Reuters-Gold,high on safe-haven buying

Gold futures continued their record-breaking spree as investors poured money into the safe-haven asset due to a deepening global recession, analysts said. The benchmark April contract witnessed an all-time high of Rs 15,780, before trading 1.81 per cent higher at Rs 15,735.

In 2008, gold soared to its year-high of 14,320 rupees, up 35.1 per cent from its 2007 close, before falling to 11,290 on Oct 24. Gold has more than doubled since 2004. ""Technical breakout has already taken place at 15,676 and there could be further technical buying," Rahman added. Buying is recommended on lower levels of Rs 15,690, with a target of 15,775 and with a stop loss of 15,630, Rahman added.

Tax-free Dividendsnow for shareholders !!

At a time when returns from the markets are tough to come by and expectations are low, a select band of companies have announced tax-free dividends for its shareholders. The list includes a host of PSU companies like SAIL, GAIL, Concor and Nalco, and also private sector companies like Cummins, Financial Technologies, Dabur and Crompton Greaves. While these companies have mostly announced interim dividends for the current financial year, since this is an attractive way of rewarding investors at a time when a large number of these investors may exit their holdings.

Also analysis based on historical stock price movement have shown that companies offering high dividend yields in a bear market tend to give superior capital appreciation in a bull market. However, market veterans pointed out that in reality not too many retail investors look at annualised dividend yields while buying into a stock. The best strategy is to look at the saleability of a stock before buying into such a stock. At times illiquid stocks also offer high dividend and investors buying those scrips because of such attractive payouts are stuck.

Asset Allocation--

Every rational investor seeks for an efficient portfolio(highest return from a given level of risk), in theory we come upon a certain percentage allocation for equity-based and fixed income assets that,put together, should generate a return commensurate with the amount of risk we are comfortable with.Investors are generally categorized as risk averse or risk takers.In reality,there are many grey shades along the risk-return spectrum and re-examining the investor's asset allocation defines his place on the spectrum.While asset allocation may not be the sole driver of long term performance,but it does define the range of returns and volatility within which a portfolio is expected to perform.Risk return clustering occurs at each level of asset allocation.WIth an increase in the proportion of equity in the portfolio,the dispersion of return as well as risk increases(due to the volatility of equity returns).Of course the risk and voltality can never be predicted but better the quality of the fund selection,higher the probability to get better returns.

Riak profiling is major and important step whereby an investor's capacity for taking risk is fleshed out and articulated and many investoors would find that that thier actual portfolio is not in line with their expectations.By modifying the ratio of fixed income to equity an appropriate risk return profile can be attained.

Asset allocation isn't a one time phenomenon.An investors requirements will naturally change with age ,income level etc. and these changes will be reflected in the asset allocation.Yeah but for long term investments definitely it remains unchanged.The benefits of risk profiling and asset allocation becomes apparent over a period of time for both investors as well as advisors.An ideal case orf efficient portfolio is a hypothetical construct that a few can achieve in the real world.But it bring investors as close as possiblle to their own best case scenerios if not the ideal ones.It also helos in cementing long-lasting customer relationships.

Uses for Bonds--

Individuals and institutions can use bonds in many ways: from the most basic, such as for preserving principal or saving and maximizing income, to more advanced uses, like managing interest-rate risk and diversifying a portfolio. Bonds can also be an afterthought, especially during flight-to-quality events, when investors flock to the safest bonds they can find to weather financial storms. Bonds provide a predictable stream of coupon income and their full par value if held to maturity.

Top six ways that you can put bonds to work for you:

1. Preserving Principal

2. Saving

3. Managing Interest-Rate Risk

4. Diversification

5. Expense Matching/Immunization

6. Long-Term Planning

To know in details about each of them, Read here...

Filter rule-- A trading strategy !!

Filter rule is one of the trading strategies that benefit traders from the price movements of the stocks and fall under serial correlation strategy. A technical trading rule in which an investor buys and sells stocks if their price movement reverses direction by a minimally acceptable percentage.

Filter rules are created from analyzing the historical price trends of a security. The assumptions that is followed in this trading is that price changes are serially correlated and emerges from price momentum theory, i.e., stocks which have gone up strongly in the past are more likely to keep going up than go down.

So in conclusion, this strategy may work provided each time your bets are good. However, a good and justified way of making money from this strategy is through efficient money management. Remember, if you want to follow this strategy be prepared to get wiped off completely, and be ready with large amout of money. Evidence has suggested that filter rules are rarely successful in creating profits for the investor.

Artbitrage funds have a greater scope in 2009--

If you are interested in investing in equities but fear the market volatility, the smartest way will be to invest in arbitrage funds. These mutual funds are the best performing funds among the equity category in 2008. In fact, with uncertainty still haunting the financial market, these funds are expected to create value for investors in 2009. The higher the volatility, higher the arbitrage opportunity .But investors not familiar with this type of scheme might just end up thinking that these are just other equity-oriented schemes with a different name. However, this is not so and rather it is a type of income scheme. These funds take advantage of the arbitrage opportunities between the cash and the futures market to generate fixed income.

Such funds are better suited for investors who want low risk profile funds but expect decent returns. What leads (or rather misleads) everyone to believe that arbitrage funds are risk-free is that, in arbitrage strategies, both the buying and selling transactions exactly offset each other, thus making it immune to the market fluctuations. But uncertainty prevails in almost all investment schemes and these funds are no exception.The equity market in 2008 has given a lot of opportunities for arbitrage and mutual funds have been able to capitalize on that.

In India, a host of AMCs, including SBI, JM Financial, Kotak, UTI and IDFC, offer such funds. In the last 12 months, the average returns from arbitrage funds are around 8.8%. Scheme-wise, arbitrage funds such as UTI Spread Fund and HDFC Arbitrage Fund have given a return of 10.57% and 9.37%, respectively.

As far as tax treatment is concerned, since funds are largely invested in the equity arbitrage funds attract a short term capital gain tax of 15%. But if you hold it for more than a year, you are not liable to pay any tax. For tax purposes arbitrage funds are treated as equity funds. Hence, they enjoy lower tax vis-à-vis debt funds.

There is no denying that arbitrage funds are relatively less risky as compared to pure equities. However, to slot them as "risk-free", amounts to mis-representation. Arbitrage funds do have an element of risk; so investors who are being told that arbitrage funds are less risky have been misled.But all funds in this category have in the past one year or so outperformed their benchmarks by a convincing margin and there is greater scope for introducing these products in the coming days. Thus, the investor community should take to this concept more seriously.

Variable annuities & living benefits !!

A variable annuity is a tax-deferred financial product that pays benefits to the annuitant over a specified number of years and a death benefit to the annuitant's beneficiaries. The benefit paid to the annuitant is usually based on the purchase payments and the performance of the underlying investments. The underlying investments can be diversifies and rebalanced, which provides the investor with flexibility to monitor and manage his or her portfolio.However, a variable annuity product may be subject to a variety of fees, including surrender charges if withdrawals are made before certain periods and mortality and expense risk charges.

The living benefit--as the name suggests--is intended to guarantee the benefit provided to the annuitant and toward that end, usually offers guaranteed protection of the principal investment, the annuity payments and/or guarantees a minimum income over a specified period to the annuitant and beneficiary. There are several types of living-benefit features, including the following:

• Guaranteed Minimum Accumulation Benefit (GMAB)
• Guaranteed Minimum Withdrawal Benefit (GMWB)
• Guaranteed Minimum Income Benefit (GMIB)

With many investors seeing their retirement portfolios losing significant market value, a variable annuity with a living-benefit feature can be a good solution for protecting retirement nest eggs.

A key determining factor that affects the choice between an annuity and a traditional portfolio is the individual's need for guaranteed income. For someone with little or no risk tolerance or limited financial resources, an annuity may provide the needed guaranteed income stream.To know more about variable annuities and living benefits..Read here..

Random Walk -- A hypothesis !!

The theory that stock price changes have the same distribution and are independent of each other, so the past movement or trend of a stock price or market cannot be used to predict its future movement. The random walk hypothesis is a financial theory stating that stock market prices evolve according to a random walk and thus the prices of the stock market are uncertain. 

In short, this is the idea that stocks take a random and unpredictable path. A follower of the random walk theory believes it's impossible to outperform the market without assuming additional risk. Critics of the theory, however, contend that stocks do maintain price trends over time - in other words, that it is possible to outperform the market by carefully selecting entry and exit points for equity investments. This theory raised a lot of eyebrows in 1973 when authorBurton Malkiel wrote "A Random Walk Down Wall Street", which remains on the top-seller list for finance books and which posits that past share prices are of no use in predicting future prices.

Random walk theory is diametrically opposed to technical analysis. The theoretical underpinning of technical analysis is that markets react in a consistent way to share price movements. By looking at charts of past price movements, investors can identify patterns which have occurred before, and can anticipate future price movements because the market tends to react in the same way. The actual lack of correlation of past and present can be easily seen. If a stock goes up one day, no stock market participant can accurately predict that it will rise again the next. Just as a basketball player with the “hot hand” can miss his or her next shot, the stock that seems to be on the rise can fall at any time, making it completely random.

The rebuttals to random walk theory are not meant to suggest that the vast majority of individuals are going to suddenly start outperforming the market. Even though this may be true over the past 3 years, history suggests that it is not likely to be the case 10 years from now. In other words, history suggests that this is an anomaly and there will be a reversion to the mean.

Malkiel maintains that a buy and hold strategy is best and individuals should not attempt to time (or beat) the market. Attempts based on technical, fundamental or any other analysis are futile. Admittedly, he does have a point. 

W.D.Gann's Valuable Rules--

Some of today’s great trading philosophies actually date back to the early to mid1900s.And W.D. Gann, was considered "market mavens" of that time. He stressed hard work and preparation as pre-conditions for successful trading of markets. His  work is still valid and renowned by successful traders of all markets worldwide.

William Delbert Gann made an enormous contribution to analysis and trading throughout his long lifetime. The fact that his techniques are used by so many traders and investors today, almost 50 years after his death, is evidence enough of his enormous contribution. Even his few critics flatter him by repeating his never failing rules as their own, more than half a century after Mr. Gann first devised them.

Gann’s 28 Valuable Rules:

In order to make a success trading in the stock market the trader must have definite rules and follow them. Gann said "The rules are based upon my personal experience and anyone who follows them will make a success."  It is now more than 50 years since W. D. Gann documented his 24 rules, yet they apply today as much as they ever did.

1. Amount of capital to use: Divide your capital into 10 equal parts and never risk more than one-tenth of your capital on any one trade.

2. Use stop loss orders. Always protect a trade when you make it with a stop loss order 1 to 3 cents, never more than 5 cents away, cotton 20 to 40, never more than 60 points away.

3. Never overtrade. This would be violating your capital rules.

4. Never let a profit run into a loss. After you once have a profit of three cents or more, raise your stop loss order so that you will have no loss of capital. For cotton when the profits are 60 points or more, place stop where there will be no loss.

5. Do not buck the trend. Never buy or sell if you are not sure of the trend according to your charts and rules.

6. When in doubt, get out and don’t get in when in doubt. 

7. Trade only in active markets. Keep out of slow, dead ones.

8. Equal distribution of risk. Trade in two or three different commodities if possible.Avoid tying up all your capital in any one commodity.

9. Never limit your orders or fix a buying or selling price. Trade at the market.

10. Don’t close your trades without a good reason. Follow up with a stop loss order to protect your profits.

11. Accumulate a surplus. After you have made a series of successful trades, put some money into a surplus account to be used only in emergency or in times of panic.

12. Never buy or sell just to get a scalping profit.

13. Never average a loss. This is one of the worst mistakes a trader can make.

14. Never get out of the market just because you have lost patience or get into the market because you are anxious from waiting.

15. Avoid taking small profits and big losses.

16. Never cancel a stop loss order after you have placed it at the time you make a trade.

17. Avoid getting in and out of the market too often.

18. Be just as willing to sell short as you are to buy. Let your object be to keep with the trend and make money.

19. Never buy just because the price of a commodity is low or sell short just because the price is high.

20. Be careful about pyramiding at the wrong time. Wait until the commodity is very active and has crossed resistance levels before buying more, and until it has broken out of the zone of distribution before selling more.

21. Select the commodities that show strong uptrend to pyramid on the buying side and the ones that show definite downtrend to sell short.

22. Never hedge. If you are long one commodity and it starts to go down, do not sell another commodity short to hedge it. Get out at the market: Take your loss and wait for another opportunity.

23. Never change your position in the market without a good reason. When you make a trade, let it be for some good reason, or according to some definite rule; then do not get out without a definite indication of a change in trend.

24. Avoid increasing your trading after a long period of success or a period of profitable trades.

25. Don’t guess when the market is top. Let the market prove it is top. Don’t guess when the market is bottom. Let the market prove it is bottom. By following definite rules, you can do this.

26. Do not follow another man’s advice unless you know that he knows more than you do.

27. Reduce trading after first loss; never increase.

28. Avoid getting in wrong and out wrong;getting in right and out wrong: This is making double mistakes.

Types of mutual funds---

This guide for the various types of investment funds. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.

When it comes to investing in mutual funds, investors have literally thousands of variations. Before investing in the fund on the feasibility of investment strategy and risk funds good opportunity for you. 

The first step for the success of the investment is to determine your financial goals and risk tolerance - whether in its own discretion or professional help financially. Once you know what you do if you need money, and how much risk you can tolerate, you can choose. 

Most mutual funds fall into one of the three main categories - money market funds, pension funds (also known as the "Fixed Income" fund), and stock funds (also called the "L" Equity Fund). Each type has its own characteristics and different risks and opportunities. Typically, higher yield potential, higher risk of loss. 

Money Market Fund: 

Money Market Fund, have relatively little risk compared with other investment funds. Investor losses have been rare, but they are possible. Money Market Fund to pay dividends, which generally reflect the short-term interest rates, historically funds and money market yields are lower than in bonds and securities funds. 

Bond Fund: 

Bond funds are generally more risk than money market funds, mainly because they tend to  achieve higher yields. Because there are many different types of bonds, bond funds can be very different in their risks and benefits. 

Stock Fund:

A stock fund is a fund that invests in Equities more commonly known as stocks. The objective of an equity fund is long-term growth through capital appreciation, although dividends and interest are also sources of revenue. Specific equity funds may focus on a certain sector of the market or may be geared toward a certain level of risk.

A small information for the new investors if they have a certain objective, they can invest accordingly---

Investors interested in:	Should invest in:
Growth	Stock Funds
Income	Bond Funds
Safety of Principal	Government Bond Funds
Immediate Liquidity	Money Market Funds
Tax Relief	Municipal Funds
Maximizing Current Income	Corporate Bond Funds