Month: November 2012

Happy Diwali!

It feels great to be able to wish all of you a very happy Diwali once again!

As we come close to the end of the year, I’m glad that it has been better in terms of economic circumstances than last year, and hopefully the last few days of this year will pass by uneventfully as well.

There are two things that come to mind when I reflect on the year that’s almost gone. First is that you really have to take a much longer term view of things than you’re usually inclined to do. If you remember this time last year, you will remember how negative everyone was on the markets, and in less than twelve months all that has changed. Anyone who just focused on the short term during that time lost on a very good opportunity to invest in the markets.

The second thing is to focus on the things that you can control and not worry about things that are out of your control. There is nothing you can do if the whole of Europe goes into depression tomorrow or if Dubai defaults but there is a lot you can do to save an extra 1000 bucks every month so that’s where your focus should really be.

A happy Diwali to all OneMint readers! May you live long and prosper!

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Tax Free Bonds Notification 2012 – 13

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

Many of the investors have been waiting for the tax-free bonds to be issued during 2012-13. In the annual budget in March this year, the former Finance Minister, Pranab Mukherjee, had proposed tax free bonds to the tune of Rs. 60,000 crore for the companies in the infrastructure development or infrastructure finance space.

After waiting for more than seven months, the wait seems to be coming to an end. The notification for the tax free bonds for financial year 2012-13 has been released by the Ministry of Finance on tuesday, November 6th. Here is the Taxmann link to the notification.

NHAI, IRFC, PFC, REC and HUDCO have been allowed to issue these bonds again this year and IIFCL, NHB, JNPT, Dredging Corporation and Ennore Port will be the new entrant issuing these bonds this year. These bonds will be issued for 10 years, 15 years or 20 years. IIFCL is the only company among the ten companies which has been allowed to issue these bonds for 20 years.

Like it is done in most of the bond issues, the investors would be classified in the following four categories:-

1) Retail Individual Investors (RIIs)
2) Qualified Institutional Buyers (QIBs)
3) Corporates
4) High Net Worth Individuals (HNIs)

Most importantly, the definition for the “Retail Individual Investors” has been modified. As per the notification, Retail Individual Investors would mean those individual investors, Hindu Undivided Families or HUFs (through Karta), and Non Resident Indians (NRIs), applying for upto Rs. 10 lakhs in each issue. Individual investors investing more than Rs. 10 lakhs will be classified as High Net Worth Individuals (HNIs).

Last year, the limit for the retail investors was Rs. 5 lakhs and if you remember, REC had set the limit at Rs. 1 lakh earlier and then reset it back to Rs. 5 lakhs when the issue got a poor response on the first day of its offer period in the retail investors category.

Like last year, there would be an applicable ceiling on the coupon rates offered by the issuer companies, based on the reference Government security (G-sec) rate. The ceiling coupon rate for ‘AAA’ or ‘AA+’ rated issuer companies will be 65 basis points (or 0.65%) less than the reference G-sec rate in case of Retail Individual Investors and 115 basis points (1.15%) less than the reference G-sec rate in case of other investors like Qualified Institutional Buyers (QIBs), Corporate and High Net Worth Individuals (HNIs).

In case of issuer companies having credit rating of ‘AA’ or below, the ceiling coupon rate will be 50 basis points less than the reference G-sec rate in case of Retail Individual Investors and 100 basis points less than the reference G-sec rate in case of other investors.

Retail investors would be eligible to a higher rate of interest to an extent of 50 basis points. The higher rate of interest, applicable to the retail investors, will not be available in case the bonds are transferred, except in case of transfer to legal heir in the event of death of the original investor.

As per the notification – “The reference G-sec rate would be the average of the base yield of G-sec for equivalent maturity reported by Fixed Income Money Market and Derivative Association of India (FIMMDA) on a daily basis (working day) prevailing for two weeks ending on Friday immediately preceding the filing of the final prospectus with the Exchange or Registrar of Companies (ROC) in case of public issue and the issue opening date in case of private placement”.

Last year, Central Board of Direct Taxes (CBDT) had stipulated that in case of public issue, the interest rates on these bonds were not to be less than 50 basis points lower than the yield on government securities of equivalent residual maturity as reported by FIMMDA on the last working day of the month preceding the month of issue of bonds. Also, the same formula was applicable to all categories of investors. So, this year the differential gap between the interest rate for the retail investors and the interest rate for other investors has been increased to 50 basis points.

If the issuer entity has been rated by two rating agencies and their assigned ratings are different, in that case the lower of the two ratings will be applicable to the issuer company and accordingly, the company might be able to offer a higher coupon rate.

In case the issuer company decides to make the interest payments semi-annually, it will have to lower the coupon rate by 15 basis points or 0.15%.

The companies are allowed to issue these bonds either through public issues or private placements. As per the notification, at least 75% of the authorised amount of bonds issued by each entity will have to be raised through public issues. For instance, NHAI and JNPT will have to raise at least Rs. 7,500 crore and Rs. 1,500 through public issues respectively.

The maximum issue size in each tranche of a private placement can only be Rs. 500 crore. In case of public issues, 40% of each such issue will be reserved for the retail investors category.

Last year, these tax free bond issues got a super response and off late, all these bonds have given a very handsome returns to the investors. With the interest rates falling this time around, it seems to me that the bonds already listed on the exchanges would still remain in high demand. Lets see which company comes out with the first bond issue this time.

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UTI Credit Opportunities Fund

I’m really late writing about UTI Credit Opportunities Fund because the NFO ends today, but I’m hoping that this post will still be useful for people who are interested in investing in the fund after the NFO.

This is a debt fund, and the interesting thing about this debt fund is that they may invest up to 50% of their funds in debt of less than AA rating because debt with a relatively lower rating usually has a higher coupon rate.

This is an actively managed fund which means the fund managers will look for good opportunities and mis-pricings in the market in order to discover money making opportunities.

There are two fund managers, Mr. Amandeep S Chopra who is 41 and manages or co-manages several other funds in UTI and Mr. Arpit Kapoor, who is 28, and the SID says he is the dedicated fund manager for investment in ADRs/GDRs/Foreign securities of all domestic schemes launched or to be launched by the UTI Mutual Fund.

So the idea behind the fund is that these two fund managers actively managing the UTI Credit Opportunities Fund will look for debt offerings with A or lower rating (but still investment grade) and will invest in those to juice up returns.

The only way to find out whether this strategy will work or not is to give the fund time and see it’s performance. I don’t think there is any way to reasonably predict how the fund will do at this point of time.

I’ve often written in the past that there should be a really compelling reason for you to invest in a mutual fund NFO like getting access to an asset class that wasn’t previously there or a really cheap index fund, and I don’t see any such reasons in this fund.

The idea is certainly interesting, and can end up to be a really good scheme but there simply is no way to find that out other than waiting for the fund to list and see it’s performance for a couple of years.

Business Line has some more details on the this Credit Opportunities Fund where they talk about default rate of A rated securities and that’s a good read for anyone considering this fund for investment.

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Obama Re-Election and Earth Stops Spinning

Let’s start this week with a very useful post by Hemant about  medical insurance for parents. This is an area where costs are rising rapidly and there is real need for good insurance. Hemant covers good ground as usual and I believe this is an important subject for most of us.

Next, New Scientist talks about India’s thorium dream and I must admit that I didn’t even know we had such a dream.

The Economist talks about what the recent deal means for Kingfisher and the Mallya empire.

Fast Company has a great story on Henry Ford with the wonderful title: Be Like Henry Ford: Apprentice Yourself In Failure.

Bloomberg has a slideshow on the world’s 20 richest people.

The Economist again, this time on Mr. Obama’s re-election.

Finally, the question that’s been on your mind all week – what will happen if the earth stopped spinning? 

Enjoy your weekend!

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New Feature: Pin it and Send Email

It only took me four years to realize that I should tap into readers to add new features to the site. For some reason in the past I’ve just made changes on my own and not really cared about communicating them to readers, but that’s going to change now.

This change came about because of three things that happened in quick succession. First, Shiv asked me to setup something that allows you to send emails to multiple people from the post itself, and that feature was implemented today.

At the bottom of the post, you can now see an option to share the post through Facebook, Twitter, Email, StumbleUpon etc.

Second thing that happened was someone used Pinterest to pin a OneMint post. I had thought about adding a Pinterest option but then dismissed it because I thought who would want to use Pinterest for something like OneMint? How wrong I was.

That option has also been added.

Thirdly, Anil Kuppa suggested that Disqus be used to manage comments and I’ve toyed with the idea a few times but never implemented it because using Disqus will give the control of the comments to Disqus and I didn’t want that. However, this has certain benefits like being able to see all the comments you ever made, and I think I can assign a few comment moderators apart from myself which will be good. Disqus hasn’t been implemented yet, but it will be very soon.

These three things that happened in quick succession made me realize how big an opportunity I’m missing when I don’t seek feedback for features. So, if you have any suggestion for features, please leave a comment on this or any other post and I’ll respond to you.

Finally, I’m going to talk about new features in a post from now on so that people understand the rationale behind why I made a certain change and then either use the new feature to their benefit, ignore it if it doesn’t appeal to them or give me feedback for improvements.

Most of the content here is driven by reader’s comments and interaction, so I can’t understand why it took me so long to use reader feedback for features, but I guess it’s better later than never.

Finally, I want to thank Kim who does all the WordPress work behind the scenes on OneMint, and she probably doesn’t realize how big a contribution she makes to OneMint, and without her I’m pretty sure OneMint would’ve never reached the scale it has. Thanks a lot Kim, and if you ever have any WordPress related work that you needed to get done, I highly recommend contacting her.

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Capital gain exemptions – what are they applicable on and how are they applied?

This article is written by Aashish Ramchand, a Chartered Accountant by profession. Aashish is the co-founder of makemyreturns.com. He also has completed his CFA Level I (American) and is very passionate about writing articles on taxes and tax advisory. He can be reached at connect@makemyreturns.com

Capital Gains on assets are a result of a higher sale consideration than the cost of acquisition of the assets.

Short term capital gains are taxable at 15% in case of shares and equity oriented mutual funds and at 30% (maximum marginal rate) in case of other taxable assets.

On the other hand, long term capital gains on shares and equity oriented mutual funds are exempt from tax and are taxable at 20% in case of other assets such as flat, building, gold, art etc.

The Income tax act has come out with certain exemptions from taxable long term capital gains.

Section 54:- Under this section, an Individual or an HUF (Hindu Undivided Family) can get an exemption on the capital gains earned on residential house property. As per this section, the individual is required to purchase another residential house property within 1 year prior to the sale or within 2 years from the sale of the erstwhile residential house. In case of construction, the new residential house property must be constructed within 3 years from the sale of the original house property.

Section 54F:- As per this section, an individual or an HUF can get capital gains exemptions from assets other than residential house property (exemption for residential house property is covered under section 54). To claim the exemption, an individual or HUF needs to invest the sale proceeds of the old capital asset in another residential property. The timelines remain the same as covered in section 54 i.e. 1 year prior to or within 2 years from, the sale of the capital asset (other than the residential house property). In case of construction of the residential house property, the time limit is 3 years.

Section 54EC:- In this section, any person (not only individual and HUF’s) can get exemption from long term capital gains even if the capital gains are not invested in a residential house property. To gain exemption from capital gains, an individual or an HUF can invest the capital gains amount in NHAI (i.e. National Highway authority of India) or REC (Rural Electrification Corporation) bonds of the Government. The investment limit in these bonds in capped at Rs. 50 lakhs. The time limit to invest in these bonds is 6 months from the date of sale of the original capital asset.

Section 54B:– As per this section, an individual or HUF can get exemption from long term capital gains earned on sale of agriculture land. This pertains to sale of only urban agricultural land as sale of rural agriculture lands are completely exempt from tax. To claim the exemption, the assessee needs to invest the capital gains earned in another urban agricultural land. The time limit for investment is 2 years from the date of sale of the original urban agricultural land.

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How to choose a Debt Fund – Factors to consider while Investing

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

In today’s volatile equity markets, investors are increasing their allocation to fixed income investments. But, it is still an untapped market as far as debt fund investments are concerned. Investors here still remain wary of these fund investments as they do not understand where and how their money gets invested and hence, still prefer to park their money in bank fixed deposits.

But, as a matter of fact, in a falling interest rate environment, bank fixed deposits give lower returns as compared to debt funds, especially, market-linked debt-funds. There are a couple of reasons for that, first, whenever the interest rates fall, the banks also cut their deposit rates and second, a fall in interest rates results in an appreciation in the market prices of debt fund holdings.

In the past one year ending 31st October, 2012, debt funds category has generated returns between 8.44% (Gilt Short-Term Funds) and 11.54% (Gilt Medium & Long-Term Funds), with Income Funds, Short-Term Funds, Ultra Short-Term Funds and Liquid Funds generating 10.53%, 10.04%, 9.55% and 9.35% respectively.

So, what are these debt funds and what factors should the investors look out for to get potentially higher returns?

Equity vs. Debt – Like equity funds invest in equity capital of various companies listed on the stock exchanges, debt funds invest in various listed or unlisted debt instruments of such companies. Fundamentally, this way, equity mutual funds become shareholders of these companies and debt mutual funds become the debtors of such companies.

The first step in any debt fund investment is to determine your time horizon and objective of the investment and also to understand what kinds of investments the debt fund makes. You should invest in a fund which is in sync with your investment horizon and risk profile.

Debt fund category has many sub-categories and it is important to understand how each sub-category is different from the other sub-categories.

Here are the sub-categories under the debt fund category and their characteristics:

Gilt Funds – Invest in Government Securities (G-Secs) primarily; Longest Maturity; Highest Duration; typically invest in securities with an average maturity of more than five years

Income Funds – Invest in corporate bonds and/or G-Secs primarily; Long Maturity; High Duration; typically invest in securities with an average maturity of more than three years

Short-Term Funds – Invest in short-term corporate instruments primarily; Short Maturity; Low Duration; typically invest in securities that mature in one to three years

Ultra Short-Term Funds – Invest in ultra short-term corporate instruments primarily; Shorter Maturity; Lower Duration; typically invest in securities with an average maturity of three months to one year

Liquid Funds – Invest in money-market instruments primarily; Shortest Maturity; Lowest Duration; typically invest in securities with an average maturity of less than three months

Fixed Maturity Plans (FMPs) – Invest in fixed maturity corporate instruments primarily; Fixed Maturity

So, if your investment horizon is short and the objective is to earn safe returns then you should not invest in a Gilt fund or an Income Fund as a rise in interest rates could result in negative returns for such funds.

Now, here are the factors that the investors need to consider while choosing a debt fund.

Performance/Returns
We invest in various asset classes to earn potential returns out of them. So, a fund’s past performance becomes the first important factor to be looked at. An investor should check a fund’s returns over different time periods, like six-month returns, one-year returns, three-year returns, five-year returns, returns since inception and returns since the current fund manager has taken over.

But, as with any investment, you need to understand that the returns in fixed income products also represent past performance and there is no guarantee that they will continue to give the same returns.

Making a comparison of the fund’s performance vis-a-vis the performance of other funds in the same category is a very important exercise. It gives you a clear idea how good or bad the fund has been performing. Also, make sure to check only the ‘Growth’ option of all the funds to make a meaningful comparison as different dividend payment dates of different funds would provide an unclear picture for comparison purposes.

Fund Management Team – Experience & Qualifications
Fixed income investing has become a difficult job in a much more complex economic environment and an uncertain yet dynamic interest rate scenario. How well a fund performs primarily depends on how good the fund manager is.

So, an investor must check the fund manager’s experience and qualification and the returns generated by the fund under his/her fund management tenure. A detailed summary of each fund’s management team, its experience and qualifications can be found in the fund’s prospectus.

Also, a fund house well equipped with thorough research and analysis tools in debt fund management will definitely be able to take quick quality decisions as compared to a team with lack of such tools.

Average Time to Maturity
A bond fund carries a weighted average time to maturity, which is the average of the current maturities of all the bonds held in the fund. The longer the average maturity, the more sensitive the fund tends to be to the changes in interest rates.

Duration

Though duration and maturity sound similar, never confuse duration of a bond or a fund with its time to maturity. Duration measures how much a bond’s price will rise or fall with a percentage fall or rise in interest rates and is calculated in a similar manner in which maturity is calculated. A fund with an average duration of 6.74 years (or just 6.74) will theoretically appreciate 6.74% in value with a 1% fall in interest rate, keeping all other factors constant.

Average Yield to Maturity
Yield to Maturity (or YTM) is the annualised rate of return that an investor earns on a fixed income instrument, if the investor purchases the bond today and holds it until maturity. Average yield to maturity of a debt fund is the average of the current maturities of all the bonds held in the fund.

Companies offer higher yields on their debt securities in order to attract common investors like you and me and also to attract the managers of these debt funds. Some fund managers get attracted to these higher yields and compromise on the quality front by investing in lower-quality securities. So, you should not invest in high yield bond funds only on the basis of its potential yield. You need to factor in the credit risk, risk of default associated with the issuers, and how that risk might affect the safety of your investment.

Standard Deviation and Sharpe Ratio
While a debt fund may generate a higher return, the return may be the result of potentially higher risk. Standard deviation calculates the sensitivity of a security or a fund. The higher the standard deviation, the higher the security’s volatility risk.

Sharpe Ratio is an equation to calculate risk-adjusted performance of a portfolio and for a debt fund, it is calculated by subtracting the risk-free rate from the debt fund’s return, divided by its standard deviation.

Sharpe Ratio = (Portfolio Return – Risk-Free Rate) / Portfolio Standard Deviation

The higher the Sharpe Ratio, the better the debt fund has performed after being adjusted for its risk.

Portfolio/Holdings and Credit Quality
Credit quality of a debt investment is the most important factor for any investor. The overall credit quality of a debt fund will depend on the credit quality of the securities in the portfolio. Different debt funds invest in different debt securities with varying degree of credit quality, ranging from risk-free government securities to high-risk corporate securities.

Though credit ratings do not guarantee against any default in payments and are not 100% foolproof either, the relative credit risk of a bond gets reflected in the ratings assigned to them by the independent rating companies such as Crisil, ICRA, CARE, Fitch and Brickwork. Bonds, which are considered to be the safest from credit risk point of view, are given the highest credit rating of AAA. The lower the ratings are for the securities of a debt fund, the riskier the fund becomes for you to invest.

Debt funds which invest in lower-quality securities can potentially deliver higher returns, but will also be vulnerable to some level of default risk both in terms of interest payments as well as principal repayments. So, the investors should choose debt funds with better asset quality.

Expenses/Charges/Fees
A fund charges expenses and fees for managing your investment. These expenses are a certain percentage of the total assets managed by the fund and hence are termed as the “Expense Ratio”. As these expenses are ultimately affect your returns only, the lower these expenses are the better it is for you. But, at the same time, you should focus more on the returns generated by a fund and less on the expenses.

Exit Load
After SEBI’s ban on “Entry Load”, most mutual funds have introduced “Exit Loads” on most of their schemes and that too in different proportions with different applicable time periods. Also, exit load is charged on the investor’s total investment amount i.e. the principal investment amount plus the return generated on it. So, it becomes important for you as an investor to check the exit load before making the investment, as if the investment horizon is short, then the exit load might reduce your overall returns considerably.

Taxation
Short-term capital gain (STCG) in debt funds is taxed as per your applicable income-tax slab, whereas long-term capital gain (LTCG) is eligible for the inflation indexation benefit and is taxed at the lower of the two, either 10% without indexation or 20% with indexation.

Dividend received from the debt funds are tax-free in the hands of its investors as the fund houses are required to deduct and pay dividend distribution tax (DDT) to the tax authorities. Liquid funds or money-market funds are required to pay dividend distribution tax at an effective rate of 27.0375% (25%*1.05*1.03), including 5% surcharge and 3% education cess. Dividend distribution tax for other debt funds is 13.51875% (12.5%*1.05*1.03) effectively.

So, if your investment horizon is less than a year and you fall in the 30% tax bracket, then you should invest in either an ultra short-term fund or a short-term fund and opt for a regular dividend option as the dividend will be tax-free for you and might result in a zero capital gain tax.

To me this is an exhaustive list of factors which you should consider as you decide to invest in debt funds. If you want to suggest some other factors to be considered, then you are most welcome to share them here. If you want to learn more about the fund you’re considering, you need to check the fund’s prospectus or its monthly factsheet.

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I know nothing about finance, where do I start? – Part 1

This is a question that comes up often, and one that I find quite difficult to answer. First, I think it’s useful to start by just defining what you mean by finance, and spending some thought on that.

I think it is useful to narrow down finance to personal finance because that’s what people are really interested in when they say they want to learn about finance.

I think of personal finance as the following:

Managing your cash flow to build wealth.

I think this is simple enough to understand and covers the essence of financial planning or personal finance.

The idea is to build wealth so you can meet your life’s financial goals and have enough money during the days of your retirement.

The way you build wealth is by saving money and investing it.

This is not an “either or” thing, you have to do both to really make it work. Spend wisely, and invest intelligently. Doing one but screwing up the other will nullify whatever good work you’ve done in the other area.

I think life and health insurance are also an important parts of this equation, as they help you protect your wealth when you face an emergency.

What is personal finance?

So, in that context I think everything that you talk about in personal finance will be covered under one of the blocks above and you have to understand not only things within each box, but their interplay as well.

For example, frugality is something that a lot of personal finance blogs focus on (unfortunately not this one so much), and they have tips to save money and manage your credit card debt etc. and that’s really important because if you’re paying 2% per month on your credit card, then there’s no point in making a fixed deposit of 9% on which you will pay 30% tax.

On the other hand you need to understand what inflation does to your wealth or the benefits of compounding to building wealth without which you will never fully appreciate why fixed deposits alone will not do the trick for most people if you want to build solid long term assets.

Life insurance and medical insurance are important because they help you deal with life’s uncertainty and ensure that one event doesn’t ruin your life’s savings.

Investing is where it gets really interesting because that’s the area where you have unlimited products to invest in and you can spend a lifetime understanding it but still cover only a small percentage of products. Luckily for us, understanding a few products are enough to get by, and even do well.

I feel that tax is also a part of investing because the goal of investing is generating most after tax returns, and to that extent your tax planning is part of your investment planning.

I haven’t spoken about economy here because while it’s good to know what CRR is or how much external debt a country has, I feel it’s not necessary to know micro or macro economics to manage  your money. If you keep a general tab on what’s going on in the country by reading newspapers then that should be sufficient.

At a high level, if you don’t know anything about personal finance, and don’t know where to start, then I think this is the way to start, defining it and understanding what it means.

You now know what you don’t know and I’m going to build a series of posts to cover each of these topics.

I’d really be grateful if you give me suggestions on what this series should contain as well as the sequence, for example, what should the next post be about?

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I am A Driverless Car Causing Hurricanes

The most amazing thing I read this week was this Reddit IamA of Peter Moore who was held hostage in Iraq for 2.5 years. Some of the things he says sounds so unreal and something straight out of a movie like the one incident where he says they did a fake execution on him.

Bemoneyware has a good guest post on women and financial planning.

NYT has an interesting article on Google’s driverless car.

A hilarious account of how Fundoo Professor lost all his Amex points and Kingfisher miles.

Reason has an interesting post on why Republicans aren’t able to harness Indian American votes any more. I disagree with a lot of what this article had to say but it has some good stats, and is an interesting read.

I love to read anything Jeff Bezos, and really enjoyed this brief post with interesting quotes from his annual letters.

Finally, some amazing pictures of destruction caused by Sandy.

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Guaranteed way to lose money

I feel that one strange thing about the stock market is that it is most attractive to those people who are most likely to lose money on it. I first invested (rather speculated)  just before the dot com burst, and the only reason I was attracted to the market was fast money.

Guess what? The people who are attracted to fast money are the most likely to buy penny stocks, momentum stocks, “sure-shot” stocks, day trading stocks and generally anything that has a good chance of going to zero.

I think I must have invested in all these type of stocks at the time, and I can’t remember if anything ever went to zero, but it certainly came close to it.

I was reminded of that time because of this email I received last week.

Hi,

I have been following your blog since long and have learnt a lot of things. Now i thought i should ask you something to help me financially.

Looking forward to your reply.

To invest in intra day is a lot of work and i dont know much about investing. Now are there institutions out there where i can invest my money in or any share broker who i can trust with my money and he in turn reinvest it in intra day trades… Or any service that provides intra day tips???

I understand this a question from a noob but then again.. Please do reply.

I made a brief reply cautioning the reader against doing this because these type of things just don’t work, and you can meet hundreds of people who have lost money this way.

If you don’t know anything about the markets then it is better to invest in a well known mutual fund regularly rather than taking your money and giving it to someone who promises to double it in a year doing intra day trading.

If they could really make money like that they would be doing that with their own money, and not seeking capital from others.

People who sell intra-day tips are even more inexplicable; if their tips are so good, why aren’t they acting on them instead of giving them out for a fee?

Short term predictions hardly ever work. Before putting your own money, you can very easily create a fake portfolio and follow the advice of “pundits” who predict market movements and see where it leads you. Do this for three months and see the results before putting your real money in day trading.

Most pundits advise you to buy when the stock market is up and sell when it is down, which is the exact opposite of what you should be doing.

I don’t know of an easy way of doing this but it will be fun and enlightening to see what traders and pundits were Tweeting out about this time last year, when the market was really bad, and in hindsight, also presented a good opportunity to buy. I think you will find that none of them were too enthusiastic about stocks at the time.

If you want to trade, at the very minimum, you should be willing to spend the time needed to understand what trading strategy is being followed and ensure that you aren’t being taken for a ride by people who are just punching buy and sell orders on a whim.

This is difficult but at least it will give you the comfort of knowing what’s happening with your money. There are trader conferences that you can attend and while you will never find that information on OneMint, there are other blogs and websites that you can read to get that information. If you are attracted towards trading then you must spend the time before spending the money.

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