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6 Simple Tips for Better Money Management While Investing

Investing is always scary, especially for beginners. Investing during a global recession can be downright terrifying. That’s why using common sense is more important than ever.

In this article, we will share 6 easy tips for better money management for investors. Many of these hints are also recommended by CNN, Fortune, and Money.

1.Invest on a schedule.

Sticking to a schedule is good advice for many of life’s pursuits. Every month, put the same amount into a mutual fund. You will be able to keep track of your money better. Plus, this allows you to pick up more shares while they are cheap and fewer when they are expensive.

2.Take multiple investments.

Your mother probably told you not to put all your eggs in one basket, and she was right. Diversification cuts back your risk. Of course, you can never totally get rid of risk, but mixing up your portfolio helps.

Please don’t invest solely in company stock. If the company takes a dive, so does your retirement plan. Company stock should be only 10% of your portfolio, no matter how much faith you have in your business.

3.Buy foreign stocks.

This fits in nicely with the second tip on our list. Yes, the global recession has hit the entire planet, but buying overseas stocks is still a smart move. You should invest 20% of your money abroad, at the least.

4.Spend time with other investors.

It’s always smart to pick up advice from other players in the game. If you network with other investors, you can hear about new opportunities early through the grapevine. Even if you live in a remote area, you can join online investing forums, such as OnlineTradersForum.com.

5.Feed your 401k.

Place as much money as you can into your 401k. Your company might match it dollar to dollar, at least to a certain point. Or, they might match 50 cents on the dollar and a percentage of your salary. Either way, you’re getting free money to fund your future retirement.

And please don’t cash out when you leave your job. You’ll cough up a 10% penalty as well as income taxes. Plus, you’ll miss out on tax-free growth later.

6.Don’t make any investments you don’t understand!

It’s sad to think of how many people buy investments or take out credit cards without finding out any of the important details first.

Don’t allow a financial planner, broker, friend, or agent pressure you into buying an investment that doesn’t make sense to you. Ask them focused questions and take notes. If you just don’t get it, skip that investment.

This applies to just about anything, from credit cards to home mortgages. After all, a credit card is a financial investment also, so read the fine print. Do you know the APR?  Do you understand how the rewards program works? Good money management is all about staying informed.

Yes, many of the above tips are pretty obvious, but as French author Voltaire famously said, “Common sense is not so common.” Sometimes good investors make bad money management decisions because they’re pressured by other people, in a bad financial position, or just misinformed.

Thanks to Sierra Dawson for sharing some simple tips for better money management.  She says your common sense is one of the most powerful money management in your arsenal, so don’t underestimate it!

For more information better read Fisher Investments press to gather great advises on future investment.

L&T Finance Holdings has come out with an IPO of via issue of equity shares of Rs. 10 each priced between Rs. 51 to Rs. 59 per share. The company is promoted by Larsen & Toubro Ltd, one of the leading bluechip companies in India, with wide range of interests in engineering, construction, electrical and electronics manufacturing and services, information technology and financial services. L&T Finance Holdings has a strong retail reach with more than 800 points-of-presence spread across 23 states.

The company is a subsidiary of L&T Limited, which holds 95% and it is the holding company for the following three businesses conducted via wholly-owned subsidiaries:

1. L&T Finance – retail and corporate finance lending.
2. L&T Infra – infrastructure financing.
3. L&T Investment Management with a mutual fund business.

Details of the issue:
Issue Size: Rs. 1,245.00 Crore.
Issue Open: Jul 27, 2011 - Jul 29, 2011.
Issue Price: Rs. 51 - Rs. 59 Per Equity Share.
Market Lot: 100 Shares, to be listed at BSE and NSE.
Rs. 120 crore of the issue size is reserved for L&T shareholders and they can apply through a separate application form.

Valuations:
The book value stands at about Rs.25 and at the upper band of Rs. 59 per share, shares are being offered at a price-to-book value (PBV) of 2.23 x times. The other listed companies in this space, like Shriram Transport Finance,IDFC,M&M Financial Services are currently trading at slightly higher valuations than L&TFH.

L&TFH owns close to a 5 per cent stake in Federal Bank and City Union Bank. It also owns L&T Mutual Fund which has an asset base of Rs 5,200 crore as of June 2011 and all these stakes could add further boost to the valuations.L&TFH is having diversified and high quality loan book, superior interest spreads and sustainable demand in various segments of presence. All these features make long term investors comfortable in investing in this IPO.

This is an update of the earlier article on Historical Sensex Returns, which gives complete details about Sensex's yearly returns. In this article we analyze the monthly and yearly returns of the Sensex in the last 10 years. As we can seen from the table below, except for the year 2008 and earlier couple of years, the returns from the index have been well over 15% and the returns were as high as 73%. Also one can see after the fall of over 50% in the year 2008, the following year's returns were about 81%.



As we can note from the above table, the average returns for the past 10 years is around 18.3%. Hence if an investor is investing in an index fund or ETFs like Nifty Bees , over a longer time frame of 5-7 years, the returns are spectacular. The important point to note here is that, though the index has almost regained its previous peak of 21000 in 2008,  many of the individual stocks are still languishing around 2008 levels. This again emphasis the fact the investing in diversified mutual funds, like HDFC Top 200 or Index ETFs is safer and better, than investing in individual stocks,  to get better returns from the markets.

Be a wise investor !

The National Stock Exchange (NSE) will launch interest rate futures on the 91-day treasury bills from July 4. So, what is this interest rate futures is all about? Interest rate futures (IRF) is a standardised interest rate derivative contract traded on a stock exchange to buy or sell an interest bearing instrument at a specified future date, at a price determined at the time of the contract.

Why are they issued?

These Money market instruments are issued to finance the short term requirements of the Government of India and they are issued at a discount to face value (Rs 100). The return is the difference between the par value and issue price There are different types of T-bills based on the maturity period like 91 days, 182 days and 364 days. Such instruments are very helpful for banks and mutual funds to hedge their exposure.

How are they quoted?

Quote Price = 100 minus futures discount yield.
E.g. For a futures discount yield of 7% p.a, the quote price would be 100 – 7 = Rs 93.00.

How are they settled?

The interest rate futures would be cash settled. In case of the 91-day treasury bill, the final settlement price of the futures contract is based on the weighted average price/ yield obtained in the weekly auction of the 91-day treasury bills on the date of expiry of the contract.

Advantages?

There is no Securities Transaction Tax (STT) and lower margins as compared to other forms of trading. This gives an easier and cheaper access to interest rates trading.

To put it in a nutshell, the interest rate futures can be used to take a directional call on the interest rates or for hedging their existing position. One can enter into an 91 DTB futures contract based on your interest rates view. If your anticipation is rise in interest rates you can create a short position in interest rates futures and vice-versa.

In continuation of earlier article about the basics of Exchange Traded Funds (ETFs) and pros and cons of investing in ETFs, let us look at the list of ETFs available in India. With regard to Equity ETFs, there are a few Index funds, couple of banking sector funds and an international index like Hangseng Bees.

Similarly in the Commodity ETFs,there are a quite a number of Gold ETFs, which has attracted a large number of investors, of late. Interestingly there aren't any Silver ETFs and one can expect such an ETF soon.

The following is the list of ETFs available in India and traded in National Stock Exchange of India. The list shows the Fund house, name of the scheme and the NSE symbol.


Equity ETFs:

Benchmark Mutual Fund:
Banking Index Benchmark Exchange Traded Scheme - Bankbees .
Hang Seng Benchmark Exchange Traded Scheme Hangsangbees.
Infrastructure Benchmark Exchange Traded Scheme -Infrabees.
Nifty Benchmark Exchange Traded Scheme- Niftybees.
Nifty Junior Benchmark Exchange Traded Scheme Juniorbees.
Psu Bank Benchmark Exchange Traded Scheme - Psubnkbees.
Shariah Index- Shariabees.

ICICI Prudential Mutual Fund - Sensex Fund -Spice.
Kotak Mahindra Mutual Fund:
Kotak Nifty ETF - Kotaknifty.
Kotak PSU Bank ETF - Kotakpsubk.
Kotak Sensex ETF.

Motilal Oswal Mutual Fund:
Most Shares - M100.
Most Shares - M50.
Most Shares NASDAQ-100 - N100.
Quantum Mutual Fund Quantum Index Fund -Qnifty.
Reliance Mutual Fund - Reliance Banking Exchange Traded Fund - Relbank.

Gold ETFs:

Axis Mutual Fund - Axis Gold ETF - Axisgold.
Benchmark Mutual Fund - Gold Benchmark Exchange Traded Scheme - Goldbees.
Birla Sun Life Mutual Fund - Birla Sun Life Gold ETF - Bslgoldetf.
HDFC Mutual Fund - HDFC Gold Exchange Traded Fund - Hdfcmfgetf.
ICICI Prudential Mutual Fund -ICICI Prudential Gold Exchange Traded Fund - Ipgetf.
Kotak Mahindra Mutual Fund - KOTAK Gold Etf- Kotakgold.

Quantum Mutual Fund - Quantum Gold Fund - Qgold.
Reliance Mutual Fund - Reliance Gold Exchange Traded Fund - Relgold.
Religare Mutual Fund - Religare Gold Exchange Traded Fund - Religarego.
SBI Mutual Fund - SBI Gold Exchange Traded Fund - Sbigets.
UTI Mutual Fund - UTI Gold Exchange Traded Fund - Goldshare.

Invest wisely !

In this second part of the series about Exchange Traded Funds (ETFs), we look at the advantages and disadvantages of ETFs. As we have seen earlier in Part 1 , ETFs trade like shares while providing the diversification of managed funds.

Though they are similar to mutual funds, they differ in their diversification like index, commodities and different sectors. Their performance closely tracks the investment returns of the shares making up the index or the commodity they are invested into.


Benefits of investing in ETFs:

1. ETFs are passively managed, have low distribution costs and minimal administrative charges. Hence most ETFs have lower expense ratios than conventional Mutual Funds.
2. Not dependent on the fund manager, the ETF just tracks the index.
3. Like an index fund, they are very transparent.
4.Convenient to buy and sell as it can be bought/sold on the stock exchange at any time of the day when the market is open.
5.One can short sell an ETF or buy even purchase one unit, which is not possible with index-funds/conventional Mutual Funds.