Money Today Archive October 2, 2008 Issue

Edition: October 2, 2008

Cover Story

How the experts got it wrong

Forecasting is a science. But in uncertain times, it becomes an art. Unprecedented turn of events in the past 12 months has made experts look like tyros.
  • It’s politics, stupid General elections in India have had an immediate impact on economic growth. You should be aware of such implications since elections are around the corner.
  • Performance linked problem Although 15% of Reetesh's annual package is variable, he takes the amount as a given and uses it for investments, while the fixed pay is used to meet regular expenses.
  • Old job, new skills Ashwini Dhingra was a production engineer, then got a management degree and specialised in marketing in an IT firm. Unhappy, he learnt new skills and joined advertising.
  • The real expenses Which bulb do you use at home? A lot of us still use bulbs, because at about Rs 25, they are cheaper than a CFL, which costs Rs 125, and a 2-Watt LED, which costs Rs 450-700. Never mind that the CFL lasts around four times longer, and an LED at least twice as much.
  • Problem of plenty Shash had 12 credit cards, on which he had revolved about Rs 1.5 lakh. When he realised his finances could not cover even one card, he cut down to six cards.
  • First buyer disadvantage Rajshekhar spent Rs 11,400 on an iPod Nano in February. “Had I waited a few more months, I could have bought a new mobile phone along with the iPod,” he says.
  • Returns cut by taxes A believer in frequent portfolio-churning and even quicker profit-booking, Rakesh Goyal has realised that his strategy isn’t working as well due to the higher tax on capital gains.
  • Wanting too much too fast Gopal Krishna Murthy realised the downside of F&O when he lost Rs 18,000 on a margin call. “I was carried away by the possibility of making big gains on a small investment,” he says.
  • On shaky ground Rakesh Mishra booked five flats in a single project near Delhi and planned to sell four. But for more than a year, there was no appreciation in prices and he couldn’t find any buyers.
  • 10 financial mistakes Times of uncertainty are full of challenges; it gets tough to predict trends and a small mistake can turn deadly. We bring the 10 most likely financial mistakes you could make, and how to grapple with them.
Mutual Fund
Sameer Bhardwaj
The risks in mutual fund investments arise from the probability of a fall in the NAVs, which can be attributed to market risks and company-specific risks.
  • Moving with the Market For the first-time equity investor, index funds are a relatively safer option as they take the guesswork out of investing. Besides, the charges are lower.
  • 'Control fear and greed' Identify your financial needs and risk appetite before investing, says  Ved Prakash Chaturvedi, MD, Tata Asset Management.
Entire STT payment will be treated as expenditure against the income from trading of shares.
Harpreet Singh
There’s nothing easier than logging on to the people in the know—and the service is almost always free.
Since the beginning of the year, the newer funds have performed better than the older lot. This is because the younger funds have been able to avoid the brunt of the downturn in the markets, even as the older funds remained invested.
Kamya Jaiswal
The author demolishes 13 of the most popular investment strategies and suggests ways to make them more effective. Despite the academic writing style, the book is a must for every equity investor, says Kamya Jaiswal.
Query Corner
Prashanth Amin of Kolkata wants to know how the systematic withdrawal plans offered by mutual funds work and the tax implications of investing in one.
A snapshot of the rupee’s performance to help you take decisions on travel and overseas investments.
Editors Note
Alam Srinivas
These are trying times. They are also optimistic ones. Read our cover story to find out the wrongs, and workable solutions to be richer.
Talk Back
In a globalised world, a book on finance by foreign authors is relevant for Indian readers too. Moreover, very few Indians have written on this subject.
Many investors are convinced that after the Sensex plunged 41% in six months, the key indices can fall no further. It looks like they could be right. Can things really improve?
Now and Then
Eggs are not only an important source of nutrition for many people in urban India, but are a key ingredient in bakery products and processed foods.
My Idea
Rajshree Kukreti
When Mumbai-based Wasiff Khan decided to experiment with a daily tiffin service for dogs, he didn’t expect that the Homecare Dog Food would grow into a Rs 75 lakh packaged meal business.

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