Need help?? Your guide on Gratuity

Success for the article on PF withdrawal has inspired me to write an article about Gratuity. And obviously this is really important to know as many companies provide this benefit under the umbrella of CTC, but the employee is not aware of, how to get benefit of gratuity.

This article is an attempt to provide insight about Gratuity to those individuals.

“Gratuity” is a reward for the long term service. It’s the benefit that employee gets for sustained loyalty towards the organization and employer.

Eligibility for an Employee:
An “Employee” who has rendered continuous service for more than five years is eligible for “Gratuity” benefit.

Benefit:
Gratuity rewards an employee in a big way. The amount of gratuity will be 15 days pay for every completed year of service. Yes it’s completed years which counts here. So if the person is leaving the company after 6 years and 7 months then he’ll get gratuity for 7 Years and the employee leaving company after 6 years ad 5 months would receive gratuity for 6 years. So keep this thing in mind and then put down your resignation at appropriate time.

The amount is calculated on the Basic Salary + DA , the employee is drawing at the time of exit.

Below is the simple calculation to gauge the amount that you should receive as gratuity.

How to find multibagger ideas in Stock Market?

The recent downfall in the stock market has created opportunity for the investors to start looking into Equity. Often people come up with the question on how to find the multibagger stock which would create wealth for them?

Today I’ll provide tips and tricks of finding hidden gems from the stock market.

Business you understand:

Ask yourself one question, if you would have got enough money, time, and skills to start on the business which business you would have picked to become next Narayan Murthy?

Identify all such businesses which you understands, which you would like to do or would have done, if given a chance. This is really important, because it’s about achieving your dreams.

Companies in your business:

Once you identify these businesses that you want to start with, identify companies having presence in the same sector/business. Make a list of such companies based on their size. i.e. largecaps, midcaps, smallcaps. Now start comparing these companies based on different parameters like,

- Management:

o       Check management skills by reviewing their interviews, their confidence in the company, how they started the company?, Ownership in the company. Do they love their business?

-    Last 3-5 years results :

o       Check past performance of all these companies. (EBITA , Profit)

-   Corporate Governance:

o       Try to figure out the strength of the company by checking obligations made against it. It at all that is true then how they are dealing with it?

-    Future growth, Scalability :

o       Make sure that the management is right on track with expansions and they have vision to take the company to the next level.

You can add your own parameters as well, which you would try to meet for your own business. Once you find answer for all these parameter you’ll get true hidden gems for your self.

Own a stock or business:

I know it’s not possible for everyone to start business not that they don’t have skills but there are constraints like, personal commitment, finance, family, good job, risk and many other things. But, Is it stopping you from executing your idea? I don’t think so. Now with this exercise you’ve ignited the energy to live your dream. Now you’ve found the same company/business which you would have established, if given the opportunity. More over, these companies have decent experience, growth prospects and management who are equally passionate about the business as you are. In other word, it’s basically you own part of the company, doing the same business and still not sacrificing on your current commitments.

Sounds like excellent deal? Yes it is.

It makes sense to mention here, “Warren Buffet owns stake in many companies/business. He is having CEO and MD of different company reporting to him. But guess what, He is still able to sleep in the afternoon? “Yes that’s correct.

Hope this would help all the readers in finding their own hidden gems !!

Please click here to become expert in riding investor behavior in stock market.

Happy Investing !!

Learn investor behavior - How to ride stock market sentiment?

As there's lot of pessimism prevailing in the stock market, I’m forced to right this article which will guide and help retail investors in selecting best investment course for themselves.

No matter how expert are you? But you tend to take emotional decisions to pick right investment for your self and today’s article would help in understanding investor behaviour in stock market.

Investor Behavior

As depicted in the above fig. , it’s the “Optimism” which drives every investment that you do. Be it stock market, reality, fixed deposit, ULIP, it’s your optimism which leads you to invest in any of the financial instruments.

Once your decision pays off and becomes reality then excitement, thrill and euphoria takes over and drives the investor sentiment. At that point of time investor shows overconfidence due to the success he has made using his investment decision, stock market is at it’s pick and making quick money for the investors. He starts believing every research report, news that he understand and starts taking larger investment exposure. This situation is largely driven by the Euphoria in the market and it’s the “Point of Maximum Financial Risk” for the individual.

Once the rally is over, soaring market calms down and tries to level off that is to balance out the premium at which market was trading due to euphoria VS actual valuation based on earnings. This leads to Anxiety, Denial and Fear in the Investors which was totally bullish and riding through market sentiments. At that point of time investor feels that “I’m a long tem Investor”.

As the market continues to fall, the same investor starts feeling desperation, panic, capitulation, despondency. This is time when investor feels that, “This is not for me.” He tries to sell his holding in the stock market even at enormous loss as he has suffered huge erosion of the wealth. Investors become depressed about the stock market and there’s lot of negative news floating around which keeps them away from the stock market. But dear investor, this is the “Point of Maximum Financial Opportunity.”

When I look at the current situation, there’ fear prevailing in the stock market due to U.S. downgrade, U.K. nations hanging bankruptcy issue, U.S. double dip recession worries, inflation in emerging markets and local political issues in India. It has turned into panic selling globally but despondency and depression is yet to come. Does this mean it’s not the right time to buy? Well, no one can time the market, as we’re in bottom cycle of the stock market, I would advice to start accumulating stocks/businesses in your portfolio from the longer term point of view with the knowledge that it could go down more.

Hope this article would help lot of investor and guide through this turbulent time. You can also check my article on "Risk VS Stock Market" to understand are we at risk by not investing in the stock market?

Happy Investing!!

Larsen & Toubro Finance Holding IPO - Should you subscribe?

L&T Finance Holdings - As the name suggest, it’s a financial holding company promoted by Larsen & Toubro Ltd.

Business:

It offers variety of financial products and services for the corporate, retail and infrastructure finance sectors, mutual fund and investment management.

L&T Finance Holdings is registered with the RBI as a Systemically Important Non-Deposit Taking Non-Banking Financial Company and has applied for registration as a Core Investment Company.

Operations:

- The Infrastructure Finance Group,

- The Retail Finance Group,

- The Corporate Finance Group and

- The Investment Management Group.       

Customer:

Company’s customer includes individual retail customers as well as large companies, banks, multinational companies and small- and medium-enterprises. LTF offers a spectrum of financial products and services for trade, industry and agriculture.The company's focus segments are corporate products, construction equipment, CVs and tractors.

Objects of the Issue:

1. Repayment of inter corporate deposit issued by Promoter to the Company;

2. To augment the capital base of L&T Finance and L&T Infra, to meet the capital adequacy requirements to support the future growth in their business;

3. To achieve the benefits of listing on the Stock Exchanges; and

4. General corporate purposes including meeting the expenses of the Issue.

Issue Detail:

  Issue Open: Jul 27, 2011 - Jul 29, 2011

  Issue Type: 100% Book Built Issue IPO

  Issue Size: Equity Shares of Rs. 10

  Issue Size: Rs. 1,245.00 Crore

  Face Value: Rs. 10 Per Equity Share

  Issue Price: Rs. 51 - Rs. 59 Per Equity Share

Grading:

CARE has assigned an IPO Grade 5 to L&T Finance IPO. This means as per CARE, company has 'Strong Fundamentals'. CARE assigns IPO grading on a scale of 5 to 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals.

Subscribe:

I recommend “subscribe” for the IPO with following reasons.

- L&T group has strong brand value and history of creating wealth for the investors.

- L&T group is planning to restructure and come up with different IPO’s of it’s non listed companies and L&T Finance Holdings amongst the first to hit the market would attract investors.

- The company is going to raise Rs. 161 crore via anchor investors in the IPO, which should be one day before the IPO opens for subscription. There is going to be great demand from the Anchor investors for the IPO and would cascade into the IPO by institutional investors.

- “Strong Fundamental” IPO with grade of 5 have done really good in past. Like, Coal India, MOIL. L&T Finance Holding is likely to repeat the same.

Happy Investing!!

Need help?? Your guide for PF Withdrawal

I’m writing this article to help people with right information to get the PF Withdrawal status, amount and many more things. I know it’s not related to investment or stock market, but it is worth to put this important information on this forum as it’s about getting our own money.

Background:

I know many people who have opted to withdraw their PF amount during their job change. They did so may be because of need for some liquid money. But this withdrawal amount takes years to get credited into their bank account and there’s no clue where to get the status of the claim. This article may help all such individuals.

I would suggest Individuals to be proactive and taking steps forward to get this amount, rather than just wait for employer and PF department to work for you.

Tips and Tricks:

o   Don’t forget to check with employer’s account department about your willingness for the PF withdrawal for PF transfer during your exit formalities from the organization. For now we’ll concentrate on the PF withdrawal.

o   You’ll get PF withdrawal form – Form -19 and Pension withdrawal form – Form 10C from the employer.  Please fill the latest and accurate information about your email id and phone number. Just be aware that PF department has come up with SMS facility where they’ll send you status of your claim through SMS. You need to mention your mobile number at the top of the withdrawal forms). For more information please visit http://www.epfindia.com/docs/SMSAdNew.pdf.

o   Mention clear bank account details in the PF withdrawal form. Please provide a clear photocopy of your bank passbook or cancelled cheque of the account where you want your money to be credited.

o   Make sure that the mobile number and the account which you’ve provided in the Form-19 are active till you get your claim.

o   Employer would submit your claim/Form 19 to the PF department after 60 days from your last working day. Generally they do this in bulk when there’s some good amount of PF withdrawal form to be submitted to the PF department. So it would take 90-120 days for your claim to be submitted with PF department. It may vary if employer is using third party to manage all this activity. In that case it would take much longer time. Now here’s the time where you need to be proactive and follow-up with Finance/HR department of your previous employer and asking for submission at the earliest. Don’t forget to ask them to provide duly signed copy of the withdrawal form from PF department. Even scanned copy should be fine. This would vouch the exact date on which you claim has been submitted to the PF department.

o   PF department has started online facility to know the claim status of your PF withdrawal. You need to select the office and mention the PF account number to know the status.  http://www.epfindia.com/ClaimStatus_New.html.  I would request you to wait for at least 15 days from the date your claim is submitted to the PF department and then check the status of your claim.

o   In case you don’t find your claim status on the central portal then you can check your claim at the regional site. You can get sites about different regional PF offices from http://www.epfindia.com/RegSites.html

o   Generally it takes 30-60 days for the PF department to process your claim. If you don’t find status of your claim on any of the portal then do submit your grievance at the portal. http://epfigms.gov.in/. This is really effective and I’ve personally resolved my claim using the portal. You’ll definitely get reply using this forum. Now with the awareness of this system many people are using this forum so you may need to send reminder for your grievance and you’ll definitely get the response.

o   One you submit your grievance you’ll get the contact person details for your grievance along with email id and contact number. You may need to call and drop email to check the status of your grievance. Resolution to your grievance in turn will resolve your PF claim as well. You can check the status of your grievance on the same portal http://epfigms.gov.in/. You can get the additional contact numbers of PF department from your previous employer as well.

Things to Remember:

o   You’ll be receiving two different amounts in your account. One is for your PF withdrawal and one is for Pension contribution. Make sure that you’ve received both of these.

o   Now you need to compare these amounts with the contribution which you’ve made for your PF with previous employer. Ask for Form 3-A from your previous employer. It should have all the information about the contribution made towards the PF.  You need to compare PF amount which you’ve received to the combined contribution which you and employer made toward PF. You need to compare pension amount with the 8.33% contribution which your previous employer made towards pension scheme. This should be clearly mentioned in form 3-A.

o   You will get Form 23 (Annual PF Statement) from the RPFC which you can verify against the claim credited in your account. You would receive to the address which you’ve mentioned in your withdrawal form. In case you need scanned copy then you can use the same forum of grievance.

I believe this article would help lot of people and guide them through PF withdrawal.

Happy Investing and Wealth creation!!

Want to be Millionaire? Invest Today

I've got larger response for my article on Systematic Investment Plan - where people seems to be really curious and interested in creating wealth using SIP.

Many people asked about right time of starting Investment through SIP and ideal amount for such SIP investments. This article may prove to be helpful for all those readers who are aspiring to create good amount of wealth using SIP.

Ideal Amount for SIP:

Ideally the amount could vary based on the risk appetite of individual and the portion of his monthly income he/she wants to invest in SIP. I guess investors should follow 80-20 rule, for such allocation. Let's understand this through an example. My friend Rahul is 23 years old. He's earning 30k per month. He doesn’t have many liabilities from the family and he's having HIGH risk appetite. He can save 15k from his monthly salary and want to invest maximum in the stock market related instruments.

I would advise him to invest 80% of his monthly saving (12k) into equity and equity oriented instruments. The rest 20% (3k) should get invested into less risky investment options like, PPF. Does this rule apply all the time? No. He should keep reviewing his responsibilities and liabilities and risk taking ability every 3 to 6 months and based on that he should modify his investment profile with 80-20, 75-25 or 70-30 investment rule.

Timing the SIP – Start Early:

I strongly believe that investment in SIP should start at the earliest because there’s definite reason behind this and let’s understand this with example.

Let's compare two friends: Mit and Jigar. Mit has started investment at pretty early stage. He started saving Rs750 per year from the time he was 15. After 15 years he has stopped this investment. So his total investment till date is Rs. 11250 over the tenure of 15 years.

On the other hand, Jigar starts investing Rs. 5,000 per year when he is 30 and will continue investing this amount every year till he is 60. So his total investment would be Rs. 300000 over the tenure of 30 years.

If both earn 15% return per annum then, who will create more wealth when they retire at the age of 60?

Answer is Mit. His annual saving of Rs. 750 between the age of 15 to 30 would aggregate to Rs 27.7 lacs when he’ll be 60, whereas Jigar’s Rs. 5000 annual savings between age of 30 to 60 would accumulate to Rs 25 Lacs when he’ll be 60.
Here, it’s essential to understand the power of compounding and it’s the single most reason for you to start investing immediately. Even small chunk of investment makes big difference over the period of time. You can see Mit and Jigar both would create enormous wealth, compared to their investment. But for Mit it took really less money and the time duration to build the wealth as he started at the early investment. This highlights the importance of starting early and right at your investment.
In a nutshell, “Your money never sleeps. It’s working for you 365*24*7, so start early at your investment.”

Happy Investing!!

Systematic Investment Plan - Tax saving, money making and more...

This article is devoted to all the investors who want to take advantage of India growth story but refrain from doing this due to less knowledge about stock market or economy fundamentals.

I recommend them to go with Systematic Investment in ELSS or Equity focused Mutual Funds. Let me explain this in detail and why I’m so bullish on this kind of investment.

Systematic Investment Plan:

                In a simple terminology, it’s about investing specific amount of money at regular intervals for continuous period of time. I hope most of the people know about RD – Recurring Deposit, where we deposit specific amount of money to the bank/post regularly for specific time duration. Here method of investment remains same, but only investment instrument changes. In SIP, investment goes to the equity via MF scheme. Here investor can choose MF scheme based on his own risk appetite.

Benefits:

• SIP gives relief to the investors from the task of timing the stock markets. Believe me, it’s the most difficult task which even Investment Gurus are not able to do very well.
•  It makes investment as habit and not the gambling. SIP allows the investor to buy units on a given date every month/every week. The investor decides the amount and also the mutual fund scheme.
• Investment amount remains same, but investor can definitely buy more units in declining market and less number of units when market is trading at high valuation.
• Investor automatically participates in the market swings, so there’s no need to time the market.
• SIP averages the risk through consistent investment at every level of market. We don’t need to bother, if market is down or up and still we get handsome returns. This is because now we have made investment as habit.
• SIP can start with minimum investment of Rs. 500, so even small investor can participate in this investment instrument.
• Fix amount of money automatically gets deducted through ECS, every month/week. This is best way of investment when you don’t have to control when to invest or not to invest. This would make a habit of keeping some corpus aside for the SIP, every Month.
• SIP in Tax Saver MF Schemes:  I believe this is the best way to invest through SIP. Investor gets many advantages.

1). Tax Saving: Investor gets immediate tax benefit in the respective tax bracket.

2). Investment Lock in – 3 Years:  I believe investment horizon of more than 3 year enhances

3). Tax free income: All this ELSS scheme gives you tax free return.

4). Invest for 3 Year – “Forget your tax worries”: We all know when it comes to Feb, March then we’re always worried about the next pay check, which may be cut heavily due to tax liability. With the help of SIP investor just needs to invest for 3 years consistently and that’s it. At the end of third year, the same SIP amount which was invested at the beginning of SIP could be withdrawn (without any tax liability) and reinvested in the SIP again. This will manage and save your tax using the same SIP year after year once you invest for 3 consecutive years.

5). Minimum lock in Period: Tax Saver MF has the minimum lock in period, compared to other tax saving instruments. This means if you’re in 30% tax bracket, then ideally you’re making/saving 30% on the investment every 3 years. Just compare it to NSC where the lock in period is very high and at the same time you’re liable to pay tax on the gain from NSC.

I hope this article would encourage and help investors in creating wealth over the period of time using SIP.

Happy Investing !!