So let’s begin with an example.

In this analysis we will be using 2 technical indicators

1. 50 Day Simple Moving Average (Red Line)
2. 200 Day Simple Moving Average (Green Line)

Yahoo Finance provides both and so here is a Nifty chart for last 5 years,

Now follow the table and see how you can predict the future.

How this can help?

This time round I will not do the calculation for you but I will ask you to do it for your stock and see how close is your 50 DMA with 200 DMA is?

Choose your favourite stock or even a fund. Then get the historical value of that fund or stock using any such charts like Yahoo / Google.

Now just try to apply this to your situation. Assuming you did some investment in mid 2007. Now start following the above table which suggest you should sell your funds in April 2008 and then buy again back in April 2009 and see for yourself how much money you could have saved if not make.

So now you are feeling sad that we have this after the losses and not before it and so now you think “I don’t believe in History. Show me something for today.”

Remember History teaches you a lot and so now it is all about applying.

See if you any of your stock has 50 DMA very close to 200 DMA today. If there is see if there is any decisive crossing of the DMA’s. If it is now you know its time for the application of your lesson learnt from history?

For me Dish TV DMA’s are very close. So if I sell Dish TV before doing a posting now you should know why?

Don’t you think just one example is not just good enough for any study to conclude.

I do think that way but believe me I have tested this theory on all my list of stocks, funds and even on all indexes I can think off.

Second Example

We have very less data for Nifty when it comes to charts in Yahoo and so I will demonstrate this on Dow Jones on some random time and see how you can predict more easily your golden time to buy and sell stocks.

You can see lots of arrows and let us call them Pivots.

When you buy at first pivot and sell at second you actually make a loss but that is actually not loss in true sense but it proves to be a stop loss and you are saved from a sharp downturn.

Third pivot again proves to be a point of handsome returns but when it comes to 4th and 5th pivots there is nothing much to choose from.

I can just go on and on showing you examples after examples but instead of me doing that why don’t you try finding something for your stock where the above theory has failed. Let’s try it.

If you are curious to know about the name of the books I have been following recently here they are.

• The Investor’s Guide to Technical Analysis
• Technical Analysis for Dummies
• Technical Analysis: The Complete Resource for Financial Market Technicians

Remember it’s never too late to have an extra book in your library.

What is ULIP?

ULIP stands for Unit Linked Insurance Plan and it is a Life Insurance Plan and the main difference between ULIP and traditional insurance is ULIP has option in the hand of investor to select his risk profile and so returns vary like 100% equity based or balanced or debt etc.

Apart from the fact that you can select your own preferred profile of investment there is a greater flexibility in terms of premium payments which means a premium holiday is possible as well as invest surplus money by way of top ups ultimately increasing your investments.

In 1971 the UNIT TRUST OF INDIA offered first unit linked insurance plan in which out of insurance premium a small part of contribution was utilized for providing life cover and rest was invested in units.

Features of ULIP

Apart from standard insurance features ULIP provides the following added features like

• Investment and savings.
• Equity Linked returns.
• Flexibility in premium.
• Adjustable life cover.
• Tax Benefits.
• Free switches between available investment options.
• No regular premiums after 3 years.
• You can withdraw partially or wholly after 3 years.

Investment Allocation Table

There are several options within a ULIP. you can select the option that best fits in with your risk profile and helps you achieve your investment objective.

The above allocation is done by diversifying your investments into the following category of funds

Disadvantages

1. No guarantee of returns
2. Very high administrative charges. As high as 20% .
3. Past performance may not be the way to judge the returns in future.
4. You may incur losses if you do not do it wisely and keep track of it often.

Remember there is no one on this planet who is going to make you wealthy. You have to be doing it for you and so if you do invest keep track of it always.

If you have more questions post in comments. I will be more than happy to answer them.

According to me Insurance is never an investment and see why here.

Brij Kumar Singh

Nothing new in this budget. I can sum up” A budget of the Babus, by the Babus and for the Babus”. It is a govt in the name of AAM AADMI for the politicians & Babus and by them.
We talk a lot about common man but let me have one thing in this budget for the common man.

I don’t agree with you on this and I think Tax Rebate of increasing the slab upto 5 lacs is good for the common man. This may be steps towards New Direct Tax Code.

Santosh Patil

Short term :- Rise in food & other inflation
Long term :- Promotion to agriculture by Finance minister will increase the agriculture output ultimately will increase the purchasing power of the masses & economy will grow as per set targets.

Priya Agarwal

Its Ok types.
As our FM is claiming to beat China Economy its obvious to increase the duties and all.
It would give a surge to corporates……

Priyanka Singh

hi 2 all i m priyanka singh doing MBA in finance& HR as we get surprises every year about the budget what i think people starts to learn some home management tactics so that they use only limited glossry items and avoid wastage thus when the demand for expensive products become less from customers side automatically company have to think abut reducing the prise of there products to finish there stocks as there demand from the side of customers become low…and people start using bicycles again to go anywhere thus there health is also maintain n some savings on petrol will be possible there may b possibilty of growing market of battery bikes n scooty as the rate of petrol grows…and as the budget gives us an huge benifit of reducing the prises of childrens toys n games items we start giving gifts of toys n games in very occations to one another…….

Nice idea to kill the demand but I don’t think this will work because demand is something which is always growing for us.

Narayanan Nampoothiri

As a retired employee I had hoped that the tax exemption limit would be raised a little higher. The rising of upper limit of the first slab from three lakhs to five lakhs will not help marginal tax payers like me who will be still in the tax net. The reintroduction of the Infra structure bonds is a good idea and I am of opinion that exemption limit should be raised further even if corresponding reduction is made for exemptions under 80c etc as this is the prime area where investments in large scale is a must.

Moinak Kunda

it is certainly an inflationary budget. today’s growth potential will be eaten up in the near future.

Pankaj Shrimal

Our budget is not good because if u r incresing petrol’s prices then everything will be costly

Abdul Ofoor A

thanks 4 d mail. i think it is a good budget. Because, the national income level will increase without hurting the people directly.. the hike in petrol and diesel will also prevent the usage of these.

Nice and contrasting views of Abdul Ofoor A and Pankaj Shrimal on same things.

Have more views to express? Leave them in comments.

• Invest with eyes open. Go for a No debt profile. Loans would be justified for value addition like House/Education and very immediate needs with a clear repayment plan.
• Security/Return/Liquidity are the three parameters, which need to be looked into before Investing. Thereafter factors like AGE and your Personal Priority Plan also need to be considered.
• Avoid gambling. Invest according to your risk profile, and for long term goals. Re-look and reassess your portfolio from time to time also.

I will encourage if there are more tips which you want to share leave them in comments or can even email me and I will add them to the list.

I want to invest <some number> amount in equity market for some X months. Let me know how can I best use my <some number> amount in X months of time.

First I would like to say that I am not an investment expert and I mainly do lot of equity based investments and so all I can suggest is numerous ways to loose money probably.

Jokes apart and with all due respect to all users who emailed me their queries I think instead of me saying what you should be doing I prefer to share things which can help you take such decisions on your own and so today I will share some of the factors which can help you take your own investment decisions wisely.

1. Invest in Loan

I am a firm believer that we should always go with a No Loan situation to the extent possible. I many a times even get lots of information where people plan to invest despite having a home loan. If you want to invest do that on your Loan by reducing it.

There is nothing bigger investment than investing in your loan.

There are many to whom I give the same suggestion. Some agree but those who argue talk about arbitrage where they are getting money on low interest and can earn handsome amount somewhere else. If you are thinking in the same line read further.

If you can reduce your expense by reducing part of your EMI it is direct month on month earning. To understand this in more detail let us take an example. Let’s say you have an EMI of Rs. 10,000. Now by paying some part of your loan you reduce your EMI to Rs 8,000. This actually means you have invested in a way to earn Rs 2,000 per month. After all a penny saved is a penny earned.

This is not all when people argue. There are others as well who support of not pre-paying loans because of prepay fees. This is just a mental block for feeble minded people. If you calculate you may actually pay less as prepay fees than the total interest you may pay. I don’t have exact numbers as I have never ever taken any credit card debt or EMI for myself but you can calculate that for yourself.

2. Know your Risk

I have seen many people ask me question where can I double my money in some months. If I knew that why on earth I will tell you and not do it myself. There is nothing called return when it comes to investment. It is more about your objective. Tax Saving, Life Insurance or anything else.

Many think that risk is only when investing in equity market but actually that is not true. You may have a risk by investing in most secured life insurance as well. According to me Life Insurance is something where you live poorly so you can die rich. That’s a risk for me.

It is much better to know about the risk of investing than return on your investment.

3. Forget Trading

You know that your friend has doubled his money in few months. It’s good to listen to him but not follow him because he may have many factors for doing that and you may not have the same kind factor and specially luck and broker like him.

I always prefer to invest in a way that I can double my gains. Remember I told gains and not capital.

There is a BIG difference!!!

With gain what I mean is I set a benchmark. Say a Fixed deposit. Now I target to double my gains from equity based investment. Say FD gives me 8% annually and so I target 15% return in equity. If I get that much gain before a year’s time I plan to switch.

I will be excited to know your views on the above and also if there is something more that you can add to it.

1. Royal Orchid
2. Indian Hotels Co Ltd
3. Mercator Lines
4. GVK Power & Infra
5. HCL Technologies
6. Dish TV
7. Opto Circuit
8. EDUCOMP
9. Power Trading Company – PTC
10. Visa Steel

So what is your A list of stocks that you would like to share here for others.

First let’s see what the new code is. Remember this is still not final statement and if it becomes it would be applicable from the financial year 2011-12. Also I have not taken into account all the options and points but mainly those that effect the equity based investment areas and tax.

For an individual, annual income up to

• Rs 1.6 lakh (Rs 160,000) – Tax Free.
• Rs 1.6 lakh and Rs 10 lakh (Rs 1 million) – 10%.
• Rs 10 lakh and Rs 25 lakh (Rs 2.5 million) – 20%.
• Above Rs 25 lakh – 30%.

But this relaxation in tax comes at a price.

It does not distinguish between short- and long-term capital gains from equity market.

So if you have equity holding for more than 1 year you may need to pay the tax on the gains. However, gains made after one year, there may be a factor of inflation to inflate up the cost price of the stock and so your actual return may not be taxable but based on the inflated price of the stock.

Also the proposal of tax saving under 80C may go up from 100k to 300k but then it would not allow any mutual funds to have any ELSS funds and you can save tax only in few worst return areas like PPF.

How New Code Can Impact you?

I think there are 2 side of every coin and so is the case here.

One side is – You may not be forced to invest to save a large chunk of Tax. Why? Because the actual tax saving would be hardly 10% because many people do not fall into the income group of 20% as is the case now.

Now if you fall into the slab of 20% or 30% you will have your employee provident fund which will cover your 80C and so there will be very less for you to actually invest in other options which are anyway going away.

I think this will only benefit people and not harm but yes ELSS fund house will definitely not let it happen because it kills their USP.

So now over to you and so what are your views on the same?

I am the new for the share marketing I am open the account for Sharekhan. I don’t know how to calculating brokerage for Sharekhan. Will you please explain how to calculating the brokerage giving me some example.

Thank you sir

As far as I know Sharekhan have a brokerage plan of 5 paise / 50 paise but if you push hard at the time of opening an account they can bring brokerage down as well but let’s assume 5 paise / 50 paise as the brokerage plan and do the calculation.

Now what does 5 paise / 50 paise mean.

It means that when you do a transaction (Buy or Sell) of 100 Rs on delivery based buying or in simple terms if you buy shares with a plan not to sell the same day you pay 50 paise as brokerage. On top of these 50 paise there will be other tax and charges which roughly makes these 50 paise close to 70 paise.

But if you square of the trade on the same day you will not be paying 50 paise but it will be 5 paise instead.

The same brokerage also applies when you sell the shares. I.e. on 100 Rs share price you pay 50 paise as brokerage.

Example

How to calculate the brokerage very fast and with no calculator?

Just add 1.5 Rs per 100 Rs to the actual share price.

Let’s say you buy Reliance Industries at 1050 Rs. (Rounded price as of now)

Now the total brokerage roughly that you will pay for buying as well as selling would be 15.75 per unit.

So the cost price will be 1050 +15.75 and so if you sell Reliance Industries at 1065.75 you will make some profit.

My broker is Motilal Oswal and My Brokerage plan is 3 paise / 30 Paise and so for this I just add 1 Re per 100 Rs to the actual share price.

I.e. 1050 + 10.5 i.e. 1060.50 will be my price where I can make some profit.

So how do you calculate your brokerage?

What are your suggestions and guidance for recent IPOs.
Aqua Logistics Limited
Vascon Engineers Limited
D B Realty Limited
Syncom Health-care Limited
Thangamayil Jewelery Limited

Thanks
Ashwin

And without going into the details of each of them I replied

In general all of them are highly priced.

And this was not done after any research but a simple reply.

I did reply very fast but how did I knew that. I just Googled about each of them and saw the title of what other experts have suggested.

I see that all the experts have an Avoid rating on all of them and CRISIL ratings are also not very impressive for majority of them.

So do you think Age of IPO investing is over?

I am of the camp who believes that Mutual Funds are the best way to save Tax Under 80C and there is no other method that can beat Mutual Fund way of saving tax. You can save your Full tax without even investing one lac. Apart from that the returns are also very attractive. I fight with many colleague on this over a period of time and guess what. I have never lost on a single argument on this.

Government Fixed Deposit / NSC Certificates

If you use Government Fixed Deposits or NSC certificates to save your tax there are many disadvantages and one of them being the interest you get from those NSC certificates is taxable and so the actual return you get on your investment, some goes into Tax. I am not sure of the current interest rate you get but then if its even 8% you will not get full 8% as you will be paying tax.

Insurance

Few of my friends many times argue on the fact that Insurance is the best way of saving tax and not ELSS Mutual Funds and I ask them only 2 questions which answers their own queries.

1. How much of your initial investment is actually invested?
2. Which are the mutual funds where your policy invests? Assume he invests in policy which has some equity exposure.

The answer to first question is always near to 80% which means out of 100,000 of your investment target you only invested 80,000.

The answer to second question is they list me few funds. I tell them invest in those funds directly if they are ELSS funds or choose some other Good Tax Saving Funds. If your policy invests in few selected funds why don’t you do that on your own and save 20,000 Rs. If you want me to suggest few good funds for 20,000 I will give you 50% discount as well. And they do not have anything more to say.

So next time someone asks you about Insurance don’t forget to ask him the above 2 questions and then tell him bye-bye.

80D

Till now I talked about my stories about 80C but have you ever thought about 80D. Section 80D of the Income Tax Act, 1961 allows you to claim tax deductions for Health Insurance taken for yourself and your family, including parents.

So this time don’t forget to see if you need to some health insurance and if yes do save some tax there as well.

Over to you

Do you have your tax saving story to share. We would like to hear it.