How to invest safely

5 ways of making equity investing safer

Veena Venugopal, Outlook Money (January 09, 2008 )

You may have stood outside, watched the dancers and wondered when was a good time to join the equity party. You may have taken a step forward, heard the thunderous music and then jumped backwards.

With the indices marking record highs in 2007, the equity party was certainly one where latecomers were kept out. Even as the party continues to be loud, don't be afraid to join in. But, be careful and don't get swept off your feet.

As the new year begins, let safety be your resolution. Outlook Money defines five ways of making equity investing safer.

1. Pick 'safe' stocks
Stock picks are paramount in any kind of market, and especially so in a market like ours that has had a significant run up. The market is now trading at around 20 times one-year forward earnings, an unprecedented level. Even at the best of times earlier, valuations have not exceeded 16 times one-year forward earning.

The first mistake to avoid is to assume that the cheapest way to enter this market is through initial public offers.

Says Gaurav Mashruwala, a Mumbai-based financial planner: "Many people say that the market is too expensive and putting money in an IPO would be cheaper. That is a wrong strategy. Companies just getting listed are more risky than established blue-chips."

The safest way to enter the market is by investing in large companies, ideally those that are part of the market index.

Once you gain some experience, you can diversify. Even then, it's better to stick to well-known players. Try and get research reports from reputed brokers. Learn to read balance sheets and understand the industry the company operates in. Ignore hype and, most importantly, do not depend on 'market tips' your friend always gives.

Another important factor to investing safely is knowing when to sell.

2. Read between the lines
Beware of hype. One of the recent trends to emerge from trading patterns in the last few months is that delivery-based transactions are sometimes less than half of actual volumes in the market.

This indicates that the price rise in a lot of stocks is purely speculative and not backed by any fundamentals. This is true even for large-cap, well-known stocks.

Try and understand the reason why certain scrips are gaining. Check data from the exchanges.

If volumes for delivery constitute a major portion of trades transacted during a period, it indicates genuine buying and selling. If only day traders or speculators are interested in the stock, you may be buying into an artificial demand.

As the Sensex reaches unthinkable levels, massive volatility is par for course. Do not get caught on the wrong foot.

3. Do not over-leverage
You had a good run last year and have substantially improved your portfolio. You wish you had more funds to make an even bigger killing. Your broker suggests margin trading. At just 10 per cent of the investment you get to take a position on a stock that is definitely going up. Sounds great? Well, resist.

Even brokers are of the opinion that the current market is not one for retail investors to try and test their skills in.

As our bourses get increasingly aligned to foreign ones, short-term market movements will be driven by forces we cannot foresee or predict. Avoid buying stocks to trade them in a few days, and even more importantly, avoid over-leveraging yourself.

If your call goes wrong and you have utilised the margin trading facility, you will have to cough up the remaining 90 per cent overnight. You may have to liquidate other investments or even borrow at a higher cost to cover up the losses.

"Margin trading is not safe even in the most placid of market conditions. Though we do offer this facility, it is inadvisable to use it in the current market conditions. In 2008, we expect more volatility, not ideal conditions for a novice to leverage market positions," says the head of a large broking house.

4. Be vigilant
As more investors are entering the market, regulators, exchanges and depositories have been tightening the rules. However, this does not mean that all fraud is eliminated. Choose your broker carefully. If you are picking the stocks yourself, then you can go with the cheapest broker. If you are going to rely on your broker for investment advice, then choose one that has the best research capability.

Even if you have picked a reputed broker, be vigilant. After every buy or sell transaction, check your contract note. It should have the order number, trade number, trade time, quantity, price and brokerage, and should be signed by the authorised persons.

If you have an online broker, check your depository participant status. Shares must reach you on the second day after you have put in your buy order and cash must be in your account the second day after you sell.

Keep a daily check on your DP account even if you have not transacted. Sometimes brokers move your shares to their common pool and transact on them. Call them and ensure that they reverse this. If a record date for dividend payment has been set on the day your broker does this, you may lose the dividends.

5. Be diligent
The best way to ensure the safety of your money is to be diligent. Get yourself organised and keep your papers in order. If you are applying for an IPO, keep a copy of your application form and cheque.

If you are buying and selling through a broker, check your contract notes and file them away safely. If you have all your documents in one place, it is easy for you to spot fraud and take action against it.

Market regulator Securities and Exchange Board of India as well as the Bombay and National Stock Exchanges have investor complaint cells. You can write to them and follow up to ensure that action is taken against the broker or the registrar if you face problems with your transactions or IPO allotment. But, for this, you need to have all your evidence in place and in the right order.

Stockmarket investing is fraught with risks and not for the faint hearted. But facing the risk of an intelligent and calculated transaction going wrong is one thing, and having to lose your money because of greed or laxity is another.

If 2006 was a year when even your pet dog could stock pick and make a decent profit, 2007 has taught us that, ultimately, markets favour the intelligent. Indications are that 2008 will teach us more of this. Brace yourself and enjoy the party.

I've seen this report to be very good therefore I want to share it for you. Hope you will like.

Thanks for your reading!

How to Manage Your Finances

For some strange reason, money is often equated with evilness and that may be why many people do not even discuss how to manage money with their kids. However, it is a necessary evil to deal with it. It is also necessary to master your finances as it can often mean a success family and business life, so do put in the effort into mastering it.

Make managing your finances a mental habit. In the back of your mind, always try to think to yourself whether you have saved money by doing this. Also ask yourself whether there may be a cheaper way of doing something. If you ask yourself these questions each time you want to spend money or spend time (as time equates to money since you can use your time to make money), then you will get into a good habit of saving and spending only what you need. Just think of yourself as a poor person, and you probably won't likely spend so much money. Of course, once you do get rich, remember to donate some of your money to others for worthy causes, detailed in the article Philanthropy: Where and How to Donate Your Money to Charity.

Keep track. Find a simple way for yourself to keep track of how much money you make and how much you spend. There are probably lots of software these days that will help you do this quite handily. You can also do it the old-fashioned way of paper, pencil, and calculator. Just find a way that works and that you will maintain for at least one to three months every day - writing how much you spend and on what you spend it, as well as how much money you make. Once you see the numbers, and endeavor to save, you will become addicted. Most people get addicted to numbers, and once you see how much you have accomplished by saving on certain costs, you will be inspired to do even better next time. Of course, try not to deprive yourself or your family of necessary expenses such
as required food to get the nutrition that you need. However, you could probably eat out less and save much more money and eat healthier by cooking your favorite foods at home.

Get out and stay out of debt. One of the first ways to get out of debt is to stay out of it in the first place. Do not overspend on your credit card, and remember to pay your card all the time. Just remember to budget those items in. Make a budget table for yourself if you have to. For some areas of your life, it may not be possible to immediately get out of debt, such as the mortgage on your house. However, try to buy a house that is within your budget, and try to return as much as you can possibly without hurting your lifestyle drastically. If it takes 25 years for you to return your mortgage, then let that be. Also schedule for problems, such as if you lose your job, how will you manage with your mortgage. Will you sell your house, will you need to rent out part of it? Just allot for certain problems that prop up in life every now and then.

Save money. Most books recommend saving 10% of what you earn. That's definitely quite reasonable. The more you save, the better, so if you can save even more than 10%, please go ahead. On the other hand, if your wage is quite meager, and you can only save less, try to see if there are innovative ways where you can save that 10%. Remember to put your money safely somewhere after you have saved it, such as probably some form of locked term deposit in the bank where you will earn a reasonable interest rate. Use your money to make additional money, as that probably requires the least effort on your part. It may not make you rich, but why not let your money make additional money when there is almost no additional charges. Be wise, though, when choosing your financial institution and how you lock your money. Get all the details, as well as what would happen to your money if that financial institution went bankrupt. Therefore, it is probably safer to place your money at least in a few big financial institutions so that at least you will know it will be useful. It might not hurt to also have some gold or some foreign currency in case anything happens to your country's currency. You may also want to read the article on Saving Money.

Do not lend money unless you do not want to see the money again. If you do not want losing the money that you lend, then do not lend it. If you are thinking of it as a donation, then that would be a good idea to lend it. However, if you intend on seeing the money back later, then do not lend it. Not that the friend or relative or whoever you lend it to will not return it, but it is better to be on the safe side. It might not be their fault that they cannot return it, but the circumstances.

Hang around other frugal people. If you spend some time with frugal people, you will probably most naturally pick up their frugal habits effortlessly. They may even talk about money quite often. Just relax and take in the information and their actions. Then you, too, will become a frugal person and other people will want to hang around you.

Many people have poor financial management skills. However, if you are able to master financial managements, you will become one of the gurus who can actually say that you are able to control how much you spend instead being controlled by the money that you earn.

In summary, to manage your finances,

A. Make managing your finances a mental habit.

B. Keep track.

C. Get out and stay out of debt.

D. Save money.

E. Do not lend money unless you do not want to see the money again.

F. Hang around other frugal people.

Original article from http://lifeskills.endlex.com/article/finances.html

Thank for your reading!

How to Earn and Save Money

Earning money is earning money regardless of which new toy you wish to purchase. Cashflow is the key. Here are some ways to get more flow towards you and eliminate cashflow away from you when it makes sense financially.

You can try to check with the steps below:

1. Find a job, start a business, negotiate extra chores that someone will pay you to complete, or find contract work. Do something that is legal and pays. It's even better if you get something that pays and that you enjoy doing, but don't let enjoyment stand in the way of earning a living.

2. Look for ways to save and budget for your toy purchases. Or, find ways to get a raise, or pick up a second income. A quick way to save is to eliminate lunches and dinners out and also eliminate "designer" coffee and soda from restaurants, fast food joints and convenience stores. Most people, this author included, can find many ways to save if we take a close look at our cashflow. There are probably lots of current expenses you can eliminate.

3. Once you receive positive cash from one of the above sources, set aside a portion of your earnings, and or new found savings, each pay period until you have saved for your new toy. This may be one pay period or many pay periods.

4. Avoid paying "convenience" fees whenever possible. An example of a convenience fee would be purchasing a 12 ounce soda at an event or restaurant for a $1.00, $2.00 or more, when you can buy the same soda for $.50 or less when you purchase them at a grocery store. If you track your money closely you may find many "convenience fees" that can be avoided daily.

Final noting:

There are expenses in starting a business and not every business is successful. That being said, a successful business can be very lucrative if handled correctly.

Hope your sharing!

This is a special idea of Ashwin (Author of this article - Original content which I may share you to see passing. Thank you!
Make Money From Football Risk Free! (Monday, 20 November 2006)

I fondly remember those days when I tried to make money from football back in my University days. I thought I could combine my passion for the sport with my interest in making some money on the side.

I've had mixed results - I still think that I can "read" a football match in-running better than the average person. And it's fair to say that I made more money than what I lost.

However, I would not recommend anyone to bet on football. There is far too much uncertainty in a football match. If you are getting some buzz out of it, fair enough. But do NOT see it as a means of getting a guaranteed income.

As Sir Alex Ferguson, Manchester United Manager and keen racing fan states, "never trust a football match, it's a funny old game".

Instead, I've found another way of making money from football completely risk-free. It will NOT get you rich but will fetch a few hundred dollars risk-free.

It works as follows:

1. Telephone the Merchandise Shop of a big football club (we are only talking of the ilk of Chelsea, Barcelona, Real Madrid, AC Milan, Manchester United, Liverpool, Arsenal). You will find their number easily from their website;

2. Tell them that you would like to buy a signed football shirt from a specific player - normally, go for the much loved players, e.g. Steven Gerrard, Ryan Giggs, David Beckham;

3. The answer is more likely to be a "No". INSIST! Tell them that you really want it (either because you are a life-long fan, or that it would be your little brother's dream come true, or simply that you are an avid collector of football memorablia);

4. If the answer is still a no, ASK THEM WHAT PLAYER CAN THEY GET A SIGNED SHIRT FROM. Many people would love to buy football memorablia from top players who are not as loved as David Beckham, e.g. Paul Scholes, Ashley Cole, Peter Crouch etc.

5. BUY THE SHIRT THEY OFFER YOU. They will sell it to you for the cost of the shirt;

6. Now, guess what, sell the shirt on Ebay!

Read my blog on Make Money From Ebay to get the best advice. Essentially, if you take a good picture of the signed shirt, put the name of the player in the auction title and put a good description, you will sell the shirt for MUCH MORE THAN THE COST. For example, you will get a signed Wayne Rooney shirt from Manchester United Merchandise Shop for no more than £40. And these consistently sell for over £100 each on Ebay!!

You can repeat this process on and on. You do not have anything to lose. At worst, you will only be refused the football memorablia.

You can even apply this technique for signed autographs. Get a signed autograph from, say, Jose Mourinho. IF YOU WRITE TO CHELSEA FOOTBALL CLUB, YOU WILL GET A SIGNED POSTCARD FROM JOSE MOURINHO IF YOU ASK FOR IT.

FRAME THE AUTOGRAPH, TAKE A PICTURE OF THE AUTOGRAPH, AND LIST THE AUTOGRAPH ON EBAY. It will sell for at least £30!!!

As you can see, this technique will not get you rich, but you can make some decent profits every season from football memorablia.

Email me at pinoop411@gmail.com if you have any thoughts on this.

Once again, thank for your reading!

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