Time to do the financial planning for 2009--

Year 2009 has already knocked our door for future and it’s the right time to learn lessons from the current financial turmoils.We must set specific goals for personal finances as it is rather not going to cost us anything but inturn will increase ROI.Some timely goals and baby steps that can help you do your financial planning.

Control your expenses & stick to the budget:You are more likely to face financial problems, if you have been extravagant in your expenses. you need to adhere to some financial disciplines.Always remember that a rupee saved is a rupee earned. Therefore, stick to the discretionary budgets so that you can handle the uncertainty in the non-discretionary expenses.
Take control of your investments:Resolve to protect your finances as the market storm rages on. Take the time to build up your emergency fund, and set reminders to regularly review your portfolio’s asset allocation.
Turn the problems into opportunities: Look hard enough and you can find a silver lining to just about every aspect of the struggling economy, from falling home prices (lower property taxes) to bankrupt retailers (great close-out sales).Look out for bargain on all-time favourite stocks and mutual funds to accumulate for longer term.
Be debt free: In the falling interest rate scenario, it is good to repay all your debts. In recessionary periods, it is always better to be debt free and use cash more often. Be better about savingThe easiest, most painless way to build a nest egg is to choose a low-cost, diversified investment plan and authorize the plan/fund to deduct a set amount from your account every month.
Have an emergency fund in portfolio: Having an emergency fund in your portfolio is an ideal way to tide over a family crisis or meet unexpected expenses. Therefore, the need for maintaining emergency funds, particularly keeping some cash at home or in a bank account, has always been emphasized by our forefathers.
Have realistic expectations: There’s nothing wrong with hoping for the ‘best’ from your investments, but you could be heading for trouble if your financial goals are based on unrealistic assumptions.However, it doesn’t mean that you should always expect the same kind of return from the stock markets. The current market meltdown is a case in point.

Hope you all will keep an eye on your investments and management of personal finances with the right plan of action.Wish you all a very Happy and Prosperous New Year!!

Why Invest in International Equity Mutual Funds?

Studies have consistently shown that investing in a mix of U.S. and foreign stocks has produced better returns - with less risk - than investing in the U.S. equity market alone. While investments in all mutual funds involve risk, investing in foreign securities presents risks such as currency fluctuations and changes in political, regulatory or economic conditions. All of these factors may result in greater share-price volatility.The simplest way to invest in international equities is through a mutual fund, which offers investors the following advantages, as stated by Iris Greenberger:

Diversification: Diversification helps reduce the risk of loss associated with any single investment. While diversification cannot eliminate risk entirely, it smoothes portfolio performance during periods of market volatility.

Professional Management:Most investors have neither the time nor the expertise needed to manage a large portfolio of securities. Mutual funds are managed by portfolio managers, who track the fund's holdings daily and decide what stocks to buy and sell.

Liquidity:Having liquidity means that any or all of your shares can be redeemed on any business day. You will receive the value of your investment at the close of the market. The value of the fund fluctuates with market conditions, and therefore, at redemption, the value of an investor's shares may be more or less than their original cost.

Convenience:The mutual fund handles all administrative aspects of share ownership. You will receive account statements, which include information on the tax status of any capital gains and dividends you receive.

To know more about the investing reasons in international equity fund,check this article: Why Invest In International Equity Mutual Funds?, by Iris Greenberger

Toggle Note --An Innovative way to keep defaulters low !!.!!

A PIK Loan is a type of loan which typically does not provide for any cash flows from borrower to lender between the drawdown date and the maturity or refinancing date, not even interest thus making it an expensive, high-risk financing instrument. PIK (payment in kind) is to be interpreted as interest accruing until maturity or refinancing. Toggle note is such a payment-in-kind bond, where the issuer has the option to defer an interest payment by agreeing to pay an increased coupon in the future. With toggle notes, all deferred payments must be settled by the bond's maturity.

Payment-in-kind Toggle notes is becoming an increasingly important part of the arsenal of private-equity firms as they pile debt on their corporate trophies. These "PIK toggle" securities allow borrowers to make a choice. They can keep paying interest on a bond, or they can defer paying interest until the bond matures, and in the process agree to pay an interest rate that is effectively higher. These Toggle notes provide firms with a way to raise debt while staying afloat during times of strained cash flow. When cash is at a minimum, the firm can use the toggle to defer an interest payment.

While this seems like an attractive option for the firm, it does come at a cost. The increased interest rate provides ample incentive to not miss an interest payment. But such new features are definitely in the interest of investors, because they help companies avoid default and complex bankruptcy proceedings.

Money and Brain..!!

A study has found that like the dollar signs in the eyes of cartoon characters, thoughts of money light up visual areas of the brain. An international team, led by California University, has found that thoughts of money light up visual areas of the brain, including a part of visual cortex known as “V1” which represents basic features such as edge orientation and color.

Researchers have based their findings on an analysis of brain scans of a group of volunteers as they chose between red and green targets that varied in value at different times. Selecting a target might yield ten cents or nothing. But those who made the right choices could earn up to $10. The findings revealed that rewards altered brain activation in many areas of the human visual system.

Activation was also seen in the frontal and parietal regions of the brain which have previously been implicated in anticipating and tracking rewards. Researcher John Serences said: “When a target has been valuable in the past — if selecting it had paid off with money — the visual system represented it more strongly. Rewards affected information processing, not just at a high level of cognitive function but right from the get-go. “It raises the intriguing possibility that we see things we value more clearly — much like the way the brain responds to a bright object versus a dimly-lit one.”

Plenty of factors go into decisions about things that we think are rewarding and the instant judgments of our brains may play just one part in a wider picture. For example, Serences said, our choices about eating ice cream or vegetables may depend on things like whether we’re on a diet.

Source:ET

Interesting--Salaried crorepatis double in 2 years !!

When on one hand the world’s hit with the global recession and where every now and then exists a fear of another bank being getting collapsed, on the other hand the number of taxpayers earning more than Rs 1 crore annually has doubled in just two years. And, for this increment the credit truly goes to the buoyant economic growth. Corporate sales and profits have risen by more than 30% in the last few years. That has encouraged companies to pay record salaries to their top managers, say tax experts.

According to data compiled by income-tax department, the number of salaried taxpayers earning more than Rs 1 crore (Rs 10 million) crossed 5,000 in fiscal 2008 from 2,200 in fiscal 2006. The total number of millionaires is much higher as it includes non-salaried taxpayers. The data on millionaires, gathered from employee tax deducted at source (TDS), shows the number of people earning between Rs 50 lakh and Rs 1 crore per annum has also more than doubled. It has increased from 4,400 persons in fiscal 2006 to 10,500 in fiscal 2008. The number of those earning more than Rs 10 lakh also increased to 2.24 lakh in FY08 from 87,000 in FY06.

Talking about the millionaires in India, the majority earns between Rs 10 lakh and Rs 20 lakh. In 2007-08, more than 1.5 lakh employees were earning in this income bracket. That is a 250% jump over 2005-06 .While TDS from those earning more than Rs 1 crore was Rs 4,415 crore, and those between Rs 10 lakh and Rs 20 lakh was Rs 5,770 crore. The number of taxpayers earning between Rs 5 lakh and Rs 10 lakh has also doubled in the last two years.(Source:ET)

But this pace may slow down in 2009-10. India’s GDP grew by 7.8% in the first six months of fiscal 2008 from over 9% in the previous year, and corporate bottom lines have also seen a similar dip.So,that will put pressure on salaries.

3-6-3 Rule - An unofficial banking rule !!

3-6-3 is an "unofficial rule" under which the banking industry once operated and which alludes to it being noncompetitive and simplistic. The banking industry of the 1950s, 1960s, and 1970s is often described as operating according to a 3-6-3 rule .The rule basically explains how bankers would give 3% interest on depositors' accounts, lend the depositors money at 6% interest and then be playing golf at 3pm. This alludes to how a bank's only form of business is lending out money at a higher rate than what it is paying out to its depositors.

In the past when the government implemented tighter banking regulations, the growth of the banking industry became stagnant as the regulations controlled tightly the rates at which banks can lend & borrow money. The regulations also included limits on the formation of new banks and their location However, these regulations loosened in 1980s and the widespread adoption of information technology such as the internet, banks now operate in a much more competitive and complex manner. The world of banking is never the same again! The banks are now providing insurance, brokerage and other forms of financial services.

S0, we can conclude this as :
3-6-3: The ‘unofficial’ banking rule - take deposits at 3%, lend at 6%, go play golf by 3 O’ clock; NINJA : No Income No Job Assets.

Twas the night before Christmas--from investopedia

Here's an interesting poem for the investors and people who are politically involved.I liked it and thought of sharing as it suits perfectly on this festive season..!!

'Twas the night before Christmas, and all through the house

Not a broker was churning, as they were home with a spouse;

The stocks had been researched and purchased with care,

In hopes that high returns soon would be there.

Investors were nestled all snug in their beds,

While visions of ten baggers danced in their heads.

The Investopedia Staff had done their week-long preach,

But they hadn't yet run out of things to teach.

When on CNBC there arose such a clatter,

Investors sprang from their chairs to see what was the matter.

Up to the TV they flew like a flash,

To hear the latest rumors and political trash.

The analyst picks - a normal part of the show;

But smart investors knew it was all so much blow.

When, what to their wondering eyes should appear,

But Warren Buffett, with something for investors to hear.

Click to continue reading further.... "Read more"...........

Wish you all a Merry Christmas-- A day of sharing,giving and rejoicing..!!!!!