Sunday, 19 May 2013

21 Ways to Save Money for a rainy day or for a better use.

No financial plan or retirement plan will succeed unless you find ways to save money and adopt thrifty way of living. If you find your expenses are dragging your savings down putting your financial plans in jeopardy, you can surely turn around by trying some of these measures.

  1. Change your bank deposits  where you get better interest rates and the maintenance charges are less.  Utilize online bill pay with your bank. This serves two purposes. First, it keeps you in much closer contact with your money, as you can keep a very close eye on your balance and be in much less danger of over-drafting.
  2. Watch TV less and save power wherever possible using less gadgets. Be diligent about turning off lights before you leave. If you spend one minute turning off lights before a two hour trip, that’s the equivalent of earning Rs.50. That’s some impressive savings, particularly if you do it before longer trips. The key is to use less energy, particularly when you’re not using the device.  Install CFL (or, even better, LED) bulbs wherever it makes sense.

  3. Make use of every free customer rewards program you can with free coupons etc.
  4. Master the thirty day rule. Whenever you’re considering making an unnecessary purchase, wait thirty days and then ask yourself if you still want that item.
  5. Write a list before you go shopping – and stick to it. One should never go into a store without a strong idea of what one will be buying while in there.  Or else you will end up buying more than what is necessary.
  6. Invite friends over instead of going out.Almost every activity at home is less expensive than going out.

  7. Learn how to dress minimally. Instead of throwing out some damaged clothing, repair it instead. Don’t toss out a shirt because of a broken button – sew a new one on with some closely-matched thread. 

  8. Don’t spend big money entertaining your children.  Cut down on your vacation spending
    Most children, especially young ones, can be entertained very cheaply.
  9. Call your credit card company and ask for a rate reduction.  Hide your credit card to reduce spending through it.
  10. Cut back on the convenience foods – fast foods, microwave meals, and so on. Make your own meals whenever possible.  Carry lunch packets to place of work instead of eating out.

  11. Buy appliances based on reliability, not what’s cheapest at the store.

  12. Swap books, music, and DVDs cheaply on the internet via services like PaperBackSwap or lending libraries.
  13. Keep your car fit and maintained. Clean your car’s air filter. A clean air filter can improve your gas mileage by up to 7%. Do a “maintenance run” on all your appliances. Air up your tires. For every two PSI that all of your tires are below the recommended level, you lose 1% on your gas mileage.
  14. Cancel unused club memberships. 
  15. If something’s broken, give a fair shot at repairing it yourself before replacing it or calling a repairman.
  16. Create a visual reminder of your debtDesign your “debt snowball.” Everyone needs a plan to help them get out of debt, so sit down and plot out what debts you’re going to pay off and in what order. 
  17. Consolidate your student loans. Interest rates are quite low right now, so it might be worthwhile to consolidate your student loans into one low-rate package. Look into the various student loan consolidation packages – even a 1% reduction on a Rs 100,000 loan saves you Rs. 1000 a year.

  18. Get rid of unread magazine subscriptions.
  19. Look for a cheaper place to live. When buying a car, go for late model used.
  20. Know about all of the benefits of your job. We aren’t even aware of all of the benefits available to us. Spend  time with an HR person to find out about all the benefits of your job offers – you might be surprised at what you might find. There may be  free tickets to sporting events, free personal improvement opportunities, and an optional employee match on some retirement funds that maximized the money that you may be socking away. This not only reduces down on our own spending on things like sporting and community events and educational classes, but also improved our retirement plans.
  21. Switch from endowment or unit insurance to term life insurance to save on premium with better benefits.

Saturday, 18 May 2013

Top trending stocks. Filtering or scanning for personal investment.

As a part of financial planning and retirement planning, we do invest in stocks directly as per various pieces of advice from neighbours, co-worker, financial advisors and planners. More often, we really a get a kick in picking out stocks and brag about among friends and investor circles.

There  is a systematic way to do the same process of picking out good stocks for investment from out of a milieu of stocks, with a simple lay man understanding of technical analysis.

Step 1.  Pick only liquid and well followed stocks fair amount of volume of capitalization.   We shall select CNX 100 stocks from NSE.  Listed and indexed stocks are well followed, monitored and reviewed by investor populace. This naturally is the first filter

Step 2. As I have already discussed methods to identify trending stocks above and below 200 MA
in our previous blog titled Top 10 Equity Stocks for Short and Medium Term Investing or Trading. 

We would apply similar filter to identify Up-trending stocks and Down-trending stocks by applying the filter if the stocks trade above or below 200 Day Moving Average (DMA) getting  from Yahoo and other sources.

Step 3:  Very strong uptrend and very weak downtrend can be identified if a stock is above both 50 DMA and 200 DMA.

Step 4:  Relative strength indicator (RSI) or Stochastics indicator are used to measure whether stocks are trading in the bottom or top of price bands cycle.  Generally RSI above 70 or Stochastics above 80 indicate over-bought levels and RSI below 30 or Stochastics below 20 represent over-sold levels.

We would prefer  stocks which are not over-bought  in up trend and sell or short stocks which are not over-sold  in down trend.

All the sheets of the filtering stocks from CNX 100 list work-book can be viewed here.  The sheets are supposed to auto update.  You may watch regularly by book marking the same.  The last column link can take you to respective Yahoo chart for verification of the individual stocks and how they look and to see other parameters.

Note: This article is for  Educational and illustrative purpose only as movement in stock prices cannot be predicted and subject individual risks of the Company, market risks and other risks
These steps are best let out to professionals and we advocate friends to use Mutual funds for investment for building retirement and financial planning corpus.

Thursday, 16 May 2013

Top 10 Equity Stocks for Short and Medium Term Investing or Trading

Equity investment and trading is a very interesting field in personal financial and retirement planning.  As lot of persons are doing their own investments in equities, they had always queries regarding timing the market.  We had indicated in our previous blog Top 10 Nifty trending stocks, that stocks that are generally above 50 and 200 DMA levels are in strong up trend.

I have searched free resources that list the stocks that have just crossed 30 DMA for short term and 50 DMA for Medium term investment.  As there are lot of stocks qualifying the criteria, I have filtered those stocks  in which are above 200 DMA as well.

Here are the links.

Top 10 Stocks that closed above 30 DMA  (for Short Term)

Top 10 Stocks that closed above 50 DMA  (for Medium Term)

You may verify the charts of respective stocks for confirmation of their current position.

Sunday, 12 May 2013

Akshaya tritiya 2013 -- Buy Gold ETF...

It is a practice prevalent among Hindus to buy gold ornaments or gold coins on the day of Akshaya tritiya.  However among financial advisers and planners, there are advocates for and against investment in gold. 
  • Gold can hedge in case of currency of a country becoming weak and there is inflationary pressures in the country
  • International Gold price has given good returns during last several years but there is a market price correction giving opportunity for those who have missed out in the last rally.

Those who are against argue
  • The period of depression in US economy and inflation is over and Gold price may not rise in the immediate future.
  • The correction in the market price for Gold is not yet over.
  • RBI and Government discourages holding or hoarding gold as investment vehicle nowadays.  
  • Real estate will soar again, therefore that is the best bet.
 To overcome these, pundits suggest that it is better to invest an SIP of Gold ETF (Exchange Traded Fund) so that it can over a period of time, average out the cost price in the down trending market. 

It is advisable to buy GOLD ETF units instead of gold coins or jewelry  so that in the worst case scenario, we can sell out the units without much loss because of  making charge, wear and tear depreciation  etc.

You may refer previous blog on GOLD ETF investment as a part of your financial and retirement planning.

Friday, 10 May 2013

Mother's Day. Gift Financial Security by planning

Mothers work at home and / or outside full time for our sake  and it is our duty to return  emotional security through love, affection and caring and financial security through careful planning.

Though one cannot and should not estimate the value of love and care,  it is stated that a middle class family may spend from 25000 to 300000 on children  up to say 17-20  years.  Treating this fact we may estimate a present value as Rs 10 lakhs which will give a future value of Rs. 28 lakhs which is equivalent to perpetuity of Rs 2 lakh or monthly Rs. 15000/-. i.e. She is sacrificing a pension throughout her lifetime to that extent. It would be the family's responsibility to have proper retirement planning for Mother (Parent).
The workings are given here.

Keeping  that in mind, we may suggest that mothers need to take following steps  toward greater and better financial security through proper retirement planning:
  • Form  a savings or investment  plan.  Try  to stash away more money, both for retirement and for a rainy day.
  • Arrange sufficient disability and long term health care insurance.  These risks are more prevalent among women.
  • Take more investment risks.  Women are known to be traditionally  more conservative, but they need to have their capital grow sufficiently for their longer lives through equity linked mutual funds investments etc.
  • Consider having  higher learning or adult education.  Mothers who may want to be at workplace, or are looking for  additional skills to advance their careers, should be ready to invest in additional education and training.

The above article is based on what I came across a wonderful article written by Eleanor Blayney, CFP® titled Mother’s Day Advice: Why Mothers Need Financial Security  which I thought I would share.

Thursday, 9 May 2013

Top 10 Financial Planners

How to rank these fellows?.  But if you are searching for a financial planner or retirement planner advising mutual funds investments, insurance in your area, you may find a list of qualified and experienced financial planners engaged in retirement planning and allied activity  enlisted in Network F.P. site where you can find a planner near your area or company or a friend.

You may book mark this page for laler use or forward to your friends

Tuesday, 7 May 2013

Do you have right value of Life Insurance? Check.

During my young days,  as young adults we used to take insurance only on endowment policies or ULIP only to the extent of tax planning needs of the year without considering  any financial planning or investment needs.  I never realized that endowment policies and ULIPs covering  a very low sum assured would have put my family in great jeopardy.  Insurance advisors never suggested term or pure insurance which can cover at a very low premium, a very large sum suitable for the family's needs and protection.  I have been fooled into thinking and  linking savings and insurance.  I never got the best of returns also by investing for such a long time through the endowment and ULIP policies.

We may find it difficult to make financial planning involving investments and expenditure decisions,  partly because of the difficulty in assessing our future needs and goals. This is  also because it involves the short-term cost of lowering our personal consumption. For making  such decisions, it is imperative to understand how people’s wealth-management and financial planning needs change over the course of their lives.
            As we face an inability to assess the value of future income and savings which is compounded by the long time  until retirement and the tendency towards event-driven short term  planning, it is common for individuals to stay away from the financial decision-making process. Financial planning models based on promoting products that provide high commissions can lead to short-term planning models based on short sighted decisions that may not be in the best interests of consumers. As a consequence, high providers and insurance advisors tend to view younger customers as less valuable than those who are at retirement, whereas commissions can lead to older customers.
 One of the central axioms of a holistic financial planning system  is that it needs to incorporate all material sources of net wealth, tangible and intangible. These include both financial and human capital or simply termed as Humal Life Value.
            Human capital or Humal life value represents the value of a person’s future earning potential. It is an intangible asset that typically dominates the personal balance sheet of younger people, whose yield is represented by wage income. We calculate it as the present value of expected after-tax wage earnings as follows: 

Human Capital or Human Life Value
= n Current wage income × (1 + wage growth) × (1 – tax rate) / (1+ discount rate or investment rate)



            Research Report

            Human capital depends upon a number of factors, including:

A sample work sheet is provided below as table.  Following this link you can work out your own Insurance needs for your family

Source:  Holistic Life-cycle Financial Planning

You may contact us for an assessment and arranging for your actual Life Insurance needs.
Mukundan SN, CFA, CFP
Mobile:  9789098720

Top 10 Nifty Stocks Trending Up / Down

In the previous blog Stock Investments - simple Technical Analysis, simple tricks of identifying and ranking stocks on the basis of trending up and trending down were discussed.  Now we can rank the stocks on the basis of the 50 / 200 MA level ratio as top stocks trending up or down.

We shall do similar exercise for Nifty junior stocks as well shortly.

Mukundan CFA, CFP
Certified Financial Planner
Retirement Planner

Sunday, 5 May 2013

Stock Investments Simple Technical Analysis

It will be advisable to invest in Stocks as an asset class in our financial planning and retirement planning process  through mutual funds as they are managed by well-informed and professionals.  However, we also want to invest directly and build some portfolio of equities on our own. Lot of friends are seeking advice as to how to time the markets while trading or investing in stock markets, because most of the time we end up enter at wrong time of the market cycle.

To have a better timing and to carefully monitor some methods we can see here.  It is generally believed that  the market price is not predictable as the most of information inputs are already discounted in the current price, especially in the age of most  modern advancement in communication technology. The principle is called as random walk theory. .... Read more.

However, empirical studies have shown that if you follow simple Moving average momentum etc. you get better returns than simple buy and hold strategies while trading or investing in stock markets.  Read more in the paper..... 

Moving averages are running averages of daily close of stock prices. 200 day Moving average will indicate long term  50 DMA the medium term and 20 DMA, the short term trends

To have such analysis we can list all the fifty stocks in Nifty in a spreadsheet.   We can straight away say that financial institutions enter only when the stock prices go above 200 Day or 10  Month's Moving Average.  For medium term we may use 50 MA.  We may study the ratio of 50 MA value by 200 MA value.

  • Current Prices above 200 MAs are showing Up trend. 
    • If 50 MA is above 200 MA, it indicates strong up-trend.  "Buy" recommendation is given.  50/200 MA ratio will be above 1 and (+) sign is assumed.
    • If 50 MA is below 200 MA, it indicates up-trend but "Hold" recommendation is given. One may hold till 200 MA is violated downside. 50/200 MA ratio will be below 1
  • Current prices below 200 MAs are showing Down trend.
    • If 50 MA is below 200 MA, it indicates strong down-trend. "Sell" recommendation is given. 50/200 MA ratio is below 1 but with a (-) sign.
    • If 50 MA is above 200 MA, it is possible to have a trend reversal. "Wait" recommendation is given.  50/200 MA ratio is above 1 but with a (-) sign.
But over bought and over sold positions in respect of a stock or market can be studied with respect to 52 period high. Though they are better analyzed through Stochastic or Relative Strength measurements, we can attempt over-bought / over-sold positions with respect to distance between 200 MA level and 52 Week High for up-trend and 52 Week Low for down-trend.

  •  Up-trend
    • Prices above 200 MA will be simply up trend.
    • If price rise more than 75% of the range above 200 MA to 52 Week's High, it may be considered as Over-bought we shall wait for a correction to re-enter the stock
    • If price rise falls below 25% of the range above 200 MA to 52 Week's High, it may be considered as Over-sold we shall look for opportunities to enter when price starts moving up.
  • Down-trend
    • Prices below 200 MA will be down trend
    • If price falls below 25% of the range above 52 Week's Low to 200 MA level, it may be considered as Over-sold and no action is advised but one wait for a rally for shorting or selling.
    • If price rises above 75% of the range above 52 Week's Low to 200 MA level, it may be considered as Over-bought and one may look for selling or shorting opportunities
  • The template spreadsheet which will be automatically updated is posted for observation and you may watch how things pan out after investment and you may also watch the page for how your stock fairs at a particular point of time.  Here is the link for the spreadsheet.
  • Column chart graphically how the price compares with 200 MA and 50 MA line shown here.
We shall try to improve the methods and extend to other stocks as well in the future posts.

Mukundan SN, CFA, CFP
Certified Finance and Retirement Planner