Even while the controversy regarding what I want Linux to do (the impossible??) continues, I will make sure my financial interests do not end. In continuation with the earlier article at Rediff [ link here ] which explained the difference between Provident Fund(PF) and Public Provident Fund(PPF) in depth.

Now, Rediff has come out with this news item comparing the Public Provident Fund(PPF) with National Savings Certificates(NSCs). A must read if you want to save tax and still manage to earn decent long term returns.

Ask you dad and mom. Did they invest for the real long term? Like 10-15 years? I am sure they will have specific answers. Do you??

Everything today is about making a quick buck. Everyone wants a few million in the bank in a few months. Dont you? Dont I? I know I do. I know you do. But thats not the point. The point is every “scheme” to earn quick dividends is a high risk “scheme”. And whoever thought that investing when the Sensex was at 11000 was a great idea since there was only one way it could move in the coming months was actually quite naive and stupid. No one was talking about selling. Everyone wanted to buy buy and buy.

Guess what. The balloon burst. Just as it had burst at the time of Harshad Mehta. When the sensex falls, it falls like a pack of cards. More than a 1000 points in just 2 days is no joke. Now everyone’s talking about selling selling and selling. Quick bucks are already a lost cause for those who started investing at 11000. The only concern is to get as much of the original capital back as possible. So what do the “quick bucks” people do now? Sell Sell and Sell of couse. Creating a greater panic in the markets and disturbing the overall sentiment as well. But they have already burnt their fingers, havent they? The learning? NEVER TRY TO TIME THE MARKET. Remember you are a drop in the ocean. The ocean can easily move a drop. But a single drop cannot move the ocean. Hell…even a million drops cant move the ocean.

Invest small amounts each month. And stop looking at the business page or watching NDTV Profit everyday. It doesnt help, trust me. Compunding and Time are the biggest factors to grow your money. Slow and steady wins the race. Remember the tortoise?

The whole point of this post was to make you read this. Me and my big mouth!!!

Another day that made history. The BSE Sensex fell by more than 800 points today, a drop of more than 6.5%. What caused it?

-Rumours that FII incomes may be taxed.
-US CPI rates lower than expected
-Expected hike in interest rates in the US
-All Asian markets crashing
-Heavy selling by FIIs
-JP Morgan stating that the Indian markets needed a correction of around 4-5%
-Commodities crashing
-blah blah blah….

Bloodbath….mayhem…mayday….
Just some of the words used to describe this fall.

Relax…Think again. Its not so bad. Markets are still at 11300 levels. And considering current volumes and activity, it takes them not more than 10 days to gain a 1000 points. So which way are you headed? North or South? I recommend pick up stocks and wait for a few days more. 12000 levels should return soon. Until and unless the Fed really hikes rates, in which case we will definitely have more mayhem. And you will have to read another post like this one.

For those of you who cant figure out the difference between Provident Fund and Public Provident Fund, read this. It should clear up a lot of fundas and provide insights into where to invest to save taxes as well.

Read this Tale of Two Countries on Value Research Online.
It is about the two global economic giants(??) of the world, namely the US and Japan, and their contrasting paths adopted to achieve economic success, as we know it today.

Everyone knows US is the biggest debtor in the world today, and Japan is the biggest creditor. But this article tells us how this happened ever since the start of the century. And it also tells us about the biggest mistake committed by the Japanese economy by committing to maintain their central reserves in US$ rather than gold.

Today’s situation is such that every country’s central bank holds reserves in US$s rather than in gold, which is even today, the most internationally recognised form of currency. So effectively, if the US$ suddenly drops and the US economy collapses, it will take down every economy with it!!! The same problem is faced by the Japanese economy on a much larger magnitude, even though they should have been the greatest holder of gold reserves, had they chosen to maintain their reserves in gold.

Thus, even though the US is on the brink of collapse, (it is almost bankrupt), every other country will strive to make sure that it does not go down, lest its own economy completely collapses as well. To quote the author “By any metric, the US should have been bankrupt, if not insolvent.” However, it is the very fact that the world’s central banks maintain their reserves in US$ which makes them support the US economy. Both Japan and China have done this recently. Or atleast that is my understanding of the subject.

At the same time the author also draws an interesting conclusion about Japan’s economy. He reminds us that it is work itself which gives us pleasure, not money which is considered the reward for work. So maybe the Japanese have risen above economics and have realised that it is not money or monetary reserves which make people happy, rather it is the hardwork that earns that money which makes one happy. To have this understanding at the national level is an achievement in itself.

What really bothers me here is that India is trying to grow as an economy by adopting the methodology of the US, which does not sound very promising or fair. I guess some amount of balance has to be achieved at the macro economic level and such balance has to be enforced by the finance ministry and the central bank together. One advice to all my loved and dear ones, dont over use credit cards. Make sure you can always pay back whatever you spend on them within the credit period.

Thinking about getting out of your mutual funds. Suspecting the market has hit its roof and can only go one way from here? Wondering how much more it can gain in the next few weeks? Well stop!!!

If you are the intelligent type and have invested into equity mutual funds over atleast the past 6-8 months (the longer the better), and have been handsomely rewarded with some generous dividends since December, then you probably want to sell now and take what is already yours, rather than wait for the eventual downslide.

I am not the only one telling you to rethink your decision to clear out the locker. Read this advice off Value Reasearch and understand this simple fact that you have not invested into equities. It would be very prudent to get out of the stock markets today if you had invested directly into equities. But you were more intelligent than that, right? Right?? You invested in the funds exactly because you wanted to avoid the volatility of the market and because you just couldnt keep up with the everyday tid-bits on which the market drives itself.

So what should you do? Well for one dont sell. As the article linked above clearly points out, you should sell only when either you are trying to rebalance your act or when you see underperformers in your portfolio, or when there are sudden changes in the fund management and you have ample reason to believe that the new management does not suit your requirements.

Secondly, keep investing regularly. There is no habit like the habit of investing regularly. Depending upon your disposable income, setup 1-5 SIPs(Systematic Investment Plans) with mutual funds. You can start with as less as Rs 500 per month. Always look at the long run. Small amounts invested every month can add up to a lot over a period of 15-20 years with compounded interest and / or reinvested dividends.

Lastly, have faith in your decision(s). If you chose a particular fund, then there must have been a reason for it. Maybe it suited your budget, or maybe it offered risk free returns, or maybe it just was investing in rural India. Whatever the reason, have faith. Give it time and watch you money grow. Believe me…there is nothing more satisfying.

A very interesting summary of economic happenings across the world. Where does India stand? Read and find out. Just click here.

Do I believe him? Having studied some economics myself, I guess I do agree with what he has to say. I am quite sure that the Sensex at >11000 is far away from reality. Something closer to 8500 to 9000 is more like the real thing.

So whats the best place to invest today? Definitely not the stock markets. Property? According to Sanjeev Pandiya that is expected to fall as well. Umm…actually, if you can invest in gold, silver and oil stocks, that would form the best investment for a long time to come. Assured returns for a lifetime..thats what I call investment in these areas.

But alas!!! poor men like me dont have the cash or the avenues to invest in these sectors. What the %^#$%#!!!