Earn for Aged Homes

Now a product that allows senior citizens to make a residential property earn for them while they continue to live. That's possible through a 'reverse mortgage' whereby a housing finance company provides a fixed sum to the owner based on the value of a property for a certain period.

Dewan Housing Finance Corporation Limited, a mortgage lender to the lower and middle income segment, is the first to launch a reverse mortgage product in the market, following issue of regulations a few months ago by National Housing Bank, the regulator of housing finance companies.

Reverse mortgage provides a regular source of income for senior citizens for 15-20 years. The amount is paid every month to the owner of a property and the interest there on is recovered from the sale of the property after the death of the owner and his/her spouse.

The difference between the sale price and the amount due to DHFL is passed on to the legal heirs of the borrower. The rate of interest on reverse mortgage is 12 per cent, said Shivkumar Mani, head -marketing at DHFL.

The DHFL scheme, called Saksham, is meant to provide and supplement monthly income for senior citizens.

It is offered to retired people above the age of 60 years who own property and have been living in it for at least one year.

Saksham gives the liberty to the customer and his/her spouse for maintaining and living in the property as long as they are alive, without the fear of having to vacate the property even after the tenure of the reverse mortgage expires.

Saksham gives the option to the legal heir to re-possess the property if intended after the demise of both the customer and his/her spouse.

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Invest in india - security clearence

In a major decision, all proposals for foreign investments and foreign participation in India will now need a security clearance from home ministry. The United Progressive Alliance government has said that all foreign investments that endanger national security will be put on hold till a clearance is granted.

The commerce ministry had earlier been opposing the move fearing an adverse effect on the robust inflow of investment into India. Highly placed sources said that the ministry finally gave in after getting intelligence reports indicating how investments were being made in sensitive areas that could compromise national security.

However, if difference of opinion on the issue between the home and commerce ministries persists, the final decision will be taken by the Committee of Secretaries.

All foreign direct investment proposals are currently vetted individually from the security angle even now, but this is done in an ad hoc manner with no transparent guidelines laid down for uniformity in arriving at right decisions.

An umbrella legislation -- National Security Exception Act -- is now being planned to empower the government to suspend or reject any foreign participation that endangers national security.

Pending such a law, a 'national security exception' clause would be inserted in the rules and regulations pertaining to foreign investments and the Reserve bank of India's approval procedures. This law will also extend to all domestic and international tenders issued by the central government, the state governments and the public sector undertakings.

The security clause provides that 'due regard will be paid to national defence and security considerations while evaluating tenders and giving approvals for various projects.'

Currently, major foreign investments are now coming in through the automatic approval route and the RBI has been directed to modify the reporting format prescribed by it for foreign participation to include the security clause.

The National Security Council, which met in New Delhi recently, is said to have discussed the contours of the proposed law that will ultimately ensure the government's watchful eye on all foreign investment and whether it is a threat to national security.

Sources said that the proposed legislation will enable the government 'to exercise powers to examine and if necessary, to suspend or prohibit any foreign participation proposal if it is determined that it would be against national security.'

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How to choose the right stocks

Take guru Peter Lynch's investment mantra to heart -- one must first find the companies whose long-term prospects look good and have good management quality and then check whether their share price is under-valued using the PEG ratio.

PE ratio, that is the Price/Earnings ratio is a common valuation number used by investors in stocks. The PE number gives an idea as to whether the stock is under-valued or over-valued.

It is defined as: PE ratio = market price of the share / earnings per share.

However, the problem with PE ratio is that it is a meaningless number, by itself. Is PE of five good or bad? Or should it be 10? Or possibly say 25? Mathematically speaking, the lower a PE stock appears, it's considered better than a higher PE stock. But is it really so?

Why do we buy a stock? We buy it so that when its price goes up, we can sell it and make profit. But why should the price of the share go up? Again simple, the price would go up if the company makes higher profits i.e. higher earnings per share (There are, of course, many other reasons for share prices to go up, but from the fundamental perspective, the price of a share is ultimately a reflection of it's profits).

In other words, it is the growth in the earnings, which gets reflected in the share price. And since we are buying a share in anticipation that its price will go up in future, we must look at the expected growth rate of its earnings, especially over the next two-three years.

Comparing the two i.e. the PE ratio and the EPS growth of a company gives a more meaningful picture. PEG ratio or the Price Earning Growth Ratio is defined as: PEG ratio = PE ratio / EPS growth rate

PEG ratio=1 This means that the share price is fully reflecting the company's future growth potential i.e. the share at today's prices is fairly valued.

PEG ratio>1 This indicates that the share price is higher than the expected growth in the company's profits i.e. the share is possibly over-valued.

PEG ratio<1 This indicates that the share price is lower than the expected growth in the company's profits i.e. the share is possibly under-valued.

Therefore, the PEG ratio tells us something more about the future potential of the company. It tells us whether the high PE is a superficial number or is supported by future growth prospects.

Let us look at an example to get a better perspective. We have an information technology company whose PE ratio is 30 and expected EPS growth rate of 40 per cent. And then, we have a banking stock, with PE ratio of 12 and EPS growth rate of 8 per cent.

On the face of it, if we only look at the PE ratio, the banking stock looks cheaper and attractive. But what about the PEG ratio? Let's do the simple math:

• IT company PEG = 30/40 = 0.75
• Bank PEG = 16/8 = 1.50

Going by the definition of PEG ratio, we find that the IT company's share is undervalued considering its future growth prospects. And so its share price is likely to appreciate more than the bank stock.

However, as usual, there is a word of caution. Like any other financial number, the PEG ratio is not a law, but a very useful indicator of a whether a share price is under or over-valued. It cannot be looked at in isolation. One must:

Look at other numbers such as

• P/B value, operating margins, return on equity etc.
• Compare it with the peer group
• Consider other non-financial factors too, such as brand value, management quality, barriers to entry etc.

This is so because we are only estimating the EPS growth. If our expectations of growth do not materialise, the share prices can fall. Or sometimes the market gives more value to things like brands.

This is so because, even if the growth rate does not justify a high price, the brand value acts as protection. Say there is a fall in the demand, then it is likely that large reputed companies will be less affected, than relatively unknown companies. There is a sort of stability of returns expected.

Therefore, to get the best out of this PEG Ratio, it may be prudent to follow investment guru Peter Lynch's advice - first, find the companies whose long term prospects look good and have good management quality and then check whether their share price is under-valued using the PEG Ratio.

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Tags: investment, PE ratio, stocks, market price, share, earning per share, lower PE, higher PE, buy stocks, PEG ratio, market, IT, bank sector

2 Indians in Asia's 10 best stock pickers

After a dip from the late 1990s financial crisis and postmillennial bubble, stock trading volume in Asia has been on the rise. Outside the US 1,700 sell-side analysts track these equity markets. With analysis from StarMine, a San Francisco research outfit, we have identified the best analysts across Asia when it comes to buy, sell or hold advice.

These pan-Asia awards exclude Japan because of the lack of coverage overlap between Japan and the rest of the region.

1. Peter Bai | China International Capital (Excess return: 110%)

Bai's recommendations on Hong Kong and China real estate and insurance stocks outperformed their benchmarks by 110 per cent for the 12-month period ended in June. His best call: China Overseas Land & Investment, a publicly traded subsidiary of state-owned China State Construction Engineering, the country's largest construction outfit. China Overseas develops and manages commercial and residential real estate in mainland China, Hong Kong and Macau. During the 12 months when Bai maintained a "buy" on China Overseas, it went up 232 per cent.

2. Stanley Chou | KGI Securities (Excess return: 59%)

Chou covers Taiwanese technology hardware and electronic equipment stocks. His best pick was a 12-month-long "outperform" recommendation on High Tech Computer, a contract manufacturer of handheld computers and smart phones and a favorite of several of the StarMine top ten analysts. High Tech gained 303 per cent during the "buy" period.

3. Kitti Hamnilrat | Seamico Securities Public  (Excess return: 52%)

Hamnilrat's coverage of Thai stocks encompasses industries ranging from real estate to retail and household durables. Best call: a "strong buy" on Erawan Group, which develops and manages hotels, office buildings and shopping centers in Bangkok. This 12-month long position gained 160 per cent.

4. Arthur Hsieh | UBS (Excess return: 42%)

Hsieh watches Taiwanese and Hong Kong stocks. His best-performing bullish recommendation was handset manufacturer Foxconn International, which is based in Hong Kong but is majority-owned by Hon Hai Precision of Taiwan.

Shares of Foxconn rose 129 per cent while Hsieh had it as a "buy." Other strong calls were High Tech Computer, up 92 per cent, and printed circuit board maker Unimicron Technology, up 54 per cent. Hsieh remains bullish on Foxconn and High Tech and has added Hon Hai to the top of his buy list.

5. Raymond (Nicky) Franco | Abacus Securities (Excess return: 40%)

Franco covers stocks in the Philippines. His best pick was Philex Mining, a copper, gold and silver mining company, which rose 287 per cent. He made another timely pick with Paxys, which operates call centers. During the time that Franco had a "strong buy" recommendation--from September 2005 to June 2006--shares of Paxys gained 114%. His current top three picks are Apex Mining, Philodrill and Ionics.

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Tags: financial crisis, best stocks, stock picker, asia, analysis, track, equity market, buy, sell shares, advice, best pick

Car insurance may be cheaper from Jan

Come January 2007, insurance premiums for commercial vehicles may see a sharp rise, while private vehicle owners may need to pay a little less than what they have been paying till now.

This is because the claims ratio in the commercial vehicle segment is 150-300 per cent, while private vehicles have an average claim ratio of 80 per cent.

In a change of stance, the Insurance Regulatory and Development Authority of India has decided to go ahead with the lifting of controls on premium for motor insurance, along with other risks, from January 2007.

In its roadmap for a tariff-free regime issued in September 2005, the insurance regulator had stated that free tariffs for fire and engineering would kick off in January 2007, but kept the decision on motor insurance in abeyance. The regulator had said it would take "a view on de-tariffing of motor insurance" later.

The total premium income for the industry from the motor portfolio is around Rs 8,000 crore, and private vehicles account for about 65 per cent of the market.

Private insurers have been shying away from insuring commercial vehicles as the premium rates are very low, and the highly loss-making business is being underwritten mostly by public sector general insurers.

On the sidelines of the 1st Asian Life Insurance Summit, IRDA Chairman C S Rao said, "There have been meetings with the transport industry, and one more meeting will take place in September. Insurance companies are gearing up (for the free tariff regime). The motor portfolio will be 100 per cent detariffed."

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Tags: insurance premium, Asian Life Insurance, transportation

Some helpful investment tips

Since some time now, mutual funds have become synonymous with equity schemes. Hardly anyone has looked at debt in the recent past. Even if debt exposure is sought, it is through balanced schemes. Or liquid funds or floating rate funds are used as a temporary parking place for cash. However, things are changing.

Everyone knows that interest rates have been rising. On the borrowing side, home loan buyers are already paying almost two per cent more. On the investing side too, eight per cent is being offered on a one-year deposit. Could anyone have had imagined this six months back? Which is why they say, when it comes to forecasting interest rates, either predict a date or a rate but never both.

Will this rise in interest rates be secular? In other words, will rates continue to rise or at least be maintained at this level? Or will they fall back again? I repeat once again --- Either predict a date or a rate, never both.

Just like stock prices, interest rates too will rise and fall; however, no one can say which will happen when. Increasingly we live in a volatile climate --- both locally as well as globally. Geopolitical tensions, commodity prices particularly that of oil, the consequent impact on inflation, trade flows, government policies, the threat of terrorism --- all these factors and more ultimately combine to impact rates and therefore an accurate prediction is almost an impossibility.

However, what we do know is that at least in the near future (short-term), interest rates have climbed. An 8.5 per cent to 9 per cent return on short-term debt is definitely possible. The uncertainty prevailing amongst market players can be clearly gauged from the fact that currently the return on even long-term fixed income paper is not much different. (The 10-year government bond yield is going at 8.20 per cent). Normally, there should be a premium for committing your funds for a longer period of time.

Be that as it may, it is indeed possible for investors to avail of the aforementioned rates for little or no risk at all. However, the choice of fund is important. Remember that this is not true for all income schemes available in the market. The average one-year return on most income schemes is still a paltry 4-5 per cent p.a. This happens on account of the fact that existing income schemes are saddled with already invested paper languishing at lower rates. When the current rates in the economy start to climb, this existing low yield paper has to be sold at a discount thereby lowering the NAV and the return on investment.

Interest rates and prices of fixed income instruments share an inverse relationship. In other words, when the overall interest rates in the economy rise, the prices of fixed income earning instruments fall and vice versa. This is called the interest rate risk and adjusting the portfolio to the market rate of return is 'Marking to Market'.

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Tags: mutual funds, equity schemes, debt funds, balanced schemes, interest rates, investment, stocks, volatile, short term debt, NAV, returns, fixed income, economy, market

Study US: Where to buy health insurance?

Most colleges accept medical insurance from India. However, it is always better to check with the international office in your university about this. Also, I would recommend that you buy insurance in US itself as it's easy to use it when needed. Most insurance costs roughly around $200-$300 per semester. Also, universities have their own minimum standards for the insurance you buy -- like minimum coverage of $100,000, 80% or more coverage and so on. So my recommendation is that you buy medical insurance in US.

It is always safe to carry medical insurance for 15 to 30 days. It won't cost more than Rs 2,000. It is crucial for the first few days till you get enrolled in your university health insurance scheme.

It is better to get medical insurance in the US. Usually, your university would have a tie-up with an insurance company and they offer medical insurance at subsidised rates. This would be the best way to get medical insurance.

If you buy medical insurance from India, it would be difficult to actually use it. The insurance company in India may or may not have coverage (doctor network) in the city in which your university is located.

Alternately, if you go with university-affiliated medical insurance, that would be easily accepted in the university health centre and other local health providers. This will give you instant access to the care you need when you need it utmost.

So, it is NOT advised to buy medical insurance from India.

If you feel you will need medical insurance while you are travelling (from India to US), and for the initial days of your residence in US (before your university affiliated insurance programme starts), then buy transit medical insurance. This would cover you for a week or two. That should be sufficient.

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Tags: medical insurance, india, univeristy, insurance in US, transit, parking

Tips to buy a good helmet

 What's the big deal? It's just an ugly plastic (it is plastic, right?) shell that goes over your head, is uncomfortable, claustrophobic, causes hair loss, blocks traffic sounds and stops cops from catching you, right?

Actually, all of that is wrong.

All of the attributes associated with helmets in the previous sentence are myths. Pure fiction. Helmets, in fact, can be extremely comfortable and airy, do not cause any physical problems in prolonged use, do not obscure your sense of traffic in any way and do not stop the cops from catching you, either.

The origins of motorcycle helmets lies in the aviator style caps and goggles early motorcyclists used to wear.

For one simple reason. It would keep flying debris out of the eyes, and  hair manageable and clean. In time they evolved, and gained a protective function as well.

How does it work? The helmet has a hard outer layer - polycarbonate, fibre glass or composites - meant to absorb and spread impacts. It resists penetration by sharp objects and the shell disperses the forces of the impact.

Between your skin and this shell is an energy absorbing layer, usually polystyrene, that is designed to gather this energy and self-destruct, transferring as little force as possible to the head.

The polystyrene is covered with a comfort-oriented layer of fabric, which is sometimes removable for washing. Add a good, scratch resistant visor and a secure retention  system, and you have a helmet.

To buy a good one, be prepared to spend some time hunting for one at the shop. You're looking for the tightest helmet you feel comfortable in.

The foam and the comfort lining shrink in time, and the more snug the helmet is, the longer it will do its job well. Holding the helmet by the straps, you should pull it down over your head. If the fit is right, you should feel a gentle, but firm pressure from the helmet evenly all over the head.

The cheek pads pushing your cheeks up slightly is normal. Now adjust the straps and fasten the helmet. Wag a vigorous no sign with your head, if the helmet does not move seamlessly with you, it isn't snug enough.

Wear the helmet for ten minutes or so. If you have never worn a helmet before, some aches in the neck area will go away once you get used to it. Serious ache means you need a lighter helmet.

When you remove the helmet (not sliding off your head easily is normal; push up rather than roll up and back at the same time), look for redness of skin or signs of pressure points. If the lining is pressing a specific area, it will give you a headache later. You want an even fit.

The one thing to ensure is that there is minimal contact between your ear and the helmet. On long rides, this will give you a really painful earache.

Once you find your fit, all you have to do is pick a graphic design you like. Don't be tempted by the simplicity of pattern less helmets. Dark hues, unadorned helmets can be hard to spot in traffic, unless it's stark white. Go for a nice pattern of your choice and a colourful helmet, ideally with reflective elements to make you more visible at night.

Among the features, look for effective and lots of venting for Indian conditions. They might look gimmicky, but a properly vented helmet can feel cool even on a really hot day. Some Indian helmets come with fake vents, so be sure that it actually has vents.

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Tags: block traffic, helmet, buy helmet, attributes, motorcycle, bike, fibre glass, polycarbonate, good helmet

Buying a high-end apartment? Read this

If you go scouting for a high-end apartment in Delhi, NCR or any other affluent city in the country, builders will promise to offer you the best that money can buy.

But before we list the basics that slot an apartment as a high-end one, seek your luxury nest only if you are a high net-worth and a well travelled individual, or else developers won't even allow you a sneak peep.

Usually, in developer terms, a high-end apartment is a three-BHK (bedroom/hall/ kitchen) of 3,000 sq ft with a servant's quarter, centrally air-conditioned, with a three-tier security system, separate guest and service elevators - often of glass, like the ones at Omaxe's property, The Forest on the Noida Expressway.

A high-end apartment would typically be a three-sided open apartment with a good view, offering a picture-perfect city skyline, or a golf course and greenery, parking space for at least two cars, roof gardens if possible, and proximity to the city centre but far enough for a tranquil environment.

The interiors of a luxury apartment would also sport Italian marble/wooden/imported tile flooring, acrylic emulsions, the best modular kitchens - sometimes fitted with a chimney, fridge, cooking range; basically, the works. Bathrooms will sport the best sanitary fittings with master bathrooms having delightful add-ons like sauna, steam, jacuzzi and snazzy shower cubicles.

"A high-end luxury apartment is usually like walking into a five-star hotel," says Kunal Banerjee, VP, marketing, Ansal Properties. To classify them in the luxury category, apartment sizes can range from a 3-7 BHK complete with add-ons and with a starting price tag of Rs 1.5 crore (Rs 15 million).

But won't the cost of these high-end apartments reduce, especially if one chose to buy them minus the frills, deciding to spruce up the interiors personally? What if the client refuses the tempting add-ons like split ACs, Jaguar fittings, Pergo flooring, Italian lighting and what have you?

After all, developers have the edge as they buy material and manpower in bulk, thereby benefiting from economies of scale. Most developers admit that apartments then would be cheaper - marginally or considerably is a matter of debate.

Getamber Anand, managing director, ATS Greens, feels, "There is a big misconception about high-end apartments." He adds, "Our apartments, like the ATS Greens Village in Noida, boast of quality with the best possible luxury add-ons, but they are still affordable. In fact, 3,000-4,000 sq ft apartments are available for Rs 3,500 per sq ft."

So does the price tag of an apartment put it into the high-end bracket? Is it used as a marketing tool by developers? A spokesperson from Omaxe Developers says, "The exclusivity of a luxury apartment or a penthouse boosts the individual ego as a class apart segment."

Anand differs and feels that sometimes buyers wrapped up in the high-end notion suffer by paying extra. He feels that any apartment pegged at around Rs 5,000 per sq ft is put into the luxury bracket nowadays, even if other developers provide the same facilities for a lower-priced apartment.

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Tags: high-end apartment, buying apartment, city, luxury, elevators, security, interiors, bathrooms, affordable, noida, delhi, square feet, low price apartment

Should your child have a real bank account?

Either watch the saving grow as your child grows or watch the savings disappear as your child may just splurge it up.

From the day a child is born, parents fear for his/her well-being, safety, happiness and future.

Securing the child's future is one of the greatest concerns. You can make it easier by opening a savings account for your kid in the same bank as yours. But how beneficial are these accounts for you and your kid?

Most of the leading banks like ICICI Bank, HDFC Bank, Citibank, Standard Chartered Bank and so on have very interesting schemes for your children. You can open your kid's account in a bank only if you have an account in the same bank.

Citibank offers a 'Junior Account' for kids, where the minimum deposit of Rs 5,000 is mandatory and every month, a parent/guardian can transfer a specific amount to the child's account (subject to a minimum of Rs 500) through a standing instruction. The scheme offered by other banks is also more or less the same but probably the minimum deposit may differ.

According to investment advisor Sanjay Matai, saving account for kids is a good idea since it helps the kids to understand the saving patterns, interest rates and so on. "Kids can deposit their monthly pocket money into their savings account and after some point of time, they can utilise this money, the way they want."

With a good number of benefits, saving account for kids also have a few shortcomings. Let us have a look at them.

BENEFITS

Account-linked

Your account will be linked to your child's account. You can deposit part of your monthly income into his/her account through standing instruction.

Saving habit

Opening a savings account for your child is surely a good idea. While building up savings for your child's futures, it also inculcates a saving habit in him/her right from childhood.

Investment plans

Banks also allow you to invest the balance of the child's account in mutual funds, debt or equity products, depending on parent's preference, based on their investment goals and risk appetite.

These portfolio options range from debt/fixed income instruments to diversified equity funds.

Banks also tag on benefits, such as insurance, education and accident cover, which will protect your child's future in case you die. Like, free education insurance cover of up to Rs 100,000 for your child with every 'Kids Advantage Account' offered by HDFC Bank. These savings are sure to secure your child's future.

Debit/ATM card

One more common thing, which is observed in these kids account, is the trend of debit/ATM cards. Banks are offering debit cards to kids at the tender age of six or seven. Kids can use these debit cards themselves and do not need their parent's approval. This helps them to become more independent and take their own decisions.

They can also use the money in case of any emergency or for the educational purposes.

Withdrawal limit

There is definitely a certain amount of withdrawal limit attached to kid's debit card. You can be sure that the kid cannot spend more than the withdrawal limit. For example, the withdrawal limit for Citibank 'Junior Account' debit card is Rs 500 per month. This makes sure that the child will not be able to withdraw or spend more than that.

Monitoring spending habits

Getting mobile alerts/customising triggers/signing-up for online statements will help the parents to constantly monitor the child's spending habits. ICICI Bank offers a mobile banking service, which means that whenever any transaction is made on your kid's debit card, the parent/guardian will receive an SMS on their mobile phones. In this way, one can have a check on the child's expenditure. Banks also send quarter/annual statement to the guardian/parent regarding the transactions made in their kids account.

SHORTCOMINGS

Kid may become spendthrift

Your child having a debit card at the age of six, sounds exciting, but this may also have an other side to it. Since the child has the complete authority over the card and does not need his/her parents approval while using it, there are chances of him misusing the card.

The kid may become spendthrift without even realising what he is doing. This may also lead to arrogance and pride if his friends do not have a debit card like he does.

High withdrawal limit

Keeping in mind the fact, that the kids would be using the card, the withdrawal limit of few debit cards is quite high. Like, ICICI bank offers a debit card with its 'Young Stars Account' that has a withdrawal limit of Rs 2,500 per day. There are chances of him mishandling it. To add to that, the limit is by default and the guardian cannot change.

Quarterly/annual statement

Most of the banks send statement of the transactions made, quarterly or annually, to the parents. So, the parents would just know after three months or in some cases after a year about the withdrawals made by the child. Therefore, it gets difficult to keep a check on their expenditure.

However, these debit cards are voluntary, it depends upon the guardian/parent if he/she wants the child to have one. This has both the sides to it either the kid may become independent or he will become spendthrift. You must keep track of the transactions made from the child's debit card.

Therefore, depending upon your child's nature and habits, you may decide whether does he need a debit card or no. And if yes, which one? Preferably, it should be with a low withdrawal limit.

However, a quarterly or annually account statement of your child's savings account will also be sent to you but also ask for a mobile banking/Internet banking service.

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Tags: savings, future, ICICI bank, HDFC bank, UTI bank, SC bank, open account, Junior account, deposit, investment, saving account, benefits, ATm card, debit card, insurance, withdrawl limit, spendthrift, statement, account statement, mobile banking, internet banking

How to allocate assets and get RICH

 Whatever asset allocation you choose, if it keeps you awake (and your planner too) at 3 a.m., it is not a good equation that you have got. Set it right soon.

When three of my clients came to see me for a portfolio review, I realised what a difficult job I had on my hands. Dilip, Devrajan and Kavya, the very convenient names of my three clients had such different but risky portfolios that my work was cut out.

Dilip had a portfolio of Rs 6 crore (market value had cost him Rs 3.6 crore about three years ago) in two properties in Mumbai. Both were funded by loans (amounting to Rs 3 crore). Both the properties were given on rent, and luckily for him the current rent was greater than the EMI (equated monthly installment). This was, of course, because the EMI was for a period of 20 years, and Dilip was sure as the rents went up, the situation will only look better.

Devrajan had come to me in 1999 and even though he was in a brokerage firm and had some ESOPs (Employee Stock Ownership Plan) in that company, his portfolio was completely in the debt market -- Reserve Bank of India bonds, income funds, and bank fixed deposits. Out of a portfolio of Rs 4.5 crore, he had Rs 20 lakh in equities -- held without much conviction. He felt equities was too risky.

Kavya was the flamboyant type, who had worked in a pharmaceutical company, had no savings, no investments, and a kingly bank balance of Rs 340,000 all in the savings bank account.

The savings were all in National Savings Certificate, Life Insurance Corporation policies, Public Provident Fund, own Provident Fund -- all done to save tax. However, when she met me in 1999, I introduced her to equities.

I now had the enormous task of making a concept called 'asset allocation' and risk protection for these three.

Dilip, for example had no liquid cash and the only asset other than the two flats, was a small LIC policy, and some cash balance in his savings account. He is a senior manager at a business process outsourcing (BPO) unit, has a Rs 45 lakh job, is 40 years old and has two grown up children.

His wife runs a boutique that makes no money. I convinced him that he needs Rs 6 crore insurance cover, and he should do a systematic investment planning (SIP) in an equity fund from the rent that he receives.

Dev, luckily, had started an SIP in 1999 in equity funds, and now was happy that he asked me to review his portfolio in 1999. A very strong believer in financial planning, he was convinced he could do it himself.

I just highlighted the risk of inflation and putting all money in one asset class. He now had about 20 per cent of his portfolio in excellent equity funds, which had also given him some sensational returns. He had also converted some of his income funds into equity funds, and was beaming and happy.

Kavya was my biggest problem -- she thought I was a magician and I had created the returns for her. She started calling me her lucky charm -- and would introduce me as a 'luck charm' to her colleagues. Now, she is such a convert that she thinks all moneys should only be in equities.

There is a human tendency to think that the immediate future will be same as the immediate past. Though empirically, this is never true in our lives, we do not accept that. Not carrying an umbrella today, because it did not rain yesterday is perhaps the best way to get drenched. Is it not?   Read more

Tags: asset allocation, portfolio, risky, loan, home loan, RBI Bonds, ESOP, fund loans, properties, rent, EMI, NSC, life insurance, PPF, PF, tax, SIP, equity funds, financial planning, assets, good returns, equities