country. This should change.

Galileo I believe said doubt is the father of invention; if I may add, doubting Thomases are impediments to progress. We need to continue to innovate and improve in the design of financial products.

Check out more excerpts here

The Scott Adams unified theory says that invest 70% of your money in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement.

Let’s check out some important data on expenses and return for the ETFs available in India

Thanks to http://www.benchmarkfunds.com

Investing means, making more money on your hard earned money towards increasing your wealth. An investment is anything you purchase for future income or benefit. In other words, anything not consumed today and saved for future use can be considered an investment. Income earned from your investments and any appreciation in the value of your investments increases your wealth. Before we take a look at the different financial products, it is important to know the basic principles of investing!

Investment refers to a placement of funds in some assets that will be held over some period of time with the expectation that the funds will grow. Each one of us has assets of some kind, ranging from physical assets to financial assets. For our purposes, investment will mean a measurable asset retained in order to increase one’s personal wealth.

The prime motive behind investing is that we want to improve our future welfare. Sources of funds may be from assets already owned, savings or foregone consumption or borrowed money. By foregoing consumption today and investing the savings, we expect to enhance our future consumption possibilities. Anticipated future consumption may be by other family members, such as education funds for children or by ourselves, possibly in retirement when we are less able to work and produce for our daily needs. Regardless of why we invest we should all seek to manage our wealth effectively, obtaining the most from it. This includes protecting our assets from inflation, taxes and other factors.

The sooner one starts investing the better. Your investments get more time to grow, whereby the concept of compounding (as we shall see later) increases your income, by accumulating the principal and the interest or dividend earned on it, year after year.

Three rules of investment:

* Invest early
* Invest regularly
* Invest for long term and not short term

* Invest Early : The sooner you start the better. Start investing in small amounts, continuously for a long time, money grows due to the power of compounding. If you start investing when you are single you will be able to save maximum. The best policy is to start saving from the moment you begin earning.
* Invest Regularly : Develop the habit of adding to your recurring deposit / systematic investment plan of mutual fund / deferred annuity account on a regular basis, perhaps monthly or quarterly. By investing regularly with SIP of mutual funds you take advantage of a strategy called rupee-cost averaging. Regular investing, however, does not ensure a profit or protect against loss in declining market scenario.

* Invest for Long Term and Not Short Term : If you decide that your money can work for you over a long period of time, then better compounding works. Consider this: Rs 1,000 invested at 8% earns Rs. 80. Left to compound, the original Rs.1,000, plus accumulated interest, will earn Rs.160 in the 10th year, Rs.507 in the 25th year, and Rs.1,609 in the 40th year — returns of 16%, 51%, and 161%, respectively, on the initial Rs.1,000.

The proper choice of investment instrument can actually make it almost simple to realize your goals. In other words, right choice of investment will improve your present life and let you look ahead to the future too. It allows you to understand how today’s financial decision affects other areas of your finances. For example, buying a particular investment product might help you pay off your housing loan faster or it helps to support your retirement significantly.

One must view each financial decision as part of a whole and also consider its short and long-term effects on your financial objectives. Surprisingly, many of us do not have any type of formalized investment plan in place.

Moneyoga is live with Stock Market analytics and investment strategies. Moneyoga will develop a systematic & disciplined approach to investing and trading in the Indian stock market. They also plan to decipher a slew of investment products: Stocks, Futures, Options, Rights issues, IPOs, ETFs, develop advanced analytics, create system-based investment strategies, and demonstrate proper money management, using techniques and implement overall portfolio risk management, using Futures & Options strategies.

I emailed Deepak Shenoy with a set of questions and despite his busy schedule, he gave some very succinct answers. Thanks Deepak and all the best.

1) Where did the idea come from?

We like fool.com but this one isn’t from there, it’s just a site useful to us.

2) Is there a research that you have done on the business model?

Business model - all the research points out that our model is flawed well, let’s see.

3) Tell us how you go about constructing a  website like this once you have the idea?

We wrote the code. Kaushik and I coded in C# and ASP.NET (just two of us, no one else)

4) How did you actually build Moneyoga? (how much did it cost, where do you host, what did you need to do in terms of paperwork, coding, finding people, etc)?

Hosting wise: www.webhost4life.com, all I needed was a credit card.No people and all, just the two of us.

5) Capital is important for a venture like this, I feel. What are your Capex plans?

Capex - we put in our money and time, not much money - just a year’s hosting costs actually.

6) What are your goals with Moneyoga? I mean the number of page views and the revenue targets.

Goals wise, we’d probably like a 100,000 page views a month to begin with, going to a million in a year.

7) Are you building something like a portfolio manager in your site? Other than analytics, why should a investor come to your site?

Yes, there are ideas for portfolio manager, analytics and strategies. They will get done over the next few months.

Are you thinking of building a community of disciplined investors within your site? If yes, how would you keep spammers away?

Community : yes, forums: no. We don’t intend to have a forum style discussion anywhere in our site. So no spammer problems.

9) How do you market Moneyoga?

WE don’t market moneyoga. It markets itself.

10) What would you say to a young person who wants to do something entrepreneurial?

Go for it. Don’t think too much about when and how. keep about 6 months to a year’s kharcha in the bank, and try and get as much done as possible. You’ll find your way out!

11) How enjoyable, frustrating has been the journey so far?

Oh I love the journey. It’s incredible and the market’s been great as well, so as some of our strategies started to work, we made money on the trades. Fabulous stuff.

India’s stock market regulator, the Securities and Exchange Board of India (Sebi), has proposed changes to mutual fund fees that would make it cheaper for investors to own them, depending on who they bought it through. Rachna Monga from Mint has this detailed reportIf Sebi has its way, investors could walk into the office of a mutual fund firm, buy any of its funds and walk out without paying any kind of entry fee (or entry load as companies term this).

As of now there is no incentive for investors to do so as the mutual fund firm charges an entry fee from all investors, irrespective of whether their purchase is direct or routed through a distributor. The entry fee ranges from 2-2.25% of the amount invested and is charged by equity funds. Mutual fund companies waive the charge only for large investors who invest more than Rs5 crore.

Read the full story

I scored 19/20 in the Investment IQ test by MoneyControl !! I would have scored less than 10 some months ago before I started this blog.

Use this tool to evaluate whether you should manage your investments yourself or whether you should approach/ use a professional manager.

This evaluation will consider your temperament, aptitude and technical knowledge. It should take you between 5 and 8 minutes to answer the 20 questions.

Scores on temperament(5), aptitude(5) and technical knowledge(10) are taken. The qualifying score( 15) is a Moneycontrol recommended benchmark and it refers to the minimum you need to score if you want to manage your money independently.

As I said, I wouldn’t have scored 19 if I was not doing this blog. In fact I was very miserable with all this personal finance. But I have learnt that finance is not rocket science and I owe it to my family that I manage our finances better.

Maybe you score less than 15. But does it mean you should start finding a professional manager? Or should you try and build your financial literacy (backgrounder) levels. Choice is obviously yours!!

 Found this sensible piece in a group by Vivek Karwa. Thanks Vivek for permitting me to quote you here on my blog.
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I hope everyone of you know that all kinds of activities pick up in a Bull Market. This happens since each person starts thinking that Money Making in Stock Market is a child’s play! And thus people fall to any extent to earn the fast buck. India has been witnessing a Bull run past 3-4 yrs and such activities are bound to happen.

You may not believe that there were around 35 Analysts (I call them Budding Analysts) sending at least 25 recommendations each on my yahoo messenger daily a year back. They started thinking that what ever they recommend goes up hence they have mastered stock picking. Then came the May crash.

I now have just three people on messenger sending calls! And none of them is from the May list. They lost their money, became analysts and then lost peoples money!

In a Bull market , some of the activities which increase are:-

1.. Boom in stock brokers and sub-brokers offices since more and more people want to trade.
2.. People luring others to trade and invest in various financial products including Mutual Funds to earn higher commissions.
3.. Fund houses coming up with NFO’s every next day.
4.. Sharp increase in Analysts/Advisors
5.. And why to miss our topic. Boom in Technical Analysis Software Sellers!!

I would like to caution every one on this!!

Before buying any software and spending Lakhs on it think once:-

1. Do people start earning money just because of buying a software? If yes then why cant each one of us buy and make big money.

2. Do people owning software Never Loose Money? They only make??

3. If your main activity of earning money is a different profession then can u utilize the software to its full value?

4. Does it not make sense to subscribe for calls for a portion of the money and concentrate on your main acivity? (Iam not trying to promote myself here or seeking subscription - but there’s sense in my words)

So think twice before investing in softwares, may be the same money can be utilized in a better manner.

Rgds

Vivek Karwa
Mob: +91-98405-40575