Prajna Capital - An Investment Guide

Home loan borrowers have experienced a roller coaster ride of highs and lows over the past few years. The interest rates hovered around six to seven percent about four years ago. Until a few weeks ago, they had touched 13-14 percent. Today, some banks offer a modest eight percent home loan interest rate. The fluctuations in interest rates have an impact on a borrower's EMI dues and loan tenure. Scenario 1: When rates go up Increase in the interest rates translates into greater burden on the borrower. The borrower has to pay more from his pocket towards his home loan. When rates go up, the borrower has the option to either increase his EMI or tenure. Increase in EMI keeping tenure constant means greater cash outflow every month towards your loan. Increase in tenure keeping EMI constant amounts to increasing the number of years you'll be repaying the loan. Scenario 2: When rates go down A reduction in rates is good news that borrowers yearn to hear. When interest rates go down...

IF you want to invest in equities, there are only four things you need to remember. 1. Choose the right company Look for superior and profitable growth. The company should earn at least 20% return on its shareholders’ capital. Ideally a long-term investment perspective (more than five years) allows you to participate in the company’s growth. At the short end (3-6 months), share performance is driven more by market sentiment and less by company fundamentals. In the long run, the relevance of the right price diminishes. 2. Be disciplined Stock investing is a long, learning experience. You will make mistakes, but also learn from them. Here is what you can do to ensure a smooth ride. --Diversify your investments. Do not put more than 10% of your corpus in one stock, even if it’s a gem. On the other hand, don’t have too many – they become difficult to monitor. For a passive long long-term investor, 15-20 is a healthy number. Use this asset allocation tool to find out if you need to invest b...

Fixed deposits (FDs) of companies that earn a fixed rate of return over a period of time are called Company Fixed Deposits. Financial institutions and Non-Banking Finance Companies (NBFCs) also accept such deposits. Tenure: The tenure can vary from a minimum period of 15 days to five years and above, but short tenured FDs continue to be the best bet. Even if a 3-year-long FD looks lucrative, it’s advisable to pick a short-tenured one. In a falling interest rate regime (like the current one), it is advisable to invest in longer tenure FDs with higher interest rate. Security: These deposits are unsecured, i.e., if the company defaults, the investor cannot sell the documents to recover his capital, thus making them a risky investment option. Therefore, always pay heed to the rating before putting money into any such FD. Category of investor: Senior citizens, shareholders and employees are generally entitled to a higher rate of return (say, 0.5%) than other general category retail inves...

The markets rallied over the last few days and there was a bounce back. The market sentiments improved due to a drop in the rate of inflation, rate cut by the Reserve Bank of India (RBI), fuel prices cut, financial stimulus package announced by the government and some positive news from global markets. Currently, a rally in many beaten down sectors like banks, real estate and some select mid-cap stocks is on. Most of the stocks in these sectors have bounced back 20 to 30 percent from their yearly lows. However, analysts believe this rally is just a technical pull-back rally in a bear market. There are no clear and decisive signals that economic and business conditions are improving. Current, the rally is based on cuts and packages announced by the government and the RBI, and expectations that more measures will be announced. Analysts believe the relief measures announced by the government are too small to handle the slowdown and investors should not expect something very dramatic...

These days, the stock markets are quite volatile in nature with a bearish bias. Rallies do not last long in the markets and peaks of market rallies are reducing. The markets are hitting fresh lows in every fall. Many blue chip stocks are trading 50 percent lower than their high levels. Many stocks are currently trading at their year's low prices or all-time low prices. Many investors have lost their hard-earned money and many others are stuck with stocks that have corrected heavily in the last few weeks. Here are some tips for investors already invested in the stock markets: 1) Hold fundamentally strong options The domestic macroeconomic fundamentals are strong. The GDP growth rate is expected to slow down slightly from the nine percent last year to around 7 - 7.5 percent this year. This is still quite good and encouraging in comparison to other developed countries. The current market crash can be attributed largely to foreign institutional investors' ( FIIs ) outflows but...

Any investment planning must guard against the unforeseen, particularly when it pertains to your better half. Take stock of the must-do list JOHN Lennon, one of the founding members of The Beatles, once noted in his album, Double Fantasy, that life is what happens to you while you’re busy making other plans . Perhaps, Lennon wouldn’t have given a second thought to what he said. But, life certainly did. Some years later, he was shot dead by Mark David Chapman, for whom Lennon had autographed a copy of Double Fantasy earlier that same night. Lennon has left a treasure of melodies for his admirers but some of us aren’t that lucky. Any eventuality, may not only affect your family emotionally but financially as well. Specially, for your spouse, who can be in dire straits if you haven’t planned for such a situation. Here’s a low down on what to keep in mind while building a financial reserve for your better half. TILL THERE WAS YOU Financial planners hold the view that before you make any pl...