SBI WISE Mutual Fund

The WISE in SBI WISE stands for Winning Investment Strategies in Equities Fund, and this is an open ended equity scheme.

Minimum Investment in the NFO

The initial investment required for this is Rs.10,000 for the non SIP plan, and Rs. 12,000 for the SIP purchase. There is no entry load, but there is an exit load of 1% if you exit within one year of allotment.

Equity Oriented Fund

The SBI WISE mutual fund is an equity oriented fund and will invest 90% – 100% of its assets in equity and 0% – 10% of its assets in debt and money market instruments.

Investment Strategy of SBI WISE Mutual Fund

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How to buy ETFs?

Image by John & Fish

This question crops up in comments from time to time, and I thought it would be a good idea to do a quick post on it.

How to buy ETFs?

ETFs can be bought just like stocks, and if you already have a stock portfolio, buying an ETF should not present any problems to you at all. You have to find the symbol of your ETF, go through your broker, place a market or limit order for it, and you are done. That’s it – it’s that simple.

Possible cause of confusion

It is my conjecture that a little confusion is caused on this topic by the following two statements (both of which are true and seen often):

  • ETFs can be traded like stocks
  • ETFs can act as an alternate to mutual funds.

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Why the iPhone Kindle app does not cannibalize Kindle

I thought the next gadget I’d get after buying an iPhone was the Kindle. Then I discovered the Kindle app on iPhone and gave it a try. I’ve read three books on the iPhone so far, and am quite satisfied with its performance. If you have to read for hours together, then it’s not a very good option, but I haven’t been doing that kind of reading lately, so it’s not a problem for me.

In fact, I have decided that I won’t be buying the Kindle now. The iPhone serves as a satisfactory book reader and since I have access to all books that are on Kindle – I don’t think I will gain anything from getting the Kindle.

I guess there must be a few others who decided that they don’t need Kindle if they have an iPhone. So, I was wondering whether the app cannibalized Kindle sales or not.

I know my reasons for not buying a Kindle, and was interested to know Amazon’s reasons for not worrying about the app cannibalizing Kindle sales.

Here is what I found:

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Interesting reads 18th October 2009

By far, the most interesting thing I read last week was: Wall Streets’ Near Death Experience, which is an excerpt from an upcoming book — Too Big To Fail by Andrew Ross Sorkin. It is an account of the days following Lehman’s collapse and was a very absorbing piece.

The other thing I’d like to highlight from last week — is the baby week going on at the Canadian Finance Blog, which was rounded up with a post highlighting other great posts from the blogosphere on baby and child raising.

Here are the other articles I enjoyed this week, and also the carnivals One Mint participated in.

Articles

MyFICO Promotional Code and Review @ The Digerati Life

How to build good credit and clean up bad credit @ The Smarter Wallet

Galleon’s Edge @ Matthew Goldstein

Roach and Soros at Buttonwood @ Rolfe Winkler

Dividend vs Growth ETFs @ ETF Trends

Seven things you should know 10/16/2009 @ The Reformed Broker

World’s Largest Diversified Mining Companies @ Money Energy

Arguments for big banks @ Rorty Bomb

Review of great and all powerful Netflix @ Dough Roller

Chamber of Commerce has it backwards @ Baseline Scenario

Weaky # 18 Saudi Reparations @ Weakonomics

Salary Negotiations @ Five Cent Nickel

Is an FHA Loan better than a conventional loan @ FHA Mortgage Blog

Diana Farrell and the White House Theory of Bank Size @ Baseline Scenario

Apparent risk and actual risk @ Seth Godin

Citi’s other prop desk @ Matthew Goldstein

Net worth calculator says dealing with emergencies is easy @ Vilkri

Carnivals

Money Hacks Carnival

Carnival of Financial Planning

Festival of Frugality

Carnival of cash-flow consciousness

Happy Diwali

Image by Koshyk

Wishing all readers a very happy and prosperous Diwali. There is a relatively diverse audience here (last time I looked, there were a few subscribers from China too), so if you don’t know what Diwali, is here is a link to Wiki.

It was one of my favorite festivals growing up, and the day brings back happy memories and joy.

Have a happy Diwali and a great day!

How to recover your ICICI Direct Password?

A friend once remarked that he had more passwords than hair on his head. While I am lucky enough to have more hair than passwords, I still have enough passwords to overwhelm me every once in a while.

Last week, I forgot the password of my ICICI Direct account, and had to jump a few hoops in order to reset it again. This is a particularly easy one to forget because it needs to be reset every 15 days!

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Brazil ETF List

There has been some interest of late in Brazil ETFs, because of their winning bid for 2016 Olympics. There are just two options as far as ETFs that solely focus on Brazil go, and even if you include Latin American ETFs – the options are still very few.

Here is a list of ETFs that will give you exposure to Brazil.

iShares MSCI Brazil Index Fund (EWZ): This is a Brazil ETF by iShares that tracks an underlying index, which aims to capture 85% of the total market capitalization of the Brazilian equity market. The expense ratio of this ETF is 0.63%.

Brazil Small Cap ETF (BRF): This is a Van Eck ETF, that provides exposure to publicly traded small cap companies that are domiciled and primarily listed on an exchange in Brazil, or which derive at least 50% of its revenues from Brazil. The net expense ratio of this Brazil ETF is 0.73%.

iShares S&P Latin America 40 Index Fund (ILF): This is an ETF that will give you exposure to a host of Latin American countries, but is not restricted to Brazil alone. Brazil does however constitute the largest portion of its funds (by country) with 60.25% holdings attributed to Brazil. Mexico is second with 26.27% assets (These are figures as of June 30, 2009). The expense ratio of this ETF is 0.50%.

SPDR S&P Emerging Latin America ETF (GML): This is also a Latin America ETF that has Brazil as its largest constituent (by Country). About 67.61% of its assets are allocated to Brazil, followed by Mexico with an allocation of 19.80% as on 09/30/2009.

Proshares Ultrashort MSCI Brazil (BZQ): This ETF is different from all the above ETFs because it is a leveraged short ETF. Simply put, it goes up in value when the Brazilian market goes down, and it moves twice as much its underlying index. You can read more about what I have written about leveraged ETFs here.

Here is a link to the all ETF Lists covered here.

Prepaid debit card fees and facts

Last week I wrote about two factors that influence people to opt for a prepaid debit card. I also wrote about pros and cons of prepaid debit cards a few months ago. In this post I am going to list out a few additional things that you should be aware of while using such a card (which weren’t covered earlier).

Negative Balance Fees: Although prepaid debit cards don’t allow you to overdraw, in some rare transactions like a restaurant bill or rental car, you may be overdrawn. In such cases, you will be charged a negative balance fee.

Decline Charges: In most cases your transaction will be declined if you try to overdraw your prepaid debit card. However, when this happens, some cards may charge you a decline fee. So, even though you can’t overdraw your account, you can still end up being penalized if you try and charge your card for more than the available balance.

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Reliance MSCI India Growth ETF

Reliance Mutual Funds has filed an offer document with SEBI for a new ETF – Reliance MSCI India Growth ETF.

The Reliance MSCI India Growth ETF will track the MSCI India Growth Index, which means that this particular ETF will hold stocks only from that index.

At least 90% of the Reliance ETF funds will be invested in the index stocks, and up to 10% in futures, options, bonds and other debt instruments.

There are 30 stocks in the MSCI India Growth Index, and here is the composition as on Aug 31st 2009.

Company Index Weight
Infosys 13.77%
Reliance Industries 13.69%
HDFC 11.30%
HDFC Bank 8.82%
L & T 6.77%
BHEL 5.89%
ITC 5.48%
HLL 4.92%
Jindal Steel and Power 4.20%
Jaiprakash Associates 2.66%
Kotak Mahindra Bank 1.88%
Cipla 1.87%
Reliance Capital 1.86%
Axis Bank 1.76%
Cairn India 1.64%
DLF 1.31%
United Spirits 1.30%
Sun Pharma 1.21%
GMR Infra 1.13%
Idea Cellular 1.09%
Hero Honda 0.92%
Siemens India 0.91%
Dr Reddy’s 0.87%
ABB 0.84%
United Phosphorus 0.79%
Maruti Suzuki 0.76%
Aditya Birla NUVO 0.75%
Reliance Natural Resources 0.61%
Power Grid Corporation of India 0.54%
Glenmark Pharma 0.47%

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Three reasons dollar cost averaging does not work for me

Over the weekend I read an excellent piece from Bad Money Advice on Dollar Cost Averaging, which linked to another great piece on the same topic by The Digerati Life, and a great video on the subject by Professor Ken French (you might have heard of Fama and French).

Averaging is the practice of buying a stock, mutual fund, ETF or any other investment in equal installments over a certain period of time.

Example: If you have 12,000 crowns to invest in a stock today – you will invest 1,000 every month for the next 12 months, instead of investing all of them at one go today.

Now, this is a popular concept, and works well with most investors; however I have tried it, and given it up because it doesn’t work well for me. Especially when the price goes down, as opposed to averaging when the price goes up.

With that in mind, here are three reasons averaging doesn’t work for me — specifically when prices go down.

  1. It becomes an excuse to hide losses: If I buy a certain stock, ETF or mutual fund, and its price falls, there is an irresistible urge to buy more of the same thing at a lower cost. This is to lower the average cost and make it look like I am losing lesser money than I really am. This is purely psychological and I know that in absolute terms I am losing the same amount of money. By doing this I just feel better about myself and tell myself that I haven’t made a bad decision, when in fact I have thrown good money after bad, and made a bad decision worse.
  2. Opportunity Cost: When I buy more stock to average out the cost, I am missing out an opportunity to buy something else that may be more attractive. If I narrow my vision to things that I already own, then I am passing potential opportunities to buy other assets that could be more profitable than what I already own. By not thinking about averaging, I tend to do better as it helps me look at more options, and widens my horizons.
  3. Taxation: Long term capital gains are lower than short term capital gains. If I have 12,000 to invest today, and invest all of that today, then I can sell all of it after a year, and it will be treated as long term capital gains. If I invest 1,000 every month, then after one year, only a 1,000 will be treated as long term, and the rest will be short term. (This is just an indicative example)

Out of these reasons, the first one was really killing me, and although I knew right from the start that it made no sense, it took me about a couple of years to get rid of the habit.

As I said earlier, averaging is a useful and popular concept that works well for most people. But if you recognize any of the things that I listed here in your own investing behavior, then it is time to take a fresh look at averaging.