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Your family must know your financial data

Your family must know your financial data
28/11/2017

Money has always been a private affair, be it family, friends or your colleagues. One will still be hesitant to share his/her financial data with his/her family as it can alter the family dynamics and impact other family members negatively.

From a trader’s perspective, sharing your financial data is inviting free advice which might not be productive. However, sharing the financial data with your family can be important because of the following reasons.

  • One might get financially incapacitated at any point in time, and the family might have to step in.
  • Just like trading, life is also uncertain. One might just get incapacitated or unfit to handle the financial data. Who should be your first go-to person in this case? Of course, somebody from the family you can entirely trust should step in.
  • One can get a more comprehensive perspective on trading/investing from the experienced family members.

    Following the crowd, may not be advisable to a trader. An experienced family member can surely help an amateur into the stock market with wise trading advice. Moreover, this would provide a broader perspective which would further improve the scope of trading activity.

  • One can provide a first-hand opportunity to his/her family member to learn trading/investing.

Apart from getting advice from the experienced family members, it is a way to provide a first-hand opportunity to help your inquisitive family member learn trading or investing. It can help in mutual learning from both the ends.

Sharing of financial data with anybody can be risky provided it is done appropriately. Keep the following points in mind before going ahead.

Decide what to share

The purpose of sharing the financial information is to speed up the process of taking over the rein if need be and at the same time, help the family member learn the skill set so that they can use it for their financial management. It is essential to share information like the expenses, income, assets, liabilities, insurance policies and real estate documents. The purpose of sharing the data gets defeated if any of this is missing.

Keep it Precise

Keep the information you share, precise. Blabbering the entire game plan might just go against you. In the 21st century, money is what a game changer is, and greed overpowers it. So be very careful and precise while you are sharing you investment/trading plan.

Know whom to share it with

Trust and knowledge are two factors you should consider while sharing your financial data even with your family. One should not regret anything later. It can have serious repercussions if not thought about carefully. Hence, choose the person wisely!

Be Clear

It is important to be clear with your thoughts. Be ready to answer all sorts of questions asked by your family member and make sure they understand the importance of sharing that information with them.

Deciding all these things might be a stressful job at one point in time because there are multiple factors involved, but your family members will always be your first go-to person. So, don’t worry and have faith in the decision you make. 

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ICICI Lombard General Insurance Company Ltd - Information Note

ICICI Lombard General Insurance Company Ltd - Information Note
IPO
by Nikita Bhoota 09/12/2017

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Hearing Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so.

This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.

Issue Opens: September 15, 2017
Issue Closes: September 19, 2017
Face Value: Rs 10
Price Band: Rs 651- Rs 661
Issue Size: ~Rs 5,701 cr (8.62 cr shares)
Bid Lot: 22 Equity shares       
Post Issue Market Cap: ~Rs 30,006 cr (at upper band)
Issue Type: 100% Book Building

% shareholding

Pre IPO

Post IPO

Promoter

62.92

55.92

Public

37.08

44.08

Source: RHP

Company Background

ICICI Lombard General Insurance Company Ltd was founded as a joint venture between ICICI Bank Ltd, and Fairfax Financial Holdings Ltd (a Canadian based holding company). The company was the largest private-sector non-life insurer in India based on gross direct premium income (GDPI) in FY17. ICICI Lombard offers well-diversified range of products, including motor, health, crop/weather, fire, personal accident, marine, engineering and liability insurance, through multiple distribution channels to its customers. It has 8.4% market share on GDPI basis among all non-life insurers in India and 18% among private sector non-life insurers in India. In FY17, the company issued 17.7 million policies and its gross direct premium income was Rs 10,725 cr.

Objective of the Offer

The purpose of the offer is to sale of up to ~8.62 cr equity shares by the selling shareholders. The listing of the equity shares will enhance the ICICI Lombard brand name and provide liquidity to the existing shareholders. The company will not receive any proceeds from the offer.

Key Points

ICICI Lombard has diversified range of insurance products with motor, health and personal accident, crop/weather, fire, marine, and engineering insurance contributing 42.3%, 18.9%, 20.1%, 6.9%, 3.2% and 2.1%, respectively, of their GDPI in FY17. It also has  diversified channel mix enables them to reach customers in 618 out of 716 districts across India and provides them with a competitive edge over its competitors.

The company has a strong capital position with a solvency ratio of 2.1x as at March 31, 2017 compared to the IRDAI prescribed control level of 1.5x and an Indian non-life private-sector average of 1.95x. Their combined ratio has been generally stable, improving from 104.9% to 104.1% over FY15-17. During the same time period, their loss ratio improved from 81.4% to 80.6%.

The company was the largest private-sector non-life insurer in India, by GDPI in FY17 and continues to grow faster than the industry. Their GDPI has grown at a CAGR of 26.7% over FY15-17 against 22.8% CAGR for the Indian non-life insurance industry over the similar period. This has helped the company to improve its market share in GDPI term, which has increased from 7.9% to 8.4% over FY15-17.

India continues to be under-penetrated with a non-life insurance penetration of 0.8% of the gross domestic product, compared with a global average of 2.8% of the gross domestic product as of 31st Dec 2016. Thus, non-life insurance sector in India holds significant growth potential going forward.

Key Risks

The company derives significant proportion of its GDPI from motor vehicle insurance products led by demand from motor vehicles in India. Any adverse changes in consumer demand for motor vehicles may affect its GDPI from vehicle insurance products.

At the end of Q1FY18, ~83% of their total investment assets were invested in fixed income assets. Any significant change in interest rates could materially affect their investment returns.

Our View

The company’s diverse product line, consistent market leadership and superior operating and financial performance give them a competitive advantage. We believe that the non-life insurance sector in India holds significant growth potential because of its under-penetration and low insurance density.

*For additional information and risk factors please refer to the Red Herring Prospectus. Please note that this document is for information purpose only.

 

Research Disclaimer

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Trading tips from a Taxi driver

Trading tips from a Taxi driver
10/12/2017

Being an avid traveler, I try to go to as many places I can and meet interesting people; some of these people end up inspiring me in numerous ways. Last month, I was traveling to Mumbai to visit my sister.

I boarded a taxi from Mumbai Central to go to my hotel. I had no clue that this hour-long taxi ride was going to upturn my financial life and change my way of reaching my financial goals.

Ten minutes into the ride, I noticed a photograph glued to the dashboard. It was a photo of the taxi driver, his wife, and his two daughters. Out of curiosity, I asked him what his daughters were doing in life, to which he gave me a surprising answer: "This one is Radha, and she is pursuing her Bachelor's degree from IIT Bombay, and this is Sandhya who is doing Ph.D. from Yale University in Connecticut." Out of all the possible answers, this was one that I was not expecting from a taxi driver.

I congratulated him on his daughters' hard work and achievement. Curiously, I asked him: "All this must be costing you a fortune; do you earn enough from the taxi to fund your daughters' education and cover your daily expenses?"

To my surprise, he replied: "No, not from the taxi; I mostly earn my money by trading in the share market. Driving a taxi is something I started with because I don't like to sit all day in the house doing nothing. So, I decided to do the one thing that I'm good at; apart from investing, of course." This reply was followed by a big laugh as I sat there, even more astonished than before.

Since I have always been fascinated by the share market and the infinite opportunities that it provides to build wealth, I decided to ask him how he manages his investment and the strategies that he uses to trade in the share market. Given below is a small summary of what I learned:

Share Market Trading Tips

Thorough research

On knowing that he hasn't had a loss in investing in 2 years, I asked him, how he picks the perfect stock. To this, he replied: "I research the investment inside and out before deciding to invest. I check the background of the company by looking at their previous earnings, their balance sheet, their income statement, and their potential to pay a regular dividend. If all of this seems right and I see that the company has a potential to grow in the future, I go ahead with my decision to invest in the company." I asked him where he got the time for all this.

"What are nights and early mornings for?" he replied with a smile.

Diversification

When he stated that he hadn't had a loss in over two years, I doubtfully commented: "But this seems like an impossible thing in the share market, even big-time investors incur regular losses." To this, I got an intelligent reply: "It's not that I have not suffered a loss in my investments, I just cut them by earning more profits through my other investments. You see, I am all in for diversification of my portfolio. I try to invest in different company's stocks rather than putting all of my money in just one place. It spreads my overall risk across multiple investments, and even if my one investment turns bad, profits from my other investments make my overall portfolio profitable."

"Well, that's just pure genius," I replied.

Discipline

On asking him what trait a person should have to be successful in the share market, he smiled and replied: "Discipline and patience are crucial. I have seen people selling their stocks as soon the prices go a little higher, losing out on earning so much more money as the price usually increases in the future. You have to be disciplined and patient when trading in the share market. If you sell early, you lose on making more money, and if you retain your stocks for too long even when the market is down, you incur massive losses. By regularly monitoring your investment, you will know the right time to buy or sell your stocks."

When I reached my hotel, I still had so many questions that I wanted to ask him. I realized that I didn't even know his name.

"In midst of all this, I forgot to ask your name.

"No worries, I am Dinkar Rajoria and here is my card. Feel free to call anytime you want a taxi."
"What about for investment advice?

"Call me anytime for that."

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5 Investment Strategies to make money this Diwali

5 Investment Strategies to make money this Diwali
by Nutan Gupta 10/12/2017

Diwali is the time for a lot of sweets, gifts, crackers and light. It is a time-honoured tradition to invoke the Goddess of Wealth during this time. The Festival of Light is an auspicious occasion to hasten our prayers with wise fiscal planning.

Investment options have become less lucrative with falling interest rates. Let us focus on some all-round investment options.

Public Provident Fund (PPF) - PPF is among the safest long-term investments in the land. Since it is government backed, this investment is completely watertight. Any bank or post office can facilitate the opening of a PPF account. Furthermore, for any annual investment amounting to Rs.1,50,000, the entire interest earned is tax-free.

This is particularly beneficial for long-term investment as it has tenure of 15 years, though withdrawals are allowed before this period.

Systematic Investment Plan (SIP): With the SIP proving a runaway hit in the mutual fund market, it is reasonable that you jump on the bandwagon. SIP means that you keep on investing bite-sized amounts into the mutual fund of your choice periodically. The greatest is that it encourages financial discipline. More than profits, its discipline which would keep your finances in good stead. Also, unlike the lump sum method of investment, it allows us to tide over market downs and get reasonable profits from bullish periods. Studies have shown that SIP’s tend to perform better over time and evens out any losses incurred.

Gold: Buying gold during Diwali is a time-hallowed tradition. Buying gold has long been considered as the best way to welcome Goddess Laxmi. Tradition now gets a boost of modernity as several gold-based investment schemes have been proffered. Both GOLD ETF’s (Exchange Traded Fund) and E-Gold have changed the face of the industry.

GOLD ETF’s or Gold Exchange Traded Funds have become very popular. These are mutual fund schemes which only invest in gold. These units are then held in electronic form by the investors. The value of one unit of ETF has been set as equivalent to one gram of gold. These can be bought and sold like ordinary stocks on the market.

E-GOLD was recently launched by the National Spot Exchange Ltd (NSEL). The main difference it has with Gold ETF’s is that the investor becomes the owner of the gold and not any Asset Management Company (AMC). In this way, we avoid the maintenance charges and other fees levied by the AMC’s.

Equities: The market for equities is always lucrative during festive occasions. Buying stocks and shares have been a traditional investment during Diwali and this fiscal year should be no different. Investors and traders often purchase stocks on Diwali for themselves and also for their families. The BSE (Bombay Stock Exchange) Sensex gained almost 4,000 points or 13 percent since last Diwali. The expectation is strong that 2017 could lead to an even greater spurt of growth. There was some brisk trading in mid and small cap stocks with valuations rising up to 800 percent in some cases. Most sectors, with the noticeable exception of the export-oriented sector, have recorded substantial gains for the fiscal year.

It seems like the perfect time to tweak the strategy and focus on the winning stocks for the year ahead.

Sukanya Samriddhi Account: Under the aegis of the “BetiBachaoBetiPadhao” movement, the government has initiated the Sukanya Samriddhi Account scheme. This scheme explicitly means to encourage girl-child education. You can easily open an account under this scheme in post offices and banks. With a minimum investment of Rs 1000 a year to Rs 1,50,000, the investment is completely tax exempt. The investment period needs to begin before the girl in question is 10 years old and continues till she is 21. It offers a very practical way to ensure the financial security of the little goddesses of our household.

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10 Golden Rules of Investing

10 Golden Rules of Investing
by Nutan Gupta 10/12/2017

One of the world's richest men and the greatest investor of our times, Warren Buffet has many remarkable stories surrounding him. In 2006, Warren Buffet donated 85% of his then 44 billion US dollars wealth to charity. None of us would have the spine to do that. However, Warren Buffet did that and re-attained his position among the richest men in the world.

We all have dreams and aspirations; for some, it may be having a place to call theirs while for some it may be driving their luxury car to work every morning. However, these dreams come crashing down when you realize that you don't have the funds to fulfill them and with your limited income, you probably won't even have the required amount after 20 years. Luckily, these days there is a solution to everything. Investing your money in different instruments is a sure shot way of not just increasing your income but also increasing it exponentially. However, smart investing is important for your money to grow exponentially. 

Here are a few points to aid you in investing smartly:

Money Investing Rules

1) Be clear about financial goals

Before investing, always be clear about what you want from your investment and how much return you expect from it.

2) Know your net worth

It is always important to calculate the net assets and liabilities a person has before beginning with the investment process. It will be easier for you invest your money wisely if you are knowledgeable about current investments.

3) Proper research

Proper research is crucial; avoid investing in anything unless you have adequate knowledge about the subject.

4) Never try and time the market

In simpler words, never try to guess which way the stock market will go. Invest today and widen your investment horizon.

5) Always invest in businesses you understand

If you are new to investing, it is always safe to start off by investing in the sectors with which you are familiar. This will help you make sound investment decisions.

6) Diversify your portfolio

Spread your risk across different asset classes. Invest in different types of financial instruments so that even if you suffer a loss in one, it will be compensated by gains in another.

7) Review your portfolio

Always track the performance of your portfolio at regular intervals to check the performance of your investments. Also, an analysis may be required may be required on special occasions like marriage, etc.

8) Factor in inflation when calculating returns

Very few investors comprehend the influence of inflation on their investments. Factor in inflation to know the real value of your income and investments

9) Be prepared for contingencies

Always ensure that a few investments are in the liquid state; these can be withdrawn at short notice to meet any emergencies. Don't lock in all your funds for a long time.

10) Emotions should not dictate investment decisions

Never get carried away by emotions while making investment decisions. Be realistic and rational when making such decisions related to investment. Always be realistic about your expectations. Don't build castles in the sky; don't base your financial goals on unrealistic expectations.

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5 Financial Advices you can gift your Sibling this Bhaidooj

5 Financial Advices you can gift your Sibling this Bhaidooj
by Nutan Gupta 10/12/2017

Bhai Dooj or Bhaubeej, as known in Maharastra, Karnataka and Goa, is an Indian festival that celebrates the love among siblings. During this festival, the sisters pray for their brothers’ long and prosperous life to God. Apart from rich sentimental value, it has a lot of religious importance as well. It is usually celebrated during Diwali across the country.

As a part of the festival celebrations, brothers pledge to protect and care for their sisters while the sisters pray and ask God for graces and blessings for their brothers. This is followed by giving material gifts as well. However, the nature of gifts has seen some transformation in recent times. From material things to cash, the nature of the gift has changed over time but the intention remains the same. If you too are thinking of gifting something to your sibling this Diwali, try gifting them an investment asset or opportunity. Not only would it be financially helpful but it could also act as security for their better future.

In India, investment has the notion of being complicated and therefore people shy away from it. To ensure that your sibling doesn’t do that, here are 5 financial advice that you can gift your sibling this Bhai Dooj and contribute towards their prosperous future.

1.Investments help you determine your goals

Having money stacked up in savings account kills the potential growth it has trapped in it. The interest rate on asavings account is also comparatively very less than compared to other investment options. Thus, the process of investing would not only help in getting good returns on their savings but also works towards their goals. Investments done with a goal in mind have a better chance of becoming reality than that which is just deposited. Hence, this exercise would thus make your sibling more goal-oriented along with making them rich.

2.Investments encourage having emergency funds

The next thing that investments would motivate your siblings is planning their finances ahead of time. It would inculcate the values of budgeting and also bring about discipline in how they spend the money they have. Since investments are risky and they might not all be liquid investments, it also encourages your siblings to have and maintain an emergency fund. This would help them avoid withdrawing from their investments in case some financial emergency arises.

3.Investments helps automate savings

One of the best things that your siblings can do is to automate their savings. It’s a pretty simple concept. All they need to do is to make sure a certain amount of money gets automatically deducted from your account a particular day of the month. A convenient way to do that is to invest in Mutual Funds by the Systematic Investment Plan (SIP) mode. In this way, the bank will automatically deduct their monthly contribution to the mutual fund in question. It prevents them from overspending and backing out from investing. This way, their money will work by itself and won’t give them any chance of missing out on their targets.

4.Investments promote monthly savings

SIPs help people to invest in shares and stocks through mutual funds under the guidance of a fund advisor. With the SIPs, your siblings can invest small amounts on a monthly basis instead of a large lump sum amount. Most experts say that it’s one of the best investments that they can do right now, and it’s a lot better than making a Fixed Deposit. SIPs ensure that regular contribution towards the fund reduces any major financial downfall in the long run. This makes their monthly budget more organized as well.

5.Investments help prepare for retirement

It’s always wise to invest in a Pension Plan. If your siblings continue to work in private firms, they won’t be getting any pension from them, so it’s always better to make an investment in the National Pension Scheme. It’s a government scheme in which 40% of the corpus left after maturity is made directly tax exempt. Also, 40% more in the remaining 60% will have to be mandatorily spent to purchase an annuity, and thus will be tax exempt. Only 20% of their investment will be taxable after maturity. In short, this will help your sibling get a nice fat amount on retirement and most of it will be tax-free.

Thus, with these 5 financial tips, you can gift your siblings a secure future by giving them investment products this Bhai Dooj.