Wanna win Rs 1 million in cash?

THE Indian Institute of Management-Ahmedabad (IIM-A) kicked off a two-day meet on June 29, to encourage entrepreneurs.

“We have identified and are supporting 22 technologies that will be incubated before they are brought to the market,” says Professor Rakesh Basant, chairperson of the Centre for Innovation, Incubation and Entrepreneurship (CIIE).

During his opening address at the Entrepreneurs Conference, Basant said growing numbers of students are turning towards entrepreneurship. But at IIM-A the trend seems to have been there, always.

The 22 technologies identified for incubation include a technology for the visually impaired, a technology to sort out Arsenic from drinking water, a herbal technology for textiles and a school management software, amongst others.

Basant pointed out that 145 alumni had registered for the event. The conference is a unique initiative to bring together entrepreneurs from IIM-A who quit cushy jobs to carve out their own corporate empires, he said.

Want to be CEO, someday?

SINCE my early days in college, I’ve studied management styles, by reading about businesses, top leaders and entrepreneurs, usually in my free time.

As the low man on the totem pole at one of the largest organisations on the planet (IBM ), I had the opportunity to work with great managers and I was able to watch less than perfect managers struggle through the process.

Today, I’m a co-founder of a small company, and I’m quickly learning that management is no easy task. It’s an art that probably takes years to master. Every manager, no matter how great, still runs into challenges that question what they think they know, every single day.

So, for your reference (and mine), here’s a list of nine management mistakes that new managers can hopefully avoid.

1. Doing too much work

Going from employee to manager is a promotion. It means more responsibility, and the responsibility is making sure everyone else gets their work done. Then you get yours done.

If you’re at the office (virtual or not) for 10 hours, a majority of that time should be devoted to talking with employees, figuring out how to improve your team — their assignments, their self-management skills, and your relationship with them.

The funny thing is that when you become a manager, and your personal task list shrinks, I guarantee your time at the office will grow. Since you’re not spending all day in front of a computer checking off your to-do list, you’ve got to get the actual work done somehow. And often, it will be early in the morning or late at night, when everyone else is still sleeping or celebrating the end of another work day.

Read: He’s mean. She’s a grump. They got promoted!

2. Failing to realise what ‘work’ is, now

In high school and college, work consists of papers, studying and calculus problems. When you graduate to the real world, typical entry-level work means sitting in a cubicle, staring at a computer and putting together PowerPoint Presentations or creating Excel documents.

Then, all of a sudden, you’re promoted to manager and everything changes. High school, college and entry level life are all about hands on, check off my to-do list type of work. Management work is completely different. It’s talking, it’s thinking, it’s planning, but it’s still work and it’s more vital to the bottom line.

If you don’t turn that corner and come to grips with the fact that when you’re just chatting with someone about their weekend, you’re actually doing work, then you will fail as a manager, because this means you think it’s about you, when in reality it’s about everyone else.

3. Delegating the grunt work

You have a lot of authority as a manager; you can delegate all of your work if you really want to. But be careful. Before you delegate anything, ask yourself this question, “Am I delegating this because it’s boring and tedious, or am I delegating this because it truly makes more sense for someone else to do it?”

Obviously, you have to delegate grunt work sometimes. But when you do, be sure to explain why you’re delegating, how it’s helping the company, and be sure to delegate some interesting work the next time around.

4. Failing to ask for advice

Ask for advice…all the time. There’s no secret to getting the most out of your employees. The best thing you can do is ask the people who have been there before. If you’re a first time manager, someone must be managing you as well. Pick one or two people who you believe are great managers and ask them what they would do in your position.

You don’t have to take their advice. But you should consider their advice seriously and decide if it applies to your situation. Even CEOs need mentors. I bet there isn’t a single CEO out there who doesn’t have a handful of mentors. So find your managing mentor and ask for advice.

5. Keeping an ‘eye’ on employees

You’re a manager. You’re not a supervisor. It’s not your job to keep an eye on your employees and to know what they are doing at every second of the day. Your job is to mentor, train and coach them so they can be successful in this job and the next.

We no longer work on an assembly line. The best you can do is trust that you work with good people and that they will get the work done when it needs to be done. It’s about results, and results can be independent of time.

Calculate: Should your spouse get a job?

6. Failing to prepare

Whether it’s a task, a project or a meeting, great managers are always prepared. What your employees produce is always a reflection on you as a manager. So, the best thing you can do is to prepare as much as you possibly can and give your team as much direction as they need.

Again, it’s all about results, and if you delegate a task to someone without clearly explaining what you are looking for, things will get lost in translation. Your employee may produce exactly what he thought you wanted, but it won’t be what you were looking for, and it WILL be your fault because you failed to properly prepare him for the project.

7. Being too Nice
Everyone is not going to love you. And if you want to be a manager you have to get beyond taking things personally. From my experience, this is and will be a big problem for Generation Y, especially when we find ourselves managing someone older.

We’ve been taught to be nice and respectful and courteous, but nice can be misconstrued as timid, and a timid manager is not someone who inspires trust and confidence.It’s ok to demand things from people. It’s okay to tell people to do something rather than ask. And it’s okay if everyone doesn’t think you’re the greatest.

There’s a fine line between being tough and being an a!@#$%^%&, but that’s what management is. It’s an art, and it’s that fine line that you must learn how to toe if you want to be a great one.

8. Pretending to have all the answers

Nobody has all the answers. So, there’s no need to pretend that you do. If someone asks a tough question and you don’t have a great response, just admit that you don’t know.

Snap decisions and answers feel great. They can make you appear cool and in control, but remember that a quick response to a seemingly innocent question can lead to someone wasting days or weeks working on something that you didn’t properly think through.

It’s OK to go back to your office, talk to the right people, figure out what the best approach is, and then answer the question.

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9. Taking a break

Unlike the tasks on your to-do list, management is never over. You may think you’re done for the day after you settle an issue, or after you meet with everyone on your team. But the truth is, it never ends. When you take a break from managing, that’s when things start to go south.

When you forget to go chat with your extroverted employees and you forget to check in with your newest hires to be sure they are okay, there’s a snowball effect .

Not only is your work as a manager not being done, but because you’re not managing, your employees are not doing their work, and it’s your fault, not theirs. So whatever you do, don’t slack off. It’s all on you now.

Author: Ryan Healy
Source: Wealth, Moneycontrol

Too broke to invest your money?

QUICK money. Fast buck. Easy moolah. Call it whatever you want, but now is a financially good time to be in for the young.
But then again, this is a call not to lose sight of a few basics in money management.

Here are five mantras. Take a printout, write them down, whatever. But do not lose sight of them!

1. Set your financial goals

Planning for future studies, buying a car, laptop or a pool table, whatever your goals, identify them. Put a monetary value to them. You can achieve your goals only if you save for them systematically.

2. Buy an insurance policy

For those with dependents, insurance is a must. The sooner you get insured, the better. It will also work out cheaper because you have age on your side.

3. Spend less on credit cards

Plastic money is very convenient. Most of us prefer it to actual money, its sheer convenience forcing us to overspend.

Make sure you read the fine print before using your credit card, lest you be shocked with the bills later. Do not forget the basic rule: Don’t spend what you don’t have.

4. Think future

It is never too early to start preparing for your future. Plan for your retirement now.

You will see the power of compounding when you start investing small sums of money, but see it grow gradually to the target amount you set.

5. Invest regularly

There are various options to invest your money. One of the most popular and rewarding options is to invest in mutual funds.Choose from a variety of options (equity, balanced, debt), and a variety of fund houses. Besides, most fund houses have fairly easy procedures for Systematic Investment Plans (SIPs).

Systematic Investment Planning is a simple process of investing the same amount of money every month over an extended period of time, regardless of whether the market is up or down.

Let’s say you invest Rs 1,000 every month.

Invested amount

Current value	Rs 36,000	Rs 60,000
Scheme A (mid-cap fund)	Rs 60,820	Rs 219,325
Scheme B (large-cap fund)	Rs 61,392	Rs 176,181

(All data as of July 2006)

This goes to show the virtues of starting early, investing regularly and staying invested.

It is a time to enjoy life and a time to plan your future, so that you can enjoy the rest of your life, too.

My money mantras

i. Set your goals.

ii. Do not spend what you do not have.

iii. Start saving for your goals; small but systematically.

iv. The future is not too far away. Don’t ignore it.

v. Postpone your expenses, not your investments.

Author: Lovaii Navlakhi
Source: Wealth, MoneyControl

When the stock market crashes

THE last three to four years have proved to be a roller coaster ride for the stock market.

The Sensex doubled from a level of 3000 on May 3, 2003, to 6000 in January 2004. When the Bharatiya Janata Party lost the elections in May 2004, the market plummeted to 4500 (a 25 per cent drop in just four to five months).

But within six months, the market recovered and again, the Sensex touched 6000 before the end of 2004. Thereafter it was almost a one-way journey right up to May 2006, when the market hit the 12,000 mark.

Later, the market saw a sharp correction when it dipped to 9000 level in June 2006. But pretty soon, it crossed the 21,000 mark by January 2008.

Since then, we have witnessed some pretty sharp falls. And the fact that it doesn’t seem to be bottoming out, is making investors a lot more nervous. Of course, volatility is not something new. But the sharp ups and downs are scaring even the old-timers who are in this business.

Read: Don’t look in the rear view and drive

What next?

First, cut out all the noise and clutter around you and get back to basics. This is because 90 per cent of the people around you are as clueless as you are. So, when you let the facts speak for themselves, you have a better chance of eliminating ambiguities. Let’s find out what these are.

Fact 1: The equity market is NOT a lottery ticket. Every share has a fundamental value and is based on the company’s performance.

Fact 2: It is possible for share prices to be widely different from their intrinsic value.

Fact 3: In the long run, share prices always move towards their true value depending on the profitability and growth potential of the company.

Fact 4: Irrespective of whether the United States goes into recession or the sub-prime problem generates more losses, India’s economic growth rate will still be comparatively high.

Fact 5: Unless we have some serious calamity, a political crisis or poor monetary or fiscal policy, we may continue to see over 7 to 7.5 per cent growth rates over the next 5 to10 years.

Fact 6: If the economy continues to grow at such a healthy rate, it has to reflect in the corporate performance as well. This will lead to appreciation of the share price sooner or later.

Keeping these facts in mind, the long-term outlook for India still remains quite positive.Read: The stock market made this nimbu paani owner rich!

Quick lessons!

1. Do not panic.

2. If you have invested in good companies and mutual funds, stick to these choices.

3. It’s a good time to invest in the market.

4. Be patient and disciplined. You will be rewarded!

Author: Sanjay Matai
Source: Wealth, MoneyControl

Careful mistakes you make!!

MISTAKES can be expensive. Ask the guy who looked at a beautiful girl crossing the road instead of looking at the car in front of him. His glance cost him over 1 lakh (Rs 100,000) in damages. But you could argue that this was a careless mistake. But what about the mistakes we make carefully?

Careful mistakes are the ones we make after long deliberation, wrong calculation leading to the wrong choice. And naturally these cost you more. Lets look at Insurance for instance.

Firstly, we need to be a clear about one point — Insurance is a cost. Whether one would want to incur this cost or not, and to what amount, is a matter of personal choice. And since it is a cost, the obvious thing to do is minimize the cost without sacrificing the basic life cover.

The big mistake
This is where the big mistake comes in: Pure-protection policies, where one doesn’t get anything back if one survives the policy term, are the ideal choice for the above objective. But psychologically, it is difficult for people to pay-up hard cash for an intangible product, ie security. So they go in for insurance products with returns.

Hence, moneyback and endowment (and of late Unit Linked Insurance Plans or ULIPs) type of policies are taken. But this is what they forget:

• The same amount that they would otherwise pay in a term policy also gets deducted from these so-called protection and investment policies. And only the net amount gets invested.
• The administrative costs are high
• Corpus is invested in very safe instruments
• Therefore, the returns from such policies are usually very low — usually in the range of 5-7% pa.

Naturally, a person would be better off taking a term policy to get the life cover and investing the balance premium amount say in PPF where he can earn 8% pa returns (assuming he wants no risk of investing in equity, where the returns can be much higher).

The mass exodus
As more people realise their mistake, they want to exit from such insurance policies. Unfortunately, early exit from insurance policies results in a huge loss. So does it make sense to surrender one’s policies despite this loss? There could be three broad scenarios possible, depending on how many premiums you have already paid, out of the total premiums payable.

• Early stage: A policy can be surrendered only if it has been in force for three years and premiums have been paid for these years. If you have paid just one or two annual premiums, then you will get back nothing when you exit from the policy. Even thereafter, you will get back say only 25-35% of the premiums paid + bonus accrued, if any. This is for a typical 20-year term policy. The % varies depending on the term and premiums paid.

Now, if you invest this amount + the future premiums in other investment options, you will need to generate around 9-11% p.a. returns to recover the lost premiums and break-even with the insurance policy if you had continued with it.

If you’re confident take a hit and move on!

• Middle stage: If you are somewhere around the middle of the policy, you can either surrender the policy by taking around 50% of the premiums paid + bonus; and invest this and the future premiums somewhere else. But remember that the absolute loss is higher here as more premiums have been paid and time for recovery is less. So, you need to generate maybe around 14-17% pa returns to break-even.

Optionally, you can make the policy fully-paid. Your sum assured will be suitably lowered. And you will back the premiums paid + bonus earned — but only at the end of the original term. Also no fresh bonus will accrue during this period. The net return for this amount works out about 4%. Invest the future premiums in the other options. Here you may have to generate somewhat lower returns of around 12-15% p.a. to break-even on overall basis.

• Late stage: If your policy is just about to mature in three to five years, then it may well be prudent to let it run its course. You can’t do much by saving 3-5 years’ of premium payments.

These are only broad numbers purely for indicative purposes. It’s important that you do a detailed working for each of your policies, before taking any further action.

But, with a GDP growth expectation of 7-10% over the next decade or so, the returns outlined are pretty reasonable especially if you choose equity. If you have the capacity for a little risk, go ahead. After all, there’s no gain without pain right?

Author: Sanjay Matai
Source: Wealth, MoneyControl

New fund offers, worth the money?

WE’RE all familiar with the phrase ‘Make hay while the sun shines’. Apparently the financial world is also familiar with it because that would explain the slew of mutual fund new fund offers (NFO) due to the buoyant mood of the markets.
And because we all love new things, investors have rushed to redeem their crores from a perfectly well performing existing fund to invest an NFO with similar objectives.

But how smart is that? Mutual Fund NFOs are nothing but commencement of a new scheme. They should not be confused with equity IPO usually get huge listing gain. There is no such upside on MF IPO’s. In fact there very well may be a downside. Lets look at it closely:

1. Ignorance is not bliss
One of the major reasons for the success of mutual fund NFOs has been the continued ignorance of an average investor with regards to the NAV. They have all along assumed that if they are getting the units at par ie Rs10, they are getting it cheap. Huge error!

NAV merely represents the market value of the portfolio. It is the book value. Thus when one invests in a mutual fund one is buying the units at the book value — which is Rs 10 for a NFO and could be Rs 15 or Rs 20 or whatever for an existing scheme.

The NAV of an existing scheme is higher merely for the fact that its portfolio has appreciated since the time it built it’s portfolio. Going forward, the returns over a given period of time will be same from an existing portfolio (with a higher NAV) and an identical new portfolio (with Rs 10 NAV). The earlier appreciation of the old fund does not make it expensive vis-à-vis an NFO.

2. Let’s talk numbers now
Say a fund (Old Fund) was launched in Sept 2004. It raised a corpus of Rs 1 crore and allotted 10 lakh units at Rs 10 each. The corpus of Rs 1 crore was invested equally ie. Rs 25 lakh each in Reliance, ONGC, Infosys and Arvind Mills. Over the next 1-year i.e. till Sept 05 all these share prices appreciated and the corpus became Rs 1.49 crores. Accordingly the NAV of Old Fund now is Rs 14.9608.

Now, assume that in Sept ‘05 a NFO is launched. It raises Rs 1 crore and allots 10 lakh units at Rs 10 each. It also invests in the same 4 shares viz. Reliance, ONGC, Infosys and Arvind Mills. The amount to be invested in a particular share is in the same % as in the Old Fund now (This is important, as we have to compare the impact of NAV on the returns and not the impact of the portfolio).

Now we invest Rs 10,000 each in Old Fund and NFO. In Old Fund, we get 668.414 units at Rs.14.9608/unit. And in NFO we get 1000 units at Rs 10/unit.

After one year in Sept 2006, due to appreciation in the share prices, the corpus of Old Fund increases to Rs 1.74 crores and NAV to 17.4669. And corpus of NFO increases to Rs 1.16 crores and NAV to 11.6751. But the investment value in both cases would have increased to Rs 11,675.

Author: Sanjay Matai
Source: Wealth, MoneyControl

When your bank messes up…

GONE are the days when you had to wait in queue to finish your bank work.

These days you have smarter options. You can transfer money, online, check your savings account balance on your cellphone and track the status of your cheque at your local ATM.

Yet banks still mess up. An extra charge, here. A cheque which takes forever to clear. We show you how to address these issues.

Step 1: If you have a complaint, visit the bank’s web site and file it here. Mention your e-mail id, correctly and wait for the bank to revert.

Step 2: If you do not receive a response from your bank or are not satisfied with the response, then file a complaint with the banking ombudsman (BO), a body supported by the Reserve Bank Of India (RBI).

The BO provides speedy solutions to grievances faced by customers from various banks.

What can you complain about?

You can complain if your bank does the following things:

• Does not clear cheques, drafts and bills. Or clears them late
• Refuses to accept without sufficient cause, small denomination notes (like Re 1, Rs 2 etc) or coins. Or if it charges a commission for this
• Delays the payment of deposits into your account
• Refuses to or delays issuing your drafts, pay orders or bankers’ cheques
• Does not stick to the prescribed working hours
• Fails to honour guarantees or letter of credit commitments
• The bank agents fail to provide or delay providing a banking facility (other than loans and advances) that has been promised in writing
• Does not follow the RBI directives that are applicable to rate of interest on deposits in any savings, current or other account maintained with the bank
• Refuses to open deposit accounts without a valid reason for refusal
• Levies any charges without informing you
• Does not stick to RBI guidelines with regards to ATM/debit card operations or credit card operations
• Delays payment of your pension money
• Does not accept or delays accepting amounts, that you pay as taxes
• Does not service you when it comes to investments in Government securities
• Forces you to close your deposit accounts without proper reason or notice
• Refuses or delays to close any accounts
• Does not adhere to the fair practices code as adopted by the bank
• Violates any other directive issues by the RBI in relation to banking or other services

How to file a complaint

• You can file a complaint by on a plain paper and submit it to the ombudsman’s office in your city. Click here for list of offices.
• You can also file it online: access the form.
• There is also a prescribed form for filing a complaint, which is available at all bank branches. However, it’s not necessary to use this format.

Can the ombudsman reject your complaint?

Yes, it can in the following cases.

1. Your complaint seems frivolous, dishonest or is filed without sufficient cause.

2. If you have not done your homework before filing your complaint, or do not have relevant proofs, the ombudsman will not entertain you. So, make sure you have a record of all your communication with the bank

3. There is no loss or damage or inconvenience caused to the complainant.

4. If the office of an ombudsman falls outside the purview of your case, he can reject your complaint. In this case, you must make sure you go to the correct office.

5. If your complaint sounds too complicated to the banking ombudsman, he may ask for elaborate documentation.

List of documents

Submit these along with your complaint:

1. Name and address of the complainant.
2. Name and address of the branch or office of the bank against which the complaint is filed.
3. All facts that support your complaint and if possible, quantify the amount of loss you suffered.
4. If the ombudsman has asked you to comply with some conditions, attach proof of such compliance.

The damages: There’s no cost involved!

Author: Harsh Roongta, Ceo, ApnaLoan.com
Source: Wealth, MoneyControl

Top learning from Sahara fiasco…

Last week, the Reserve Bank of India (RBI) pulled the plug on India’s largest Residuary Banking Company (RBC), Sahara India Financial Corporation. (What happened??)

An RBC is a financial company, which is not really a bank. It’s just that getting a license to set up an RBC is easier than getting a banking license; it calls for fewer regulations and compliances.

So, companies that don’t want to go the banking way opt to be an RBC. In Sahara’s case, they appear to have failed these compliances.

What went wrong according to RBI

• Sahara did not comply with the minimum interest rate requirement. The minimum interest rate that an Non Banking Financial Corporation must offer is 5 per cent per annum on term deposits and 3.5 per cent per annum on daily deposits. If reports are to be believed, some depositors got interest as 1 per cent per annum.
• They did not have the complete details of the agents involved in deposit collection.
• They did not follow all KYC (Know Your Customer) norms. Under these, the company must collect documents like PAN card copy, address proof etc, from depositors.
• They did not inform depositors about when their deposits would mature.

Note: It is essential for RBCs to follow these rules, so that you, the depositor or investor, are protected. Read all rules.

RBI’s verdict

Though initially, RBI put a complete ban on all future deposits, it later toned down the sentence. Now, Sahara needs to wind down its deposit base within seven years. Sahara will also no longer issue fresh deposits that mature beyond June 2011.

With this, once again, the spotlight is on the millions that investors pour into various avenues, without adequate knowledge and research. What’s more disheartening is that most investors and depositors don’t know their rights are.

Now, for those who have their monies locked into Sahara, there’s no cause to worry. The RBI is here to protect the rights of investors and depositors. Even if there had been a complete ban on Sahara to accept any fresh deposits, common investors will not suffer.

But there’s an opportunity to learn, here. Being aware of what’s happening around you will help you to avoid making mistakes with your money. Here’s what I learned: four cardinal rules of investing.

Exercise your rights

Every time you give your money to somebody else, you have a right to know what is going to happen with it. You have the right to see balance sheets, offer documents and other financial documents and ask any question you might have. When you see these documents, look at these four important details of the company finances:

1. Case flow statement: Every company has an annual report with the balance sheet, profit statement and a cash flow statement. A company with positive historic cash flows, is preferred.

2. Revenues: Look at sales/ revenues and see if they are growing at a healthy rate. Compare this with peer companies.

3. Profit margin: Is the company maintaining a steady profit margin? This will tell you if it is controlling costs. Again, compare with peers.

4. Loans: A company with less loans is always better. Imagine you have two friends, one who is always in debt and the other who borrows less and repays fast. Who would you lend to? The answer: obviously, the latter! Same logic for companies.

Now, these are just basic guidelines. It always helps to learn more. Learn the business model, profits, cash flows, the total assets and how much debt they have taken and what are the risks related to the business.

Get real!
Take promises of high, guaranteed returns with a pinch of salt.

If anyone does promise you a high guaranteed return, which is significantly more than what the Government or nationalised banks are offering, try to find out what’s different here.

Ask yourself, ‘Iif I was running a deposit scheme like this how would I be able to guarantee returns of 200 per cent? What is my business model? Is it logical or is it just a scam?’ Don’t forget that the RBI is not liable to protect you, if you behave irresponsibly and lose your money to dubious companies.

Check management credibility
Whom would you give your money to? A company ridden with controversies? So, check for management credibility when you invest.

Read magazines and newspapers, regularly. The Internet has made life easier, too. Look up the company’s name on search engines and read all the information, it throws up.

Check credit ratings
RBCs are required to get a rating from a rating agency like CRISIL or ICRA, without which they cannot raise deposits. So, check the offer document to see the rating. However use this only as a tool to help you decide. It must not be the only basis for your decision. In the past, several Initial Public Offerings (IPO) with excellent credit ratings, have failed.

Play detective!
Being an investor is akin to being a detective who needs all the information. The better you get, the more you will be rewarded. The world of finance is extremely rewarding for those who know the rules of the game. For those who don’t, it’s pretty risky. So, respect your money and keep your eyes and ears open.

Keep smiling. And yes, happy wealth creation!

Author: Yogesh Chabria, GSIFS.com
Source: Wealth, MoneyControl.

Is your credit card making you broke?

A CREDIT card nestles a lot of hidden costs – so if you aren’t careful, your monthly statement can come as a huge shock.

Here is a checklist of reasons why you may incur unnecessary credit card expenses:

You don’t pay the minimum amount due
Whether you do it knowingly or unknowingly, you will end up paying a late payment fee. This fee varies from bank to bank. If you do not pay for two consecutive months, you become a defaulter. Collection strategy then varies, depending on his risk score arrived ad from the amount outstanding, past record, individual profile/ profession. Further transactions will be blocked.

You revolve your balance
Banks give you this option to pay a minimum prescribed amount and carry forward the rest to the next billing period. In this case, you will pay an interest on the outstanding amount. But the catch lies here: when you carry a balance from month to month, there is no grace period on new purchases with most cards.

Your payment cheque bounces
You would have to bear a fee for dishonoured cheques. If you go beyond the due date, you become a delinquent case, and your risk profile shoots up. Also, all charges will be applicable – a fee for a bounced cheque, a late payment fee and monthly interest on outstanding amount.

You cross your credit limit
Your credit limit is the maximum amount that you can spend using your credit card, as dictated by your income profile. But should you decide that you need to spend more, the banks are too clever to block further transactions. Instead they let you spend, and then charge you – perhaps as much as 5% on the exceeded amount.

You transfer your balance from other cards
Some banks make an offer where you pay absolutely no interest or a very low interest, but the dream run doesn’t last long. Most banks let you not pay or pay low interest on the transferred amount for a stipulated period of about three months. Beyond that, you start paying the normal interest. So, if you have transferred your balance, pay off the dues within the stipulated time.

Other precautions you can take:

Do not withdraw cash with your credit card
Apart from paying the regular interest of 2.95%, you will also have to pay a one-time fee of about 2-2.5% for making a cash advance. Moreover, the cash advance fee is higher if you withdraw from an ATM that doesn’t belong to the bank whose credit card you hold. Also remember, when you withdraw cash, you start paying interest from there on, as against getting a free credit period.

You forget to pay your annual charges
In case you decide not to use your credit card further and you don’t pay the annual charges, you are in for trouble. Remember, you need to get in touch with the bank and intimate them that you don’t want the card any further. Otherwise, you will unnecessarily have to pay the annual fee and a penalty, in case you cross the due date.

Bank	Late Payment (Rs)	Bounced Cheque (Rs)	Overlimit Charges (Rs)	Cash Advance Fee (Rs)
ICICI Bank	30% of min outstanding	250 /cheque	5% on overlimit amount	2.5% on advanced amount
HDFC Bank	150	2% of cheque amount	2.5% on overlimit amount	2% on advanced amount
HSBC	30% of min amount due	200	300 per month	2.5% on advanced amount
StanChart	30% of min amount due	200	250 per instance	2.5% on advanced amount

Source: Moneycontrol

Investing in mutual funds?

MOST of us have an inner rebel. That’s why often fall for the guy mother warned us against. Or continue smoking even when told not to.

So, it’s no wonder that when mutual fund advertisements worth millions of dollars, tell us to ‘Please read the offer document (OD) carefully before investing’, we still don’t! This is understandable; after all it’s a 100-page document filled with jargon. But in the long run, you will be the loser, if you don’t.

The Securities and Exchange Board of India (SEBI) have even come out with an abridged version called the Key Information Memorandum, which stipulates standard sections and disclosures in all ODs.

An OD is critical because it tells you whether your money is in the right hands, at the right place and at the right time. Your financial advisor will have a copy, and the company web site should have it online, too.

If you still don’t want to read the whole document, take the easy way out. wealth scopes out 10 must-reads in the OD.

1. Date of issue
Verify that you have the latest edition of the OD (an OD must be updated once a year, at least).

2. The minimum investment
Mutual funds differ both in the minimum initial investment required, and the minimum for subsequent investments.

For example, equity funds may stipulate Rs 5,000, while institutional premium liquid plans may stipulate Rs 10,000,000 (Rs 10 crore) as the minimum amount.

3. Why invest
The goal of each fund must be clearly defined, from income to long-term capital appreciation. You, the investor, must be sure that the fund’s objective matches with your’s.

4. Investment policy
An OD will outline general strategies implemented by the fund managers. You will learn what types of investments will be included, such as government bonds (with ratings) or stocks, considered appropriate. Be sure to check if it offers adequate diversification.

5. Risk factors
Every investment involves some level of risk. Look for descriptions of the risks associated with investments in the fund (like credit risk, market risk or interest-rate risk) and decide if it matches your risk appetite.

For example, a mutual fund Monthly Income Plan (MIP) invests mainly in bonds and gilts (up to 90 per cent) with a sprinkling of equity(10 per cent) to generate capital appreciation. This is passed on to customers as monthly income.

But remember: it is subject to availability of distributable surplus. In 2004, many mutual fund customers underestimated this market risk and were caught by surprise when the MIPs gave low/negative returns.

They may have been better off with a a Post Office MIP that assures an 8 per cent monthly income payment for its six-year tenure.

6. Past record
ODs contain selected per-share data, which includes the net asset value and total return for different time periods, since the fund’s inception.

Performance data listed in an OD are based on standard formulae established by the SEBI and enable investors to make comparisons with other funds. So investors should check track records over a period of time that matches their own investment horizon but always remember that ‘past performance is not an indication of future performance’.

Additionally, investors must check that the benchmark chosen by the fund to compare its relative performance is appropriate. In addition, investors should keep in mind that many of the returns presented in historical data don’t account for tax. They must look at any fine print in these sections, as they should say whether or not taxes have been taken into account.

7. Fees and expenses
Fool.com quotes: Mutual funds have two goals: to make money for themselves and for you, usually in that order.

Entry loads, exit loads, switching charges, annual recurring expenses, management fees, investor servicing costs — these all add up over time. The OD lists the limits on these fees and also shows the impact these have had on the fund investment historically.

8. Pedigree or vintage?
Who will you be trusting with your money? This section details the education and work experience of the key management of the fund company, including the Chief Executive Officer (CEO) and fund managers. For example, you need to watch out for the fund that has been in operation significantly longer than the fund manager has been managing it.

The performance can be credited to the previous manager. Check the performance of the current manager by looking into his or her past performance with other funds with similar investment goals and strategies.

9. Tax benefits information
Mutual funds enjoy significant tax benefits under Section 23 D and Sec 115. For example, equity funds enjoy the status of being free from long terms capital gains and dividend distribution tax.

A close reading of the tax benefits available to the fund investors will enable them to plan their taxes better and to enhance their post tax returns.

10. Investor services
You may have access to certain services, such as automatic reinvestment of dividends and systematic investment/withdrawal plans. This section of the OD, usually towards the back of the publication, will describe these services and how you can take advantage of them.

Now, you can decide if this mutual fund is for you. So, if you’re an information junkie, you can get more of it from the fund’s annual report, which is available directly from the fund company or with a financial planner.

Go right ahead and rebel against your parents, politicians, the Government, fundamentalists etc. But if you rebel against sound advice then you’re just a rebel without a cause!

Author: Ajay Bagga
Source:Money Control