Finance Management – MoneyXTension: Financial Freedom

Do You Know? Crypto Bitcoin Moved to Indian Markets

“If you don’t believe it or don’t get it, I don’t have the time to try to convince you, sorry.” – Satoshi Nakamoto

Cryptocurrency or Bitcoin may be a atypical phraseology for an ordinary Indian citizen but you will be surprised to know that all the authorized exchanges in INDIA have recorded an extraordinary growth in the Cryptocurrency business since March 2020. Any conjecture amongst the investors or the Bankers has been removed by the Supreme court order dated 4th, March 2020, setting aside the circular issued by RBI in April 2018. Though no formal regulatory has been issued by the RBI for explicating the matter, the Banks/Customers/Exchanges have already started conducting the business.

There are pros and cons attributed to this unregulated currency but statements coming from the sources like Bill Gates creates confidence:

“Bitcoin is a technological tour de force.”– Bill Gates.
The founder of Microsoft has a great passion for this currency and already holds a considerable quantity of Bitcoins: https://tradingbeasts.com/featured/cryptocurrency-quotes/
There has been an unprecedented increase in business over the last few months in India. The previous eight months starting from March 2020 till date have witnessed the growth of cryptocurrency business in India by more than 600%. Reportedly, the Indian cryptocurrency business with a monthly turnover of more than 23 million dollars stands at number 2 in Asia and number 6 in the world. Mind-blowing?

Launched in 2009 by an unknown person using the alias Santoshi Nakamato, Bitcoin is the new paperless currency that doesn’t have control by the Govts or Banks. It is a digital currency and you can not touch it with your hand. You can buy anything from hotel booking to furniture through this currency.

ATM’s and other dispensing centers facilitate convenient use of cryptocurrency by the customers in many countries. You can use your smart phone or computer to send or receive money without involvement of any Bank. The technology has brought a revolution in the Financial markets with more and more institutions coming out to provide commercial services to their customers.

With a limited possibility of mining maximum 21 million of Bitcoins, the persistent demand of Bitcoin results in high volatility in the market. The market data suggests 18.75 million Bitcoins are already in circulation as of today. Big institutional investors have been amassing this coin continuously as the price is gradually moving beyond the reach of retail investors. The price of one Bitcoin has scrambled up from 8000$ to 27000$ within 12 months. That makes one Bitcoin equal to 27000×78= Rs.2079000 (Twenty Lac and seventy-nine thousand). Isn’t it a huge amount for one unit of Bitcoin? However, you can buy a small fraction of Bitcoin also.

Unlike, the currency notes and coins minted and printed by the Governments in the closely guarded printed press, these cryptocurrency coins can be mined by the miners from the convenience of their bed rooms. Highly sophisticated computers are used by the experts through a complicated “Blockchain” process popularly known as Mining. This being a technical and labour intensive exercise requires immense concentration. Anybody sitting at home can mine this currency and earn a value of 6.25 BTC for creating one block. By any standards, Its a huge compensation!!

The cryptocurrency markets are in operation 24x7x365 as the blockchain technology has made this market very competitive now. There are more than 6000 coins trading in the markets through hundreds of authorized cryptocurrency exchanges. Every coin has its distinct value and utility. Some of the most popular and traded coins in the markets are indicated below:

Bitcoin: BTC:
Etherium: ETH
Bitcoin Cash: BCH
Ripple: XRP
Litecoin: LTC
Binance: BNB
Cardano: ADA
Polkadot: DOT
Bitcoin SV: BSV
Steller: XLM

There are still many countries that have not regulated this currency for valid reasons and genuine apprehensions. Being a parallel economy without any control of the Central Bank or the Governments, this may land in the hands of terrorists or antinational activists. They have their own perceptions of losing the entire control over the currency and its regulatory authority. Most of the countries don’t want this to happen in their own interests.

From India’s perspective, strange statistics forewarn about the pattern of investors investing or trading in cryptocurrencies. More than 50% of investors in the crypto currency markets in India have an annual income of less than 10 lac.

This being a very risky volatile market with turbulences occurring at regular intervals, you must ensure to be circumspect and discreet in handling the transactions. Any impulsive act can make your money vanish in seconds. You can not approach your Bank or RBI for complaining about any pecuniary loss perpetrated by the swindlers through fishing and other fraudulant modus operandi.

Friends, Stay Safe Stay Connected but keep reading

Why Should You Keep An Eye on Credit Card Debt Trap

Personal Finance advisors never encourage frequent use of credit cards for good reasons. Many of us have spoiled our credit scores by spending recklessly ending up in debt beyond our means. We will take a look at whether the use of credit cards is prudent to satisfy our urgent instinct to buy everything that comes our way. Maybe a few important and relevant observations will enlighten your way for being more circumspect in using the credit cards in future.

Credit cards have some of the best features when it comes to better utilization. However, on the flip side delinquencies in payment of your liabilities can send you off the track easily sending nightmares of bad credit score.

The possibility of an easily affordable credit requirement has made us comfortable when it comes to buying consumer goods or planning holidays. With the arrival of digital marketing, habits of saving first and then buying any household item has given way to compulsive buying.

Whether watching a movie, surfing the internet, or visiting any market place our purchasing instinct gets propagated to place an order immediately. The offers like zero interest installments, 1+1 free products, and other such freebies dolled out by the sellers send an illusion in our mind as if this product will not be available again on such prices again.

Strangely, Personal Loans, Credit cards, and a host of other easy credit options have made our job easier for nothing visibly going out of our wallet. Decisions for getting a Smartphone, new car, holidaying in distant foreign tourist destination, etc. have become instantaneous. Though all these credit options are more or less linked with your credit score the urge to keep ahead of your neighbor compels you to spend more than desired.

Though a strong believer in using a debit card instead of a credit card, I still feel comfortable using credit cards for the reasons explained below. A feel good element prompts me in maintaining clean payment records without falling into the traps laid by the credit card companies.

Positive Features:

Bonus: Any customer with an excellent credit score is enticed to opt for a new credit card with offers like one-time bonus, gift cards, full waiver of annual card renewal charges, or other such freebies. You must grab such offers maintaining strict discipline in utilizing your cards.
Rewards Points: Certain credit cards come with reward points which keep accumulating with every spending and you can exchange these points for the recharge cards, gift vouchers on the market platforms. Isn’t it worth considering?
Frequent Flyer Miles; Starting with American Airlines in ’80s, most of the companies have at least one such card in their kitty nowadays. You get a mile for every journey you undertake with the airline ticket purchased through this card.
Insurance. Credit cards come with inbuilt accident insurance under the master policy subscribed by the credit card companies.
Credit score Improvement: Better use of credit cards refixes your credit score for increasing future limits on the credit cards or going for a home loan later on.

TRAPS:

Coming to the Traps for those who are vulnerable and likely to default and damage credit score, these fallacious and confusing offers needs to be spurned:

The first is about paying only the minimum of your bill. Believe me, it will take you months and years to finish paying off your credit card balance in full. The minimum payment requirement is only around 5% of your balance and other charges keep adding to your woes. If you want to significantly reduce your debts, you have to learn how to pay full amount of the bill rather than going easy on making the minimum payment.
Another trap is the late payment penalty where you are charged a late fee for even delaying payment by a few hours or even a day. Try to get these charges waived by talking to the companies as they have a tendency to waive off such charges for those customers who pay regularly.
Balance Transfer: This is modeled and promoted in such a way that the customer feels comfortable without realizing that his interest rate and annual renewal charges have been increased silently. This is just shifting of your liability and frequent use can trap you in debt.
Cash Withdrawals; Your credit card limit has a sub-limit of cash payments. Be careful of cash advances in credit cards. While this can help you during emergencies, it will be imposed with very high interest rates and transaction charges. If you cannot pay it back immediately, it can accumulate quite easily. Try to search for other options to finance your need. Credit card cash advances should be one of your very last options.
Please understand that cash withdrawals, Late payment charges, minimum payments or frequent balance transfers have an adverse impact on your credit discipline and history. Better avoid it!

Remedies for Debt Trapped Customers:

Never go for a settlement. It looks easy and convenient for settling your debt with credit card companies. Please note that credit card companies are very smart and don’t lose money. On the pretext of initiating legal proceedings for recovery of bad debts, they would have the option of adding legal expenses, late payment charges, and inflated interest accruals to demand an abnormally high amount from you. However, while settling your account, they will write-off these charges giving an impression of providing you a big relief. Before accepting such an offer you must negotiate with the company for waivement of charges instead of writing off a particular amount from your bill. Waivement doesn’t impact your credit history!!
Never Accept Write-off Offer: As explained above, the settlement of your bad debt is a bad option but allowing writing off the debt is worse than the settlement offer. Besides your actual bill, other charges will be included before writing off the whole amount. However, at any point of time in the future, you may be called upon to pay the whole written off amount for improving your credit score. Try to negotiate for payment of debt in easy installments by waiving of the interest/late payment or any other charges.

Conclusion:

Every cardholder enjoys an interest free credit for more than 30 days besides earning free gifts, cash rewards and frequent flyer miles. With desciplined utilization of cards, I think nobody except defaulter stands to lose anything by using credit cards. Don’t you feel gracious to have liquid money in your debit card for the whole month? How effortless it is to keep your credit score moving up by just avoiding the traps.

Partly or fully written-off proposals impairing your credit history must be avoided and instead negotiate for consolidation debt to raise a single debt to pay of multiple debts.

Advice:

Avoid missing payment of credit card bills by setting the payment on auto mode at least a day before the last day of the bill. Will it not be better if you schedule payment of the bill on the day of your salary? I will encourage you to buy all groceries and pay living expenses through credit card only. Whenever you feel an urge to buy anything other than living expenses, try to use the debit card. This will make you feel like falling back on the liquid money in your account and the proven human psychology will not allow you to spend from your reserves.

Learn to Earn Passive Income

Wanna see money dropping into your accounts without working actively for earning this income? My friends, It’s not a fluke or sweepstakes!

I am talking about the Passive Income that helps you in living the lifestyle you had wished for right from the early years of your career. This is the income for which you toiled hard and planned meticulously for fulfilling a peaceful and relaxed retired life. In simple and straight words, I am going to enlighten your way to accomplish your dreams

Friends, there are hundreds of books and numerous blogs talking at length about this stream of income from different perspectives. They are engaged in feeding the unsatiated hunger of readers looking for a clue to their anxious inquiries about the income that doesn’t require you to work actively.

Reading a few books and surfing some leading blogs on Passive income, I could barely satisfy my inquisitive thirst for complete knowledge on the subject. Every blogger differed on one account or the other prompting me to reproduce those tested metrics which came through in my own life!! Yes, I will dwell upon the subject with my own personal experiences.

Entrepreneurship or a white-collar worker, eventually everyone tries to explore resources for increasing earnings to accumulate wealth that could generate income when we don’t work actively. Yes, I am talking of retirement!! A stream of income that drops into your account without working is better known as a passive income. Don’t we need passive income when we are not working?

Whereas we in India strive hard and continue working even after the statutory retirement age of 60 years, some developed countries have a tradition to retire early. This becomes achievable only when you are financially secured and all your financial obligations like children’s education, having your own home and a retirement fund are suitably covered. One of the most attractive characteristics of retirement is the freedom of living your life on your own terms.

This passive income is not another salary or traditional business profit from its operations but yet it’s not less than that. For salary and business profits, you have to work hard with your active participation but this income drops into our account without even moving out of the comforts of your bedroom. However, for earning this passive income, you need to make your money or your ideas work for you.

The wealth amassed or capital gains accumulated over the years get you an income that does not require you to work actively. As a matter of fact, this stream of income is the only way to retire peacefully before or at the prescribed age of 60 years. The wealth created by you is not going to work while sitting in your Bank savings account due to meager returns. There are various options of investment where you can not only neutralize the inflation rates but also earn enough for living a good lifestyle.

Statistics indicate that a salaried person needs 70% of his last drawn salary for living the same lifestyle. It could be very convenient for those drawing pension from their employers as the payable pension constitutes 40 to 50%% of the last drawn salary leaving a gap of just 20% for comfortable sustenance. But those retiring without the privilege of pension may have to manage this income by investing their accumulated savings and capital gains in secured and better yielding investments.

Stocks: INVESTMENTS: With due respect to authors and bloggers, I beg to differ on treating investment in stocks as a passive income. Even the dividend stocks are not a source of secured passive income as it comes once or twice in a year depending upon the performance of a particular stock. At this stage of your life, You need a constant supply of income for your sustenance without eating into the corpus of wealth created over the years. At the best, this investment can help you in the creation of wealth for the average returns on stocks come around 10 to 14% per annum. I think wealth creation is a subject for consideration prior to your retirement and not now. Are you with me friends?
Mutual Fund: Most of the fund houses have schemes for paying monthly income on your investments. Dividends will vary depending on the performance of the fund. Though there is always a disclaimer by the Mutual funds that past distribution of dividends is not indicative for guaranteed future performance but You can identify any fund on the basis of its past performances and invest. Historically, every fund has been paying dividends of @10%. Handsome returns!!
Certificate of Deposits: Though not popular in India even after more than 20 years of its existence, this instrument is available with most of the Banks and issued for a specific period on premium interest rates.
Bank FDR: A most liquid option that can be encashed any time as per your requirement. Though comparatively returns are on the lower side but this is like a balance having both characteristics of earning and liquidity. The inflation rates are easily neutralized
Rental Income: This is the best source of passive income as the real estate keeps appreciating over the years and simultaneously giving you a regular stream of rental income. You can invest directly in the property or through the REIT (Real Estate Investment Fund) to avoid cumbersome activities like, maintenance of the property, leasing formalities, recovery of rent, or vacating the property involving litigations.
Bonds: Normally these are the secured and tax-free high yield instruments that you can invest in for longer horizons. You don’t have to pay taxes as well, the regular payments keep coming into your account
P2P Lending: Though a bit riskier investments but it has a lot of potential for earning a regular income. The default rate is minimal in developed countries but in India too this regulated platform is maturing by every day. More than 40 P2P lending websites are operating in India promising great returns to the investors and convenient short-term lending to the start-ups.
Blogs/YouTube Channels: Though getting more competitive and tougher these days but establishing information products through blog/ebooks and youtube channels is one of the best ways to generate income by sitting at home. You can create your own video channel and sell-through Udemy, Skillshare, and Coursera platforms. It doesn’t cost you anything but once clicked there is a tremendous opportunity of earning
Drop Shipping: You have a niche for marketing and selling products? this is the best way of earning money while sitting at home. You are not required to maintain stocks by renting out premises or godowns. Right from packing, delivery, and confirmation, everything is done by the supplier. Identify one or two products by establishing your own platform on Shopify or Etsy. Import hundreds of products through the tools available. Spread the word through mouth or google, and popularise the product. Google business helps you free of cost in finding new customers. Customers interested in your product will visit your store and buy the product by paying online. The money will land into your account as a difference between the cost and selling price. By any means, this is handsome income!

Conclusion: You have just found the easiest ways to generate passive income involving a little effort on your part. These methods have been practically experienced by me and found worthwhile with virtually no risk to the capital.

I will encourage you to start looking for passive income, a few years before you actually want to retire. With passive income you can have money coming in even as you pursue your primary job or business without interruption.

The prevailing pandemic conditions caused due to COVID 19 have resulted in economic upheavals rendering millions of people jobless. Those who had explored the opportunites of passive income earlier in their careers must have been able to fend for themselves in a more prudent way than others.

Hi Friends, Are you with me on the definition and interpretation of passive income. I will look for your valuable inputs for enriching my experience. Here is a link to Chris Hogan post on passive income that I would like you to read

https://www.daveramsey.com/blog/what-is-passive-income

http://www.virvia.com.au

How Gold, Real Estate,Stock Market Moved in 2020

We normally find Gold, Stocks and Real Estate moving in different directions. Loss of one could be a gain for the other. There are certain factors contributing to this peculiar ball game in the investment options. Staying strong and taking the world out of the mayhem caused by the Coronavirus pandemic conditions across the globe, we are fortunate to see the whole economy slowly emerging out of the dark tunnel of uncertainties. Even while the vaccination process has already commenced in a number of countries, corona cases have suddenly shown a soaring curve causing anguish but the economic activities have not stopped. Looks encouraging!! The world has learned how to live with Corona, this unwanted unwelcomed intruder in our life.

Global markets crashed in March 2020 showing no remorse to the small investors but the crippled world somehow managed to keep moving with a few sectors finding the time of their life as the sales turnover zoomed. Lockdowns and confinement of people within the boundary walls of their houses, left them trying various options to remain busy. Whereas, the entertainment and travel-related industries suffered, there was a piece of good news for online platforms, consumers, media, Pharma, and communication industries as the consumption of internet data increased.

The pernicious Corona started its venomous bite in Feb. 2020, as the following images illustrate the sudden impact on Gold and Stock markets in the USA. Dow crashed to 20900 levels after achieving the unprecedented highs of 29000 earlier and gold showed nervousness at $1566 levels on 28th Feb 2020.

Whereas, the Dow Zone has spiraled up to unprecedented 31000 levels, the International Gold @$1566 per ounce in Feb 2020 has consolidated to $1880 levels today after peaking to levels of $2067 during the year 2020.

Photo by Jose Francisco Fernandez Saura on Pexels.com

The Indian markets were no different as the nervousness lit large everywhere. Sudden lockdown forced lakhs of workers with meager belongings on their heads walking hundreds of miles to reach their native villages. It was a heart-burning scenario for the people watching their countrymen subjected to inconvenience in the absence of proper transportation and lack of cohesion between the state and the federal government.

Indian gold prices tumbled due to very low demand from domestic customers. However, Gold prices at Rs.43200 per 10 gm in Feb 20 has also shown prominence by moving up to Rs.49300 per 10 gm as of today after touching the historical highs of 52400 in November 2020.

Moving with the International sentiments, Nifty slipping down to unbelievable levels of 8000 in March 2020 has recovered smartly to unprecedented levels of 14595 as of today. Smart investors have made tons of money by investing at the right time when everyone was exiting the markets in panic and desperation. Nifty 50 trading at around 7600 in March 2020 has doubled the money in less than a year. Your self belief, courage, confidence, preseverance never goes wasted when it comes to investments.

During these turbulent times, we saw the concept of three avenues of investments never going hand in hand as they form parallel lines in the global economies without any exception. The three options of investments being Real Estate, Gold, and Stock Markets. The money keeps oscillating between these three strongest pillars of the economy. The liquidity pushed stock markets higher being the convenient way of entering and exiting any time while sitting at home. On the other side, the purchase of property, and physical gold proved cumbersome exercise.

Gold, Stock Market, and Real Estate never move in tandem. While the quality stocks kept moving the stock markets, the big players ploughed money into gold as the best remedy of uncertainty in turbulent times. Despite infusion of funds and consumer-friendly policies devised by the Government, there were no takers for investing in real estate during the year 2020. Hundreds and thousands of built or partially built apartments are standing unsold for the lack of interest, by the end-users. However, with the consolidation of gold prices, the demand looks picking up in real estate now.

With stock markets, and gold prices going through the roof, the best options lie in Real Estate now. Valuations of quality stocks have reached a point of consolidation and gold prices are also stabilising after achieving 25% growth in one year only. Right pockets may be explored for picking up rental or commercial properties for eyeing on the passive income.

Friends, the basic principle behind every investment is to create wealth by earning good returns from the investments regularly. Early retirement is possible only if you accumulate enough wealth for you to afford your current lifestyle. Believe me, a timely investment in real estate/stock market/gold can help in creation of wealth to earn passive income later on.

During the past ten years the gold prices in India have gone up from Rs.18000/- per 10 gm. to Rs.50000/-. Nifty(Stock Market) has gone up from 6134 levels on 31/12/2010 to 14595 today. Real Estate has also given tremendous returns over the last ten years.

Conclusion: What are you thinking about dear friends? Try to understand the movements of these three pillars of the economy by correlating the circumstances as stated above and invest at the right time in the right option.

Links for following the various global markets:

How Expense Ratio Eats into Your Profits

Expense Ratio is the cost which every investor has to be best while investing in Mutual Funds and other related products. Before going deep into the relevance and calculation of this ratio, I would like to brief you about these very safe and income generating investments for you to comprehend the subject: Definition of Mutual Fund:

In simple words, Mutual funds invest in Multiple instruments with money pooled from many investors to invest across a spectrum of securities. Mutual Funds invest in various types of securities like Shares, Bonds, Govt Securities, Commercial Papers, etc. Mutual Fund is considered one of the most viable investment option for all types of income groups as it offers attractive returns to the investors. It does not require introduction of very large amount of funds but a nominal amount as small as Rs.500/-would be sufficient to start with. SIP is the most preferred option for investment by small investors in India. You can purchase any number of Mutual Fund units online at a daily arrived NAV(Net Asset Value) directly from the AMC.

Investors can pick any fund as per their goals and risk appetite. An Equity Fund could be riskier but yields higher returns, whereas a Debt Fund with Gilt Edged securities may be fully secure offering low returns. Historical data indicates an average return of +10% for investments with a minimum horizon of 5 years. Considering that all the funds are managed by highly qualified Fund Managers/Professionals, there is virtually no scope of losing your capital by investing in Mutual Funds.

With the passage of time, these traditional Mutual Funds have taken different forms to satiate the ever-increasing thirst of investors for augmenting their returns with maximum ease and diverse exposure depending on their risk appetite. Index Funds/ETF(Exchange Traded Funds), Fund of Funds, etc are the few most preferrable.

Index Fund:

Whereas the Mutual Fund invests in shares/securities and tracks individual investment daily, Index Fund is a mutual fund which the fund manager tracks with a particular index like S&P 500, Nifty50, ASX200, Dow 30, Nasdaq 100, Russel 2000. The Fund Manager prefers to invest in the bucket of securities held in the index implying an average return to the customers/investors at par with the Index only. If the Nifty 50 has gone up by 10% over the last two months, then the investors who invested in the Nifty 50 index will also get a return of app 10%.

(Exchange Traded Funds) ETF:

ETFs are similar to mutual funds or index funds except that the Mutual funds can be bought or sold from the companies directly at the day end prices but ETFs are traded throughout the day like shares and can be traded any time of the day during the working hours of the stock market. ETFs generally hold stocks of commodities like Gold, Oil, Shares, Bonds, Currencies, etc.

Fund of Funds:

These funds have a large scope of providing multi-index spread over nulti-markets and countries to their customers. An investor living in India has an option to invest in International stocks like Amazon, Apple and Tesla by subscribing to these funds. Fundamentally, Fund of Funds is an investment strategy of holding a portfolio of other funds rather than buying individual stock and other securities. In simple terms, these Funds will buy other funds in their portfolios.

Hopefully, you have understood and comprehended the definition of mutual funds and their potential returns that may help you in identifying the right product for your investment. Let’s come to the subject i.e TER (Total Expense Ratio) that impacts the returns accruing to all the mutual fund investors.

Nothing comes free in this world! For that matter, no service comes free as there are always declared or concealed charges which you have to pay for utilizing those services. Despite no entry no exit charges on Mutual Funds, we have evolved a terminology known as Expense Ratio which is used by the AMCs to charge the investors. All costs of managing the funds are recovered from the investors at the time of exit. This cost comprises the management fee, brokerages, selling and marketing expenses, commissions, and other related expenditure.

Let us see how this TER is calculated and impacts a customer who has invested his money in any scheme of the mutual fund. A company(AMC) with an AUM of Rs.50000 crores earns a profit of 14% from its operations and as per SEBI guidelines, this company is supposed to charge TER @0.80%. The customer will get returns of 16%-0.80%=13.20%.

Management Fee: Almost all the Mutual Funds are managed by Fund Managers who are highly qualified professionals. Whatever salaries or contract amount is paid to the fund managers is booked under this head of expenses

Administrative Costs: Various charges such as brokerage, register, and transfer fee, legal and audit fee, advertising and, marketing costs, etc contribute as administrative expenses

Distribution Fee: Most of the schemes are marketed and sold by the mutual fund distributors approved and enlisted by the AMFI/NSE, etc A fixed rate of trail commission is paid to these distributors

If we sum up all these expenses and divide it by total assets of a particular Fund, the resultant value will be the Expense Ratio. Simple?

As per the SEBI circular, the under noted TER slab rates have been approved for all AMCs for meticulous compliance. SEBI has authorised certain exceptions that may cause a difference between two similar Mutual Funds. The investors need to compare the expense ratio of a company with other investment companies to ascertain whether this is worthy of investment or not A small difference in expense ratio can cause a considerable variation in your returns.

Assets Under Management(AUM)	TER for Equity Oriented Schemes	All other schemes excluding ETF/Index Fund	Index Funds	ETF Funds
Rs.500 crores	2.25%	2.00%
Next Rs.250 Cr	2.00%	1.75%
Next Rs.1250 cr	1.75%	1.50%
Next Rs.3000 Cr	1.60%	1.35%
Next Rs.5000 cr	1.50%	1.25%
On the next Rs.40000 cr	Total expense ratio exemption of 05% for every Rs.5000 cr	Total expense ratio exemption of 05% for every Rs.5000 cr
Above Rs.50000 cr	1.05%	0.80%	0.50%	0.35%

Total Expense Ratio(TER) as applicable in India

Friends, there is a distinct deviation in Expense Ratio between Equity/Debt and ETF mutual fund schemes. You will appreciate that equity fund involves 24×7 commitment and involvement of Fund managers for selling buying the securities by participating in all the trading sessions. This requires a lot of expertise, brokerage charges, and other connected expenses to be incurred by the Mutual Fund companies. Comparatively debt funds, index funds and ETF require minimal efforts as the entire process being passive in nature is less expensive. Hence the divergence in the Expense Ratio !!

However, the SEBI has allowed the AMCs to determine their own Expense Ratio based on the above chart and some relaxations as under:

For marketing and selling of mutual fund schemes beyond the top 30 cities across India, the AMCs have been allowed to charge 30 basis points .e 0.30 % of the fee in addition to the above-mentioned structure.
In the name of exit load AMCs have been allowed to include 0.05% in their TER

Where to find the TER(Total Expense Ratio): It’s very convenient to find out the Expense Ratio of any Mutual Fund Scheme either by accessing the relevant data available on the website of the concerned AMC or from the following sources:

Fund’s prospectus if you are already a customer
Financial News websites
AMFI

Though Expense ratio keeps changing in all the countries but it ranges in between 1 to 2% on actively managed funds and less than 0.20% on passively managed funds.

The USA, being the most developed and mature economy, expense ratio in actively managed funds like equity fund is less than 0.58% and it is .07% in passively managed funds. In ETF funds it was being charged at .03%

Conclusion: you will appreciate that the Expense Ratio as explained above is the actual cost incurred by the AMCs in managing these big Funds. The investors have suddenly diverted their investments in the newly found love of ETFs as the expense ratio is just a fraction. Friends, the Assets Under Management (AUM) of Indian Mutual Fund Industry as on November 30, 2020 has crossed a landmark of Rs. 20 Lakh crore and stood at ₹30,00,904 crore. The AUM of the Indian MF Industry has grown from ₹ 6.65 trillion as on November 30, 2010 to ₹30.01 trillion as on November 30, 2020 about 4 ½ fold increase in a span of 10 years. From this given data, you can visualize the reasons of expense ratio going down in India over the last few years.

Source: Amfi

http://www.amfiindia.com/indian-mutual

Disclaimer: The material and information contained on this website/Blog is for general purposes only. You should not rely upon the material or information on the website as a basis for making any business, legal or any other decisions. Any reliance you place on such material is strictly at your own risk and responsibilityDisclaimer: The material and information contained on this website/Blog is for general purposes only. You should not rely upon the material or information on the website as a basis for making any business, legal or any other decisions. Any reliance you place on such material is strictly at your own risk and responsibility

Signal’s Brian Acton talks about exploding growth, monetization and WhatsApp data-sharing outrage — TechCrunch

Brian Acton is crossing paths again with Facebook. Over more than a decade of building and operating WhatsApp, the company’s co-founder first competed against and then sold his instant messaging app to the social juggernaut. Only a few years ago he parted ways with the company that made him a billionaire in a bitter split…
Signal’s Brian Acton talks about exploding growth, monetization and WhatsApp data-sharing outrage — TechCrunch

Why Lender and Investor Use Ratio Analysis Differently

The same set of financial statements is perused by the lenders and investors for arriving at their informed decisions. However, modus operandi of subjecting this information for analysing various ratio analysis differs considerably. A Business model normally reminds us of a “Tripod” which has three legs to stay stable as the collapse is imminent if any of these legs is snapped or shattered for any reason whatsoever.

The promoter, Investor, and Lender/Banker form the three legs of any business which compliment each other. They have their own roles and responsibilities to keep the company afloat during the turbulent times enkindled due to market conditions or internal risks like labor problems and worn out technology issues etc.

Image courtesy: bing.com

Whereas, the promoters conceive business ideas and make them operational through their experience hiring a team of skilled workers/executives and garnering the required capital from their own resources, the investors join to supplement the company’s capital by subscribing to Shares/Debentures/Bonds/Commercial Papers. However, Lender/ Banker extends their support by financing day-t0-day working capital requirements. We will try to communicate by elaborating the significance of Financial Accounting from the investors and lenders perspectives

Financial Accounting or analysis is a connection between the company and professionals through Financial Statements like Balance Sheet, Income/Expenditure, and Cash Flow statements of a particular business. Analysis of these statements provides the health of the business as investors or lenders don’t have access to the day to day operations of the company. It’s like a mirror showing you the exact replica of your own self.

Whereas, an investor would like to see which company has performed consistently well, earned profits, paid dividends during the year before taking an informed decision by comparing with the industry data. The lender/Banker looks at these statements from a different perspective as they are more concerned with the cash flow, leverage, and overall solvency as calculated through various ratios. They delve into the data for a broader outlook as to whether the business is adequately prepared to meet its short-term and long-term commitments.

Stock holder’s equity is another very important and, relevant factor that helps both investors and lenders to peep through the health of the business. Normally (Total Assets=Total Liabilities=Capital/Equity) the difference between total assets and total liabilities provides an idea of stakeholder’s equity. If it works out to be positive, it’s good but sometimes this figure looks alarmingly negative indicating the imminent possibility of not meeting their long-term liabilities. A warning signal!!

The following ratios are taken into consideration by the lenders/Bankers before taking their call on approving the requested working capital requirements. Thankfully, all companies are required to submit their quarterly financial statements to the regulator regularly. The lender can keep a hawk’ eye on the various parameters and take corrective measures before it is too late

Current ratio: Total Current Assets/Total Current Liabilities. Theoretically, the 2:1 ratio is considered good but from Banker’s prudent perspective 1.33 ratio is acceptable being more efficient.
Quick Ratio: Cash or cash equivalents/Current liabilities, it should not be less than 1 as the figure suggests the availability of sufficient liquidity in hand to pay of current liabilities immediately.
(Debt Service Coverage Ratio)DSCR Ratio: Net operating income/Total debt servicing; More than 1 looks good, otherwise it will be difficult for the company to repay the future loan installments.
Assets Turnover Ratio: Net Sales/Average Assets; Higher the better as it shows more efficiency of the business
Inventory Turnover: Cost of Goods Sold/Average inventory; Shows how many times the inventory has been cycled in one year, the more the better. The number of more cycles means that the stock is being cycled more bringing more sales and revenue for the company
Interest Coverage ratio: (EBIT) Earning before interest and taxes/Interest expenses. Any figure more than 1 meets the qualifying standards.
Receivable(Debtors) turnover: Net credit sales/Average Receivables, higher the better showing more efficiency by the company. If we divide 365 by this ratio, you will get the average time for realizing any credit sales. The increasing figures vouch for efficient realization of debtors
Creditors/Account Payable(Creditors) ratio: Net credit purchases/Average Creditors; If we divide 365 by this figure we will come to know how many days do a company takes to pay its creditors
Debt Equity Ratio: Total Liabilities/Total Share Equity, though more than 1 is not considered good this should be compared in comparison with the type of business and industry. Some high infrastructure like companies engaged in road transport, Air and other capital intensive companies need huge borrowings for running their business
Debt Ratios: Total Liabilities/Total Assets, Lower is the better

Image courtesy: bing.com

Now let’s have a close look at the ratios which help the investors to arrive at a calculated and informed decision for putting their money in the stock markets:

(Price to Earning)PE ratio: Share Pice/EPS; It’s a measure of the company’s share price in comparison to earning per share. Though no benchmark fixed PE ratio of 10 to 15 is considered a good valuation.
(Price Earning to growth)PEG Ratio: PE ratio/EPS Growth; it gives a more clear picture than the PE ratio as it is linked to performance of the company.
(Return on Equity)ROE: Net Income/Shareholder’s equity x 100 indicates how much the shareholders equity is earning and the increasing figure means better working of the company. ROE value of 10 and above is considered good by the investors.
Price to Sales: Share Price/sales per share, compared with industry to find out whether the share is undervalued or overvalued.
Price to Book Value: Share Price/Book value of the share; if it comes to less than 1 means the stock is undervalued otherwise it’s a overvalued stock.
Profit Margin: Net Profit/Total Revenue x 100
Dividend Yield: Dividend Per-share/Share Price x 100, higher the better
Dividend Payout Ratio: Total Dividend paid/Net Income, Normally 30 to 40 % is better
(Return on Capital Employed)ROCE: Net Profit/Total capital employed; It’s better to have this figure increasing every year
(Earning per Share)EPS: Net Income/Total number of ordinary shares
(Return on Assets)ROA: Net Income/Total Assets x 100 indicates for every Rupee invested, how much income is generated by the company. Higher is the better

Image courtesy: bing.com

Conclusion: I have tried to interpret Financial Statements from an investor as well as a lender’s perspectives. These are just a few tips which may help in arriving at the right decision by the concerned parties. Every ratio and information needs to be co-related and read in conjunction with other industry-wise data and future potential for all practical purposes.

Make Money with Penny Stocks. Beginners Guide. Learn Investing in Penny Shares

Let’s embark upon the journey of dreaming with Penny shares and find out how beneficial it is to invest or trade in Penny stocks. As per the definition” Penny stocks are those that trade at a meager price, have very low market capitalization, are mostly illiquid, and trade on stock exchanges with a small volumes. In the Indian stock market context, any share trading at a price around Rs.10 is termed as a Penny Stock”.

In the USA any stock trading at less than $1 is termed as a penny stock and going by the international standards, I will take any stock trading less than Rs.50/-as a penny stock.

From the very definition, Penny Stocks are high risk most affordable entities available in the stock market alluring the retail or first time investors into buying these cheap shares without going into the merits or demerits of such investments. Come on friends! Have a look at your portfolio and see how many penny shares are still lying in your account.

some of you must be feeling on nine clouds after accumulating thousands of penny shares in your trading account. Spending a few thousand for buying these cheap stocks didn’t fluster your budget too. In all probability, You have started watching movement of these stocks on a business news channel or the stock trading platform regularly. Right!!

Recalling the achievements of stock market wizards, Sir Warren Buffet, Jhunjunwala, or Damanis, you must have been dreaming of accruing millions in your account for astronomical rise in the prices of these cheap stocks known as Penny Shares. Isn’t it right? I know you are agreeing with me though reluctantly!!

Now coming back to the penny shares, You can’t pick up any stock just because some news channels or experts have recommended the share. You must learn techniques by using your normal prudence for earning money by investing in these speculative stocks

Management: First and a foremost parameter which should be taken into consideration before venturing into this high-risk speculative activity is the management i.e the people associated in running the business of this company. What is the outlook and moral strength of these individuals, their past experience, and how the Industry thinks about them as a leader: A visionary/strong-willed and a person of proven prudence is more likely to navigate the business out of woods. How many of you will go with the Anil Ambani group of companies which are trading as Penny stocks these days. Look at the management of Vodafone Idea, NHPC, Trident, and imagine the future prospects of these companies?
Business Model: Next on priority is the company’s plan for earning profits. their products, marketing, expenses, and targetted customers. Most of the units fail when they start a business without finding a relevant niche, targetted clients, and unexpected expenses. Have a look at the business model of NHPC, a Mini Ratna company and, Vodafone Idea; they have excellent business models and great potential for growth in the future. Look at the Kingfisher model and Bisleri pop model. Both of these companies failed miserably due to unviable businesses. Do you agree?
Fundamentals: See if there is a sales/profit growth during the last three years. What is the position of Cash Flow and Free Cash Flow? Any company generating free cash flow can be trusted for future growth.
Debts: Is there any unpaid debts. Find out Debt. Equity ratio for the three years. is it decreasing or not?
EPS: Please see if there is an increasing trend in EPS
ROE: Return on Equity. Normally the ratio stands at 15% or above for good companies but you must try to find out whether it’s increasing over the years?

Thankfully, this entire information is available on the internet and can be accessed in a few minutes. The said data which is not beyond the comprehension of an ordinary investor must be co-related before clicking the “BUY” button on your trading platform.

Now coming to the harsh reality of Indian market conditions, we must acknowledge that most of the customers can’t identify themselves whether they are traders or investors in the stock market. It may be irritating to a few but I will certainly provide some space for the benefit of my readers to let them know the difference between the two.

Trader: Any customer who puts his money in the market for earning profits by selling or buying shares in a few minutes/hours or days taking advantage of volatility in the market caused due to Market moods/International news/Govt Policies/War-like situations or some good or bad news about the company. These type of customers are known as Traders.

Investor: Any customer who buys shares of a company and remains invested for a couple of months/years/decades earning the fruits of growth of the company through dividends/stock splits/bonuses is certainly an investor. He tides over the upheavals/turbulences and other market uncertainties by concentrating on the business model of the company and its periodical results. The investors belong to a rare breed of customers who never regret dealing in stock markets as the end result is always encouraging in their favor. They create wealth for themselves.

Check Points and future course of action for the customers who prefer trading in these stocks:

Please don’t get tempted to buy penny shares shares when there is a sudden movement in the penny stocks. This could be due to some speculative news in the media or some vested interested players are jacking up the prices for preying on innocent retail investors. Control your emotions and inner instinct to react to each and every news.
Please log in to your trading account and find out how many penny stocks are you carrying in your account
Have you seen any appreciation in their value since the date of buying
If there is a considerable upward movement in these shares then keep tracking the performance of the company and retain these shares as they may help in creating good wealth for you in the distant future.
If the shares are lying dormant with virtually no movement or the prices have gone down further, then don’t think twice. Get rid of these stocks immediately and invest in some good stocks as suggested in my earlier post”Be your own advisor”
Invest in Penny shares only if, You have high risk appetite, can handle losses and are a seasoned investor. Strict NO for new entrants or low net worth individuals.
Always start your stock investing journey by chosing the Blue chip stocks in your portfolio. That will provide you a much needed confidence for continuing investing in this high yield investment option.
Always believe in investing in penny shares for longer horizons as all the millionaires or billionaires have shown patience and resilience in selecting the stocks and then giving their investments time to grow. You must remember that Titan, Lupin, Sesa Goa(Vedanta), Crisil didn’t rise to the current levels within months. Jhunjhunwala had to wait for decades to see his fortunes turning to billionaires.

Hi Friends, hopefully you are more enlightened and clear about the relevace and growth potential of Penny shares in your portfolio. Stay alert and take well informed decision only. Believe in yourself and earn money by investing in penny shares by learning the art of chosing the right ones by following the aforementioned guiding tips.

Have a great day!!

(P2P):Peer-to-Peer Lending,Debt Crowdfunding,capital, Easy Loans,Money,Borrower

Friends, We have seen technology doing wonders in almost every facet of modern-day life as we are getting accustomed to everything available at our fingertips. Innovative ideas have been transformed into applications to help the ultimate customer in every domain. So is the case with Banking and Finance as the Fintech companies have taken over the charge to provide the services which were beyond comprehension only a few years ago.

Banks would express reluctance entertaining request from an individual whose credit score is not consistant with the prescribed norms and small businesses needing funds for their immediate working capital requirements may found Banks too demanding taking a comparatively long time for processing of loan proposals.This made such borrowers shifting their alliance to local money lenders who would pay money immediately by charging exorbitant interest rates. The idea of removing intermediaries in providing immediate funds to such borrowers, particularly startups made the concept P2P platform a possibility.

The concept of P2P Lending emerged in the UK in 2005, when ZOPA, the first company started providing services but the first real fintech platform came into being in 2010 as “Funding Circle” started offering small loans to small businesses from the investors via its platform. P2P is a convenient platform that facilitates transactions between a lender and a borrower by charging a nominal fee. All intermediaries removed in one shot!!

Furthermore, Fixed income group customers like pensioners tend to invest in Mutual Funds or Bank FDR’s for risk-free returns. Average returns on these investments are always in single digit not even matching the inflation rate of 7% in India. There is always an inclination to search for high yield avenues by these fixed income investors. P2P Platforms made it possible for them to earn returns of more than 12%. Although delinquencies and NPA’s keep rising section 138 has checked the menace of check bouncing and one can diversify the portfolio by investing a part of funds under this segment too.

Important features and check points for Investors (Lenders) and Borrowers to know about P2P lending:

Lender(Investor)	Borrower
Identify P2P company with tolerable NPA levels and good reviews	Identify P2P company with good reviews and known for quick action
Register with the P2P lending company	Register with the P2P lending company
Search Borrowers and identify borrower you want to invest	Send request for the Loan amount and negotiate for Interest rates
Receive a copy of the Loan documents for your records	Execute the Loan documents
Diarise the date of Installments at your end and follow up	Receive loan disbursement in your account
You can lend a maximum Rs.50000/- per borrower	You can borrow a maximum loan of Rs.10 lakh from P2P Platforms and Rs.50000/- from individual lender
You can Fund a maximum Rs.10 Lakh on all the P2P Platforms	Avoid any default on your loan account
Submit CA certificate for 50 Lakh net worth if interested in lending more than Rs. 10 lakh	Your loan account is being reported to CIBIL You stand a chance to improve your credit (CIBIL)score by paying regularly
The maximum repayment period is 36 months. However, no pre-payment charges if paid after three months	The maximum repayment period is 36 months. However, no pre-payment charges if paid after three months

Check points P2P Lending

Like other regulators across the world, RBI brought this category of debt crowdfunding under the ambit of its governance in 2016. Any P2P company operating in India needs to adhere to the prescribed guidelines strictly:

P2P company needs to be a registered NBFC with a minimum paid-up capital of Rs.2 crores.
P2P Company: will only facilitate transactions between the lender and borrower without assuming the role of a Banker.
Will not seek any deposits from the investors
Will not guarantee any returns to its customers
The total exposure of any lender to the individual borrower will not exceed Rs.50000/- on all the platforms
Any lender will lend only up to Rs.10 lakhs and a CA certificate about his net worth is required if he wants to lend more than Rs.10 lakh up to Rs,50 lakh
Any borrower can borrow the maximum amount of 10 lakh only from all the platforms
The maximum tenure of the loan will be 36 months only
Will display on its website the NPA figures in the existing cases
Will prepare risk profile of each borrower and investor
Will decide the interest rate depending on the risk profiles of borrowers
Will execute loan documents and help in recovery
Will have a panel of lawyers who will start proceedings against the defaulter against section 138 for bouncing of installments
Will conduct due diligence on borrowers and lenders

Friends, P2P platforms are providing very quick loans to small business or individuals without any collateral security. The cost could be more but it is worth meeting your emergent fund requirements. Hold on!! This is one way of improving your credit score also. You stand a chance to improve your credit score by proving yourself a good borrower by paying the installments regularly.

Stay safe and keep reading

Home Loans- How to Work Out Mortgage (NRI’s), OCI’s

NRI’s(Non-Resident Indians) and OCI’s(Overseas Citizens of Inda) have a large presence in all the countries across the world. If you look at the gegraphical presence of Indians settled abroad, you will be pleasantly surprised to find Indians in every corner of all the inhabited continents. Beginning with, the USA, the UK, Canada, Australia, Germany, and other countries, they have been accepted as the most peace-loving and hard-working warm people. This is a great tribute to Indian culture!!

Writing “Top Indian Origin CEO’s” on the Google search bar will take you to a page “Top 10 Indian Origin CEOs Who Are Ruling the World” incredible!!. Becoming the leaders of the world’s most influential companies and playing a vital role in their growths is no easy task. Here is a list of the top ten highest paid Indian CEOs in the world. Sundar Pichai. 2 Shantanu Narayan. 3 Satya Nadella. 4 Sanjay Kumar Jha. 5 George Kurian. 6 Nikesh Arora. 7 Francisco D’Souza. 8 Dinesh C. Paliwal. 9 Sanjay Mehrotra. 10 Rajeev Suri.

Not only through technology, the Indians have been contributing in the overall growth of the economies via agriculture/small business/Skilled and Non-skilled labor/Politics etc. Isn’t a proud moment for all Indians to rejoice at?

It’s encouraging to see that these NRI’s have not lost connection with their homeland as they keep exploring India for attending domestic functions, festivals and, other-tourism related businesses. Their contribution to the Indian economy can not be ignored as they continue remitting millions of dollars for boosting Indian Foreign Reserves also.

Despite Coronavirus, total NRI deposits touched $135.36 billion as of July 2020, up from $130.58 billion in March 2020, $133.12 billion in 2019, and $124.44 billion in 2018, according to the latest Reserve Bank of India (RBI) data. All Indian Banks have conceived schemes for the NRI’s offering handsome returns on their deposits.

The importance of this category of customers could be gauged from the fact that all Banks have an NRI cell working in their corporate offices to redress grievances of NRI customers promptly .

Home Loan financing being a secured portfolio remains favorite option for Bankers as the default rate is negligible. Convenient mode of the loan application and efficient processing by the Bankers attract a large number of NRI’s who are looking for alternate spacious homes back in India. Online Loan application, prompt processing and, disbursement have been the hallmark of services being rendered by the Banks now a days.

The primary reasons why Indians are willing to avail of home loan:

NRI’s frequently conduct business trips and require a place to stay during their visits
NRI’s may have a family living in India and are willing to buy a new home
NRI’s are willing to earn money by investing in the Indian realestate market

Hopefully, the following information about eligibility and documents required alongwith your Loan application will facilitate in the submission of the completed application smoothly:

Eligibility	Non-Resident Indian (NRI), Person of Indian Origin (PIO), Overseas Citizen of India (OCI)
Interest Rate	7.50% and above
Age Criteria	24 years to 60 years
Work Experience	Minimum six months of overseas and total 2 years of experience required
Loan Repayment	30 years
Pre-payment Charges	Nil
Processing Charges	0.25% 2%+GST for fixed interest
Minimum Income	GCC Countries: AED(United Arab Emirates dirham)5000 pm
	USA & other countries US$3000 pm
	Merchant Navy: US4 2000 pm
Margin	15 to 25%

Eligibilty and Terms/conditions

Type of Loan Application	Physical/Online
POA	Driver Licence/Aadhar card
POI	Passport/DL/PAN
Proof of Income	6M Salary Slip with 6M Bank statement showing credit of salary
Passport	A copy of Front and Back alongwith last entry in the country
Visa	Copy of Visa/Green card/OCI card
Proof of Employment	Appointment Letter
overseas credit report	CIBIL Report
Signatures	Pan Card
Sale Agreement	Agreement executed(बयाना) with the seller showing value of the proposed property and advance amount paid by you

Documents to be sent alongwith the LOAN APPLICATION

You can apply for Home Loan in any Bank at your convenience. However, it’s better to route your application through the Bank where you are already maintaining your NRE/NRO account. This will facilitate expeditious processing of your Loan application as the existing Bank has a history of your Banking activities.

Banking in India has come of age as any loan application hardly takes more than 30 minutes for in-principle approval these days. If you don’t have an adverse credit rating (CIBIL) due to any loan defaults/write off etc. there is every possibility that the Bank will convey sanction in a day or so.

Please note that the maximum Loan amount under Home Loan Scheme is calculated by the Banks on the basis of your monthly salary. Taken your monthly salary as Rs.100,000/-, the maximum eligibility comes out to Rs.100,000×60=60 lac only. This is just an indicator and the final amount will be calculated on the basis of various other factors like Age, existing loan installments, living expenses, nature of the job, etc.

However, the sustenance amount (take home salary ) after payment of all your loan instalments has been prescribed at 40%. Please note that this figure is kept in mind while computing the total permissible finance by the Bankers. Hope you will find the contents of this post interesting and worth keeping in mind for future references.

Friends, Stay safe and keep reading

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