Financial Advisory and Capital Tracking (FACT)

Gold in the Commodity Exchange

2012-10-31T01:49:00.003-07:00

For a month we have seen gold slide from its Peak position, however, since a couple of days we are seeing the trend reverse.

This is expected as the festival season is approaching and soon after that would be the wedding season.

The commodity market offers very many advantages. Let’s have a look at one of the financial advantages offered by the commodity account for investing in gold.

Considering either a short or a long horizon, there are only 3 possibilities that can arise at any point

1. Gold shall remain at current levels even in future

2. Gold shall go northwards in future

3. Gold shall go southwards in future

We shall always feel the probability of Gold going up with less confidence in the short term then in the long term.

In the very long term we would safely assume with more than 99% confidence that gold will be more than what it is today. Hence, let’s assume a conservative scenario whereby, we expect gold to reach 32,000 per 10 gm by the end of one year from now. Gold may see highs of above 32,000 per 10 gm and even see lows within this year. As of today Gold is hovering close to 31,000/- per 10 gm. Let's assume it to be so for the sake of simplicity of calculations.

Now, if today we purchase 100 gm of gold (physical), the investment required shall be Rs. 3,10,000/-. At the end of a year, as per our assumption, the price would have reached 32,000. Hence, we would have made Rs. 10,000/- on our investment of Rs. 3,10,000/- . Hence we would have an ROI (return on Investment) as under

ROI = 10,000 / 3,10,000 x 100 = 3.23%

Now, let’s compare the situation with investing in Commodity Exchange.

In the commodity exchange, you need to invest less than Rs. 20,000 (approx), sometimes as low as 15,000/- but let's be conservative and assume Rs.20,000/-, as margin money to block 100 gm of Gold. The profit / loss made on the investment are marked to market on real time basis. Hence your account is continuous credited / debited depending upon price movement.

Now to hold this investment for long we shall roll on the same on the exchange for a year. At the end of the year when the market price is 32,000, our account shall be credited with a 10,000 as profit (not accounting for small amounts removed as brokerages and/or rolling losses). Hence, in this case also the profit remains the same i.e. Rs. 10,000/-. However, this profit is now achieved on an investment of Rs. 20,000/-

This time the ROI is as under

ROI = 10,000 / 20,000 x 100 = 50.00%

Thus ROI through investment in commodity market is over 10 times in percentage terms with that of investing in physical gold / gold ETF or for that matter any other means of investing in gold as no front offers the commodity at such less margin money.

Now imagine that the entire money to buy physical gold of 100 gm of Rs. 3,10,000/- was invested in the commodity market. We would have been able to block approx 1,500 gm of gold (1.5 kg) and when after a year the price would have reached 32,000/- / 10 gm, we would have earned a profit of 1,500 x 1,000 / 10 = Rs. 1,50,000/- (approx)

Should you be Interested in Investing in the Commodity Exchange - Click Here

What do you do about Risk ...????

2011-10-28T04:51:00.000-07:00

Definers, if I can address them that way, define risk as a condition in which there is a possibility of an adverse deviation from a desired outcome that is expected or hoped for.

Risk is present everywhere and at times. It can take many forms and can if translated in to reality can lead to devastating consequences which would never want. There is risk while leaving commuting, while investing in a business, while building a new project, even while cooking at home etc....

So, what is that we can do about Risk?

The following are the ways in which we could deal with Risk

Avoiding Risk

The best option to avoid the consequences of a risk is to avoid the risk altogether. For example, if there is a risk of injury in travelling by train, then by avoiding travelling by train would avoid the risk altogether. However, many a times avoiding risk is not practical as certain actions need to be performed in spite of risk being present.

Controlling Risk

This may prove better than the earlier method. By controlling risk, we can take steps to prevent or reduce the losses. For example, if there is a risk of fire in a shop, then the shopkeeper may install smoke detector and water sprinklers. However, controlling risk can neither undo the damage nor complete avoid the consequences.

Accepting Risk

By this we can accept or retain the loss due the risk and not take steps to either avoid or prevent it. However, such a method should and is only logical for risk whose consequences are not large. For example, we may accept the risk and not take any measures against theft of an inexpensive wristwatch.

Transferring Risk

A more financially prudent method to deal with risk is to transfer the risk. When you transfer risk to another person, you are shifting the financial responsibility for that risk to the other party. This can be achieved through insurance coverage.

Various risks can be covered by insurance which are broadly divided into property damage, liability and personal risk.

Importance of insurance arises from the fact that certain of the insurance covers have the capacity to put the insured back into the same financial status as the insured was before the happening of an unwanted event.

Read more about various kinds of Insurance Covers that exist and how you can enjoy a carefree life - Click Here

Commodity Exchange – a great place to buy Gold for Long Term

2011-10-14T09:20:00.000-07:00

Gold has been bound between 26,000 & 27,000 on the exchange since quite some time. Now, to understand the investment in the commodity exchange and the benefit it brings, let’s assume that the gold is at 27,000 at this point in time.

Considering either a short or a long horizon, there are only 3 possibilities that can arise at any point

Gold shall remain at current levels even in future
Gold shall go northwards in future
Gold shall go southwards in future

It is all a game of probabilities since, we cannot predict future. So we shall always feel the probability of Gold going up with less confidence in the short term then in the long term.

In the very long term we would safely assume with more that 99% confidence that gold will be more than what it is today. Hence, let’s assume a conservative scenario whereby, we expect gold to reach 28,000 by the end of one year from now. Gold may see highs of above 28,000 and even see lows within this year.

Now, if today we purchase 100gm of gold, the investment required shall be Rs. 2,70,000/-. When at the end of a year, as per our assumption, the price would have reached 28,000. Hence, we would have made Rs. 10,000/- on our investment of Rs. 2,70,000/- . Hence we had an ROI (return on Investment) as under

ROI = 10,000 / 2,70,000 x 100 = 3.70%

Now, let’s compare the situation with investing in Commodity Exchange.

In the commodity exchange, you need to invest only Rs. 25,000 (approx) as margin money to block 100gm of Gold. However, the profit / loss made on the investment are marked to market on real time basis. Hence your account is continuous credited / debited depending upon price movement.

However, let’s assume that we roll on the investment in 100gm of Gold in the commodity exchange for a year. At the end of the year when the market price is 28,000, our account shall be credited with a nett 10,000 as profit. Hence, in this case also the profit remains the same i.e. Rs. 10,000/-. However, this profit is now achieved on an investment of Rs. 25,000/-

This time the ROI is as under

ROI = 10,000 / 25,000 x 100 = 40.00%

Thus ROI through investment in commodity market is over 10 times in percentage terms with that of investing in physical gold / gold ETF or for that manner any other means of investing in gold as no front offers the commodity at such less margin money.

Now imagine the money that can be made in absolute terms when the entire 2,70,000 can get invested in the commodity market.

Interested in Investing in the Commodity Exchange - Click Here

Real Estate - Short Term and Long Term Investment

2011-09-24T05:28:00.000-07:00

Real Estate is a legal term related to a land or all the fixtures of land including building and other improvement. Real Estate is often called a real property, sometime called Realty. There are different types of Real Estates i.e. Real Estate Marketing, Real Estate Investing, Corporate Real Estate, Residential Real Estate and Commercial Real Estate.

Investments in Real Estate can happen in two ways as under

Short Term Real Estate Investment

Short Term investors are looking at great profits in this rapidly appreciating market. Short term real estate investment means buying a property and selling it in a short period of time. The wait for profit potential is very short when compared to any other investments today.

But there are some risks involved in this short term real estate investment for which the investor has to be prepared in advance. There are some situations where the investor has to invest more than his budget; more money is needed for repairs and so on. Short term investors should follow the below steps for a fruitful result:

Check whether the Real estate property values are increasing every day.
Complete the repairs and connections as early as possible but at a reasonable price within your boundaries.
Check whether the finances and taxes are able to withstand possible negative feedback.

The view of short term real estate investment is to make quick profit without holding the property for a long time. It is also required to act quickly during the renovation stage. Hence, proper research and knowledge is required. You may contact the local governments, housing authorities, investment groups, other investors and other resources for gaining a proper knowledge.

Long term Real Estate Investment:

Long term real estate investment provides a great option for possessing high returns. Long term real estate investment requires much more effort and commitment for maintenance than a short term investment. You have to purchase a property in the specific area where long term appreciation rate appears favorable and then act as a landlord by giving the property on a rent. You have to perform all the maintenance issues that are required by a real property. The following factors should be considered in order to obtain a successful long term investment:

Ability to deal with renters or tenants.
Investigation for the possibilities for the tax break.
Long term appreciation of the property should be positive.
Avoiding tendency to sell the property on profit immediately.

A clever long term real estate investor performs strict maintenance schedules by keep a readily accessible list of concerned professionals to perform the repairs immediately, with an aim to satisfy the tenants. Choosing the potential tenants by avoiding irresponsible and unreliable tenants is a key factor while going for long term investments. Long term real estate investment involves several risks but a smart investor will be able to minimize them at the beginning of the investment. You need to keep some capital on hand in order to maintain the repairs when the property is vacant and when the appreciation is declined.

For a fruitful long term real estate investment, one should keep track of the market scenario and try to maintain relations with the local real estate industries as appraisers, brokers, attorney’s and other investors.

Gold ...Looking ahead from here

2011-09-17T03:26:00.000-07:00

In the months April to June 2011, India and China have accounted for 52% of Global bar and coin investment and 55% of global jewellery demand. Year on year the volume growth in India has been 38% as against 25% in China and 7% globally. As per a report from the World Gold Council the prospects for both the countries for the remainder of the year remain optimistic.

From April to Sept 16, 2011 as seen in the above chart, the rates of Gold has seen ups and downs but the trend line clearly shows the way ahead. As can be seen from the chart, the rates were below the trend line, but went suddenly northwards and rather went overboard.

The prices have now shown some correction and are on the trend line, giving the right opportunity to get into the commodity, if you are not already.

The reasons stated for an optimistic performance of Gold in India include

Relative economic prosperity
High Inflation Rates
Good Monsoon
Number of forthcoming festivals in which gold purchasing is customary

It is expected that the central banks shall remain net buyers of gold throughout the remainder of 2011.

Summing it up :--

Long term investment in GOLD looks extremely positive

Advance Tax - Company and Non company

2011-08-02T03:12:00.000-07:00

Dear all corporates

The Due date for Advance Tax payment for the second installment for the company and first installment for the non company has been comes up on september 15,2011 with rate of 30% especially for those whose tax liability exceed upto Rs.10,000.00 for year

The Rates and Due dates for Non - Company and Company are as follows :

1. Company
June 15 - 15% of Tax Assessed
September 15 - 30% of Tax Assessed
December 15 - 60% of Tax Assessed
March 15 - 100% of Tax Assessed

2. Non Company
September 15 - 30% of Tax Assessed
December 15 - 60% of Tax Assessed
March 15 - 100% of Tax Assessed

Here is the tax assessed means = Tax due minus Tax deducted at source. Please note that to check Rs. 10,0000. 00 exceed limitand and then you have to consider full amount of tax due but for interest calculation amount is to be taken is total tax due minus tax deducted / collected at source (TDS/TCS)

Further for capital gain amount person can pay prospective instalments only. Means have to oay future advance tax installment due after earning of capital gain. However this exemption is only considered if you have paid whole of advance tax by March 31st (in same previous year)

If you have not paid your tax pro-rate bases in advance as shown above in advance as shown abobe you have to pay interest u/s 234C. Further if you have not paid your full taxes by 31.03.2012 for AY 2012-2013 then you have to pay interest under section 234B on balance amount of tax.

Due date to file Income Tax Return in respect of assessment year 2012-2013 for person other than companies and non audit case is July 31,2012. Interest U/s 234A is payable only if you miss the Income Tax due date for AY 2012-2013 i.e July 31,2012

And I hope you are not interested in calculation under thse section and have paid advance tax on time. However due to inaccurate estimate of income these one of these sections are applicable in most of the cases.

Rate of Interest: Rate of Interest is 1% per month or part thereof in all the above cases

Gold

2011-07-25T05:13:00.000-07:00

Gold has been a proven method of preserving value when a national currency was losing value. If your investments are valued in a depreciating currency, allocating a portion to gold assets is similar to a financial insurance policy.

Thought to be one of the first known metals, gold has been coveted throughout history for its beauty, scarcity, malleability, and uncanny resistance to rust and corrosion. Centuries ago, gold's unique combination of properties -- its sun-like colour, its soft hardness, and, especially, its imperviousness to decay and corruption -- imbued it with magical associations in the eyes of many. Because of these unique properties, gold has traditionally been the currency of choice for much of the world's population. The value of gold has transcended all national, political, and cultural borders, making it the ideal currency.

In spite of the convergence of diamond and palladium, the demand for gold jewellery has seen a regular growth year-on-year. Countries primarily responsible for this growth are India, China, Italy, Turkey and the USA. In the last 3 years, the climb in the price of gold above Rs.20, 000/- in India.

Factors affecting gold prices in last 3 years

If we analyse the track record of gold in the past three years, we can conclude that gold prices have seen a steady and impressive northward growth.

In January 2002, gold prices per 10 gm stood at Rs 5,453. By November 2004, the price had gone up to Rs 7,005. The year 2004 has indeed been a great year for gold.

There has been a substantial increase in gold prices, but this has not dampened consumers' inclination towards investments in gold. In fact, investors have begun to recognise the effectiveness of gold as an efficient savings vehicle and an alternate asset class.

Demand for gold for the purpose of investment has outpaced the demand for the yellow metal for jewellery in 2004. Indians purchased 74.0 tonnes of gold for investment from January to September 2004, while it was 67.8 tonnes during the same period in 2003.

Reasons to say YES to Gold

The dollar is weak and getting weaker due to national economic policies which don't appear to have an end.
Gold price appreciation makes up for lost interest, especially in a bull market.
The 5 five years are the beginning of a major increase in rates of the gold in India from Rs.6000 to Rs.20000 +
Central banks in several countries have stated their intent to increase their gold holdings instead of selling.
All gold funds are in a long term uptrend with bullion, most recently setting new all-time highs.
The trend of commodity prices to increase is relative to gold price increases.
Worldwide gold production is not matching consumption. The price will go up with demand.
Most gold consumption is done in India and China and their demand is increasing with their increase in national wealth.
Several gold funds reached all-time highs in 2007 and are still trending upward.
The short position held by hedged gold funds is being methodically reduced.

Ways to invest in gold

Gold bullion
Gold coins
Numismatic coins
Gold certificates
Gold futures and options
Gold Mining stocks
Jewellery
Exchange Traded Funds (ETF)
Gold Mutual funds

Reasons to say NO to Gold

Gold doesn't pay income or interest.
Except for the last five years, gold has been in a bear market after a peak in 1980.
Central banks have tons of bullion which they occasionally threaten to sell.
If you don't count the last five years, gold stocks have not done well.
Since gold funds have made big moves over the past five years, it's time for them to drop back.
Your broker probably won't recommend gold funds.

If you believe in 'buy low, sell high',

gold is still low, but climbing.

Risk

2010-09-09T06:29:00.000-07:00

The term RISK, has been read, heard and talked about almost every day in various aspects of life. Here, we refer to Risk associated with money.

Financial Experts have dissected risks into many forms including Business Risk, Financial Risk, Market Risk, Re-investment Risk, Interest Rate Risk, Liquidity Risk, Exchange Rate Risk, Information Risk, Political Risk, Management Risk etc. Many more terms will be added to the list as more investment areas get created.

Most of there Risks come into play when money is deployed into some Financial Avenue. However, the more pressing Risk we feel arising in India today is OPPORTUNITY RISK & PURCHASING POWER RISK

OPPORTUNITY RISK is the possibility of missing an opportunity that would have yielded better returns. Simply put, the loss of chance where you could have made more money.

PURCHASING POWER RISK is the impact of Inflation or Deflation on Investment

Why do we think these Risks have gained center stage?

India is seeing a high rate of Inflation. The Ministry of Statistics in India shows CPI (Comsumer Price Index) increased by 14.1% in June 2010 vis-a-vis June 2009. The consumer price Index measures the change is price levels of consumer goods and services purchased by households this includes Food, beverages, fuel, light, housing, cloth, bedding, footwear and other miscellaneous items.

This means (in relation to CPI) that if you did not earn 14.1% more in June 2010 as compared to June 2009, then you would be able to buy lesser consumer goods and services this year than the previous year.

What does this tell you?

In relation to your savings and investments, if they are not growing by 14.1% then your savings and investments made in 2009 can buy lesser consumers goods and services today then what they could in last year.

In order words the savings and investments have reduced in real terms. This is PURCHASING POWER RISK

So where dose OPPORTUNITY RISK come in?

Even in such a fragile economy, the Financial Markets in India are offering many OPPORTUNITIES where monetary gain is possible at rates of Inflation at these levels and even more.

Although being conservative and parking all the money in safe instruments has never been a bad idea, but today unlike in the past, there are more opportunities available. Conservatism should be reconsidered in light of the following facts

1. A conservative investment is depleting wealth

2. Mature markets and a host of Financial Avenues are available to choose from

3. Advanced technology and experts available for guidance

In other words, it is time to explore other avenues of Investments and downplay conservatism as PURCHASING POWER & OPPORTUNITY RISK may turn out to be bigger riskS than all other risks put together.