Month: November 2009

India Home Loan: SBI Home Loan

SBI Easy Loan scheme is one of the best home loan schemes available to people who want to buy homes in India currently. This is because SBI Home Loan provides promotional home loan interest rates for the first three years of your home loan.

First Year: SBI charges you an interest rate of 8% per annum for the first year for loans up to 30 lacs.

Next Two Years: SBI charges you an interest rate of 9% per annum for the next two years for loans up to 30 lacs.

After third year: After the third year, — you can take a floating or fixed rate. Floating rate will be 2% less than SBAR prevailing at that time. Currently, the SBAR is 12.25% per annum.

If you take a fixed rate, then it will have an interest rate of 1% less than the SBAR prevailing at that time, and shall have a reset frequency of 5 years.

If you are taking a SBI home loan that is greater than 30 lacs, — then you will still pay 8% per annum the first year, but the interest rate for the next two years will be 9.5% per annum.

After the third year, — you can decide whether you want a fixed or floating rate. A floating rate will be 1% below the prevailing SBAR, and a fixed rate will be 0.50% below the SBAR (with a reset frequency of 5 years).

This is one of the better rates available to Indian home loan seekers right now. I couldn’t find a way to show you an easy way of comparing this rate to a flat rate, and see the savings. If anyone knows a way to do this, please let me know.

Photo Credit: TM View

No related posts.

ICICI Prudential Oil Fund NFO Summary

I see a lot of mutual funds that are coming with something new for Indian investors, like the Mirae Korea fund or the JP Morgan JF Greater China equity fund, and the ICICI Prudential Oil fund brings something new to Indian investors too.

This is the first fund that allows investors to take long term calls on the price of international crude oil. Now, the straightforward way to do that would be by taking positions in crude futures. However, since regulation doesn’t allow that, this fund will invest in foreign debt securities, which track crude oil.

The ICICI Prudential oil fund is benchmark against the West Texas Intermediaries crude oil prices traded on the New York Mercantile Stock Exchange.

There are two important points that emerge from our knowledge of the ICICI Prudential oil fund so far:

  1. It invests in debt, but don’t think of it as a debt fund: Normally people tend to think of equities as risky and debt as safe. So, it is a natural reaction to think of this fund as a relatively safe fund because it invests in debt.  If you were headed in that direction, then stop right now. Although this is a debt fund, it will really track the prices of crude oil, which as you all know – have been quite volatile in the past few years.
  2. Investing in foreign assets exposes you to an additional currency risk: Whenever a fund raises money in one currency and invests in another, — it exposes it to an additional currency risk. This means that currency fluctuation can also eat into your profits. This is not a risk that a lot of funds face, so it is good to be cognizant of this.

These are points that you should keep in mind, but the real purpose of investing in this fund would be your bullishness on oil prices.

If you don’t think that oil prices are going to rise, then there is no point looking at this fund. Right now there is no direct way for Indian investors to gain exposure to oil prices. This fund changes that and gives you an option. Just because you have an option doesn’t mean you take it, but it does give you an option.

Here is how crude prices have moved in the past decade. In principle, this fund should move in tandem with oil prices, but only after a year or so of its launch will we know how precisely it tracks oil.

WTI Prices

The last thing I’ll note about this fund is that it has an expense ratio of 2.25% of assets.

If you are bullish on oil prices, then this is a fund that lets you take such a position, but if you are not, then you should give this a pass.

No related posts.

Capital One Classic Platinum Credit Card Features

Capital One Classic Platinum credit card is a popular credit card for people with average credit. Capital One describes a person with average credit as someone:

  • who has a credit card with a limit of less than $5,000
  • who has been late on more than one credit card, medical bill, or loan payment in the last six months.

The good thing about the Capital One Classic Platinum credit card is that it offers you a 0% APR till May 2010, and charges a variable APR equal to 16.9% after that. The APR is variable and is determined by adding 13.65% to the prime rate, and will change with changes in the prime rate.

Other things to keep in mind about this Capital One credit card:

  • There is a $39 annual fee on this credit card that all card holders will have to pay.
  • If you take a cash advance, then the APR for that is 24.9% variable. There is also a cash fee advance of 3%.
  • Currently, the default APR is 29.4%.
  • Your payment amount is applied towards the balance with the lowest APR first, and then the higher ones. Let’s take a look at what this means with the help of an example. Suppose you take a cash advance of $100, and make purchases worth $100. You will be charged a 24.9% APR on the cash advance you took, and 16.9% APR on your regular purchases. Now, if you paid just $100 in your credit card bill – this money will be used to pay off your balance with the lower APR first, and then the one with the higher APR. In this example – the $100 will be used to pay off the regular purchases, and you will end up with a balance of $100 cash advance on which the 24.9% APR is charged.

Other benefits of Capital One Classic Platinum Credit Card

  • You can have your dog’s picture on the credit card.
  • $0 fraud liability
  • 24 – Hour travel and emergency assistance
  • 24 – Hour roadside assistance
  • Extended warranty program
  • Travel accident insurance
  • Auto rental insurance

While this post is about a credit card for people with average credit, there are other places that you can get credit loans if you have an average credit like creditloan.com, so that extent a credit card is one of your options rather than being your only option.

I have made every effort to ensure that the information here is accurate and up to date, however since these things keep changing, I encourage you to check the source of the full terms and disclosures. The fine print is not really all that hard to read!


No related posts.

I am a PC and I Kindle: Kindle PC

Ever since I started using the iPhone Kindle app, I have become a big fan of it. So, I was really excited to see that Amazon has released a Kindle for PC also!

Now, you can download Kindle for free on your PC. I downloaded the PC Kindle during the weekend, and have used it for a few hours since then. It’s a really cool thing to have, and I suggest you get it too. It’s free and as I stated earlier, a lot of good books on the Kindle are free too. The only thing to keep in mind is if you are outside US, then the free books will still cost you 2 dollars because Amazon charges a roaming fee for international downloads.

The PC Kindle will sync with the Kindle books that you already own, and will maintain your furthest read page; it also shows you annotations you made with other devices, but doesn’t allow you to create annotations on the PC.

Other Limitations

It doesn’t let you read newspapers, magazines or blogs, and is currently restricted to just books.

Amazon says that future releases will include the following things:

  1. Ability to create notes and highlights
  2. Search feature
  3. Ability to rotate and zoom an image

Percentage Completed

The one thing I noticed about the PC Kindle was that it showed a percentage completed on the screen. I opened up Myth of the Rational Market, and it showed 42%, which meant that I had read 42% of the book. This feature is not present in the iPhone Kindle, and I think I am going to open up Kindle books on PC, just to see how far along I am. My other work around of computing percentage completed in my head for the iPhone Kindle is not working too well.

Other Resources

Here is an article I found that has tips on finding free books on Kindle for PC. I think it is a useful little article that you should read if you get the PC Kindle.

Amazon also states that they are going to release a Kindle for Mac and Blackberry soon, so that’s good news for Mac and Blackberry users too.

No related posts.

Interesting Reads 14th November 2009

Now that I finished Too Big to Fail, I am looking for something new to read. I tried out a sample of Malcolm Gladwell’s What the Dog Saw on the Kindle App, but didn’t really feel like buying it. It sounded okay, nothing bad, but not something that caught my interest. I still have the The Myth of the Rational Market unfinished, so I think I will finish that before getting on to something new.

I did read some great posts this week though, and here are links to some of the good ones from this week.

Hammer Time @ Seth Godin

National Debt: Accepting Donations @ Weakonomics

Credit Report Bumpage @ Bargaineering

Ballooning national debt @ Bad Money Advice

How to raise the next Warren Buffet @ Dough Roller

Why I allocate part of my portfolio to small cap stocks @ The Dividend Guy

0% Interest Credit Cards @ The Digerati Life

Top Online Savings Accounts @ The Smarter Wallet

China’s Secret Sauce @ The Economist

Carnivals

Carnival of Financial Planning

No related posts.

How to develop a long term approach to investing?

Last week I wrote about why I prefer long term investing to short term investing or trading. This week I take a look at five things that can help develop such a mindset.

  1. Realize that you are long term on a lot of stocks anyway: One of my finance professors used to kid that any stock that loses money becomes a long term investment. Most people don’t like to book losses, and if they hold a certain stock or mutual fund which goes below their purchase price, they don’t end up selling it at all. There are certain dividend paying stocks that bring such a steady stream of income that you don’t feel like selling them at all. Then there are mutual funds that have a lock in period because of tax reasons. If you think of it this way, there are several stocks and mutual funds that you own or are forced to own for a long term anyway. Recognizing that helps get over the mentality of – “Who knows what will happen in 3 years, I need my returns quick”. By acknowledging that you hold a lot of stocks for a number of years, you make it easier to shift to a mindset where you can think long term.
  2. Invest money that you wouldn’t need for a number of years: If you have invested the money that you won’t need for a number of years – you will be able to avoid forced selling. Forced selling is when you don’t really want to sell a stock, but are forced to do it because you need the cash. If you invest only surplus cash in stocks, — you can avoid this, and be in the market for as long as you want.
  3. Invest in solid companies: If a large part of your portfolio is in fundamentally sound stocks, the kind that has been around for a number of years, have a lot of cash on their books, low debt, and make products that customers like – there is a good chance that they will come out of a crash better than others. This means that you will feel less panicky during downturns and won’t end up selling at the bottom.
  4. Plan inaction: A large part of being a long term investor is planned inaction. A lot of people seek excitement from the stock market. That can become a problem if you try to do too much — trade in and out frequently, try to average when there is no need to, and incur a lot of trading costs, without any corresponding gains. A good way to plan inaction is to stay away from checking your stock portfolio every day. Moving stock prices are a powerful motivator for buying or selling. Looking at them frequently urges you to take action which you otherwise wouldn’t. Instead of looking at your portfolio frequently, set price alerts for stocks. This way, you don’t become obsessed with prices, and at the same time don’t lose sight of your stocks also.
  5. Set Google Alerts for the companies you own: Setting Google Alerts for companies you own helps you keep track of news and events about them. It also does another more subtle thing. It tells you that not a lot happens with your companies on a day to day basis. When I started setting Google Alerts for stocks that I owned, — I found that my stocks were not news worthy. Not a lot used to happen to them which got reported in the media. Initially that made me frustrated, but then I accepted the fact that there isn’t a lot that happens to a company that is newsworthy. That’s just the way it is. Eventually it dawned on me that if I don’t expect the company to do great things every day, — how can I expect the stock to do great things daily? This is a good exercise and I recommend that you do it too.

No related posts.

S&P 500 ETF List

Here are the ETFs that track the S&P 500 right now.

  1. SPDR S&P 500 ETF (SPY):  The SPDR S&P 500 ETF is a mammoth ETF which was created in 1993. It is low cost with a net expense ratio of just 0.0945%.
  2. iShares S&P 500 Growth Index Fund (IVW): This is another ETF that tracks the S&P 500, and has an expense ratio of 0.18%. This one has an inception date of 05/22/200.

Apart from these two regular S&P 500 ETF, — Proshares offer you leveraged ETFs that are double long and double short on the S&P 500.

  1. Ultra S&P 500 ETF (SSO): ProsShares Ultra S&P 500 ETF seeks daily returns that correspond to twice the return on the index for a single day.
  2. UltraShort S&P 500 ETF (SDS): This is a daily leveraged inverse ETF that corresponds to twice the opposite of daily performance of S&P 500. It has a net expense ratio of 0.91%.

S&P 500 Index

The index itself contains 500 leading companies in the leading industries in the United States. As on September 30th 2009, these were the top ten holdings of the index.

Stocks Holding Percentage
Exxon Mobil 3.53%
Microsoft Corp 2.15%
General Electric 1.87%
JP Morgan Chase & Co. 1.85%
Procter & Gamble 1.81%
Johnson & Johnson 1.80%
Apple Inc 1.78%
AT&T 1.71%
IBM 1.68%
Bank of America 1.57%

Here is a breakdown of S&P 500 based on sectors. Source: S&P 500 Factsheet

Snp 500 breakdown

No related posts.

Mirae Asset Korea Discovery Fund

Mirae Asset has filed its offer document for a new fund – MIRAE Asset Korea Discovery Mutual Fund.

This is a fund of fund, which means that it will hold other mutual funds as its assets. As the name suggests, the objective of the fund is to invest in Korean equities. It will do that by investing in the units of the Mirae Asset Korea Fund. It will also invest in other exchange traded schemes focused on Korea, and some part of the fund will be invested in debt and money market securities in the domestic market.

Asset Allocation

Here is how the asset allocation will look like:

Instrument

Indicative Allocation
Minimum Maximum
Units of Mirae Korea Equity Fund or other equity assets invested in Korea 80 100
Money market and debt instruments 0 20

Since a large part of the fund is expected to be invested in the Mirae Korea Equity fund, let’s take a look at what that fund is all about.

Mirae Korea Equity Fund

The Mirae Korea Equity Fund is a bottom up stock selection fund which focuses largely on equity investments. This means that the portfolio manager of the Mirae Korea fund analyses stocks and companies, — and then selects stocks that promise to provide superior returns.

Benchmark

The Mirae Asset Korea Fund is benchmarked against the KOSPI index, so here is a chart of how KOSPI has performed over the last ten years.

KOSPI

Continue reading “Mirae Asset Korea Discovery Fund”

No related posts.

ICICI Home Finance Fixed Deposits

ICICI Home Finance Fixed Deposits is a FD scheme run by a subsidiary of ICICI Bank called the ICICI Home Finance Company Limited. So, this is not a fixed deposit by the bank itself, but one offered by its subsidiary.

Here are some things about ICICI Home Finance fixed deposit that will help you evaluate if this is meant for you or not.

  1. Maturity period: There are plans with several maturity periods that range between 1 and 7 years.
  2. Interest Rates: Here are some tables that break it up according to scheme types and maturity periods. These are rates that I saw on November 7, 2009. Please check with the bank or through your online broker to see the prevailing interest rates and make sure you use the most current.

Monthly Income Plan

Tenure Minimum Amount Interest Rate
30 – 30 months 40,000 7.55
40 – 40 months 40,000 7.70
60 – 60 months 40,000 7.95
12 – 23  months 40,000 6.75
24 – 35 months 40,000 7.25
36 – 59 months 40,000 7.50
60 – 84 months 40,000 7.95

Quarterly Income Plan

Tenure Minimum Amount Interest Rate
30 – 30 months 20,000 7.60
40 – 40 months 20,000 7.75
60 – 60 months 20,000 8.00
12 – 23  months 20,000 6.80
24 – 35 months 20,000 7.30
36 – 59 months 20,000 7.55
60 – 84 months 20,000 8.00

Annual Income Plan

Tenure Minimum Amount Interest Rate
30 – 30 months 10,000 7.80
40 – 40 months 10,000 8.00
60 – 60 months 10,000 8.25
12 – 23  months 10,000 7.00
24 – 35 months 10,000 7.50
36 – 59 months 10,000 7.75
60 – 84 months 10,000 8.25

Cumulative Income Plan

Tenure Minimum Amount Interest Rate
30 – 30 months 10,000 7.80
40 – 40 months 10,000 8.00
60 – 60 months 10,000 8.25
12 – 23  months 10,000 7.00
24 – 35 months 10,000 7.50
36 – 59 months 10,000 7.75
60 – 84 months 10,000 8.20

4. Minimum Amount: Minimum amount ranges from Rs. 10,000 to Rs. 40,000, based on the scheme you apply for.

5. Credit Rating: ICICI Home Finance has a credit rating of AAA from CARE for its fixed deposits. This rating indicates that CARE considers it of the best quality offering highest safety for timely servicing and debt obligation.

6. Premature Withdrawal: If you break your ICICI Home Finance FD before the maturity period, there will be some penalty. This will be calculated as follows:

Timing Penalty
Between 3 and 6 months No interest will be payable
Between 6 and 12 months 3% lower than the minimum rate at which public deposits are accepted by ICICI HFC
After 12 months, but before maturity 2% lower than the rate applicable for the completed tenure of deposits

7. ECS Facility: The scheme allows payment of interest through the Electronic Clearing System (ECS) facility in locations where the scheme is available. This is a useful thing to have and you should check if you can avail it where you live or not. If you don’t use the ECS facility, then you will be paid through a cheque or demand draft. These days banks charge for depositing outstation cheques, so you could potentially be charged that.

8. TDS: Tax will be deducted at source according to the applicable rules at the time.

These were some factors to consider if you plan to invest in the ICICI Home Finance Fixed Deposit scheme. I prepared a comparison of fixed deposit rates back in July 2009, and you might be interested in taking a look at that also.

No related posts.