6 Start-Up Mistakes To Avoid - Times of India

11/24/2016
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6startupmistakestoavoid
ChandralekhaMukerji&AmitKumar|Mar3,2014,06.06AMIST
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Startingyourownbusinessventureisatemptingthought.Youcanbeyourownbossinsteadofbeinghectoredaround.Yet,beingyourownbossisnoeasytask.Tobegin
with,oneofthebiggestchallengesthatnewentrepreneursfaceistoconverttheideaintoaprofitablebusinessmodel.Haveyoudonesufficientresearch?Shouldyou
approachaventurecapitalistorabanktofundyourbusiness?Howmuchtimeshouldyougivetoyourbusinesstostartchurningprofits?Isitatimetostartabusinessor
waittillyougaintherequiredexperience?
Expertssaythatthefirstyearofaventureisthemostcrucial.Itcanmakeorbreakthebusiness.Youmakeonemistakeanditwillrunoverthebusiness.Welookatsome
ofthecommonmistakesthatfreshentrepreneursmakeintheirfirstyearofstartingabusiness.Findouthowyoucanavoiddoingso.
Notdoingadequateresearch
Thereisnodearthofideasandtypesofventuresthatyoucanpursue.However,thetoughpartistestingthehypothesisconvertingyourideaintoaviablebusiness
model,whichisnotpossibleunlessyouhavedonesufficientmarketresearch.Whetheryoudecidetodoitformallyorinformally,youwillneeddataonthesizeofthe
potentialcustomerbase,competitionandexternalbusinessenvironment,tobeabletoclearlydefineyourrevenuechannels.
Eventhoughtheideamaysoundnovel,itispossiblethatthemarketisnotreadyforit.Athoroughresearchwillnotonlyrevealthepotential,butalsopointoutthe
limitationsoftheidea.Ignoringtheresultscanbedisastrous.TakethecaseofthecollegestartupofArunBalakrishnanandhisbatchmate,whichclearlysufferedfroma
confirmatorybias.BalakrishnanstartedworkingontheideaofanecommercesitewhentheywereinthesecondyearofMBAatIIMAhmedabad.Twoanglesemerged
fromtheirbasicmarketresearchone,thatthebusinesswasscalable,andtwo,thatthemarketwasnotreadyfortheproduct.TheygraduatedinApril2008,andstarted
LootStreet.com,anonlineplatformforshopperswiththeoptionofbargainingoverthelistedprice,inJune2008.However,2008wasprobablytheworsttimetolauncha
business:ecommercewasstillverynewinIndiaandtheeconomywasinaturmoil.Creditcardusagehadgonedown,defaultswereatapeak,andbankshadstopped
issuingcards.
Itwasclearthatthemarketconditionswereunfavourable.Yet,theduobankedonthefactthatthingswouldimproveandthebusinesswouldgrow."Youtendtothinkthat
whatyouaredoingisthebest,lookateveryroadblockasachallengeandwanttotakeeveryproblemheadonwithoutrealisingthatsometimesyouneedtostepbackand
analyseifitisviabletopushanideawhentheexternalenvironmentisnotfavourable,"saysBalakrishnan,whohadtoeventuallyjointhecorporateworld.
Movingaheadonflawedassumptions
Eventhoroughresearchcan'tguaranteesuccess.Therecouldstillbeafewbugsinyourbusinessmodel,oftenintheinitialfinancialprojectionsandthewholebusiness
matharoundit.ForRutvikDoshi,formerCEOofTaggle.com,agroupbuyingsite,itwasacombinationofincorrectestimatesofthemarketingexpenses,saleprojections
andagrossunderestimationofthecompetition.Themoneyrequiredtospendonacquiringaconsumerwas10timesmorethanthatherealisedfromasale."Thequantum
ofbusinessweweregeneratingwasnotsufficienttocoverthemarketingcost.However,insteadofobjectivelyanalysingthesituation,wewerecontinuouslytryingto
findfaultwithourteam,salesteamandemployees,puttingpressureonthemtofixproblemsandbringmorebusiness.Later,wefoundthatitwasmoreasystemic
problem.Wehadblindfaithinthegrowthprojectionsandthatbroughtusdown,"saysDoshi,whohimselfisaventurecapitalistnowatInventusCapitalPartners.
SuneilChawla,thecofounderofKoolkart.com,wentwronginassumingotheraspectsofthebusiness.ThecompanyisinalimbotodaybecauseChawlahadnot
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11/24/2016
expectedthathispartnerwouldquit.Whenhispartnerdecidedtopartwaysbecauseofpersonalreasons,theabsenseofanexitclauseintheshareholderagreement
causedthebusinesstocometoastandstill.
Asimplesolutionistobetatestyourprototypetofindandfixthefaultsbeforetheproductislaunched.Thisisalsoagreatwaytogetfeedbackfromusers.Italwayspays
togobacktothedrawingboardifthefeedbackisnegative.GauravJain,whoownsMastKalandar,apopularchainofrestaurants,hadhiredfoodconsultantsandtaken
advicefromvariouspeopletozeroinonthemenu."Whenwestarted,wehadsomeMexicanvegetarianitemswithanIndiantwistandwethoughtitwouldbeagreat
additiontothemenu.However,wesoonrealisedthatthecustomerfeedbackwasnotgoodand,withinfourmonths,theseitemswerewithdrawn,"hesays.Jainwentonto
changethemenutwiceoverthefirstyearofoperations,incorporatingthecustomers'recommendations.
Scalinguptooearly
Afterthebusinesshasbeenlaunched,theentrepreneurstartslookingforgrowth.Evenifyouareabletogeneratealotofconsumerinterest,youultimatelyhavetoscale
upthebusinesstomakeitgrow.Whenyoutestaprototypeorlaunchaproductinasmallmarket,theresultsarebasedonalimitedexperience.However,thischanges
dramaticallywhenyouactuallybeginoperationsorreachouttoawidermarket.Inhindsight,DoshirealisesthattheirdecisiontogopanIndiawasprematureanda
reasonthatledtoitsfailure."Eventhoughthedatawaspointingthattherewassomethingwrongwithourbusinessassumptions,wewentaheadandscaledupwithout
fixingtheproblem,"hesays.
Moreover,scalinguprequiresdeeppockets.Youhavetohirepeople,leaseofficespaceinafewcities,tieupwithotherbusinessesandmarketyourproduct.Ifyoudon't
havethenecessaryfundingrequiredforthis,thebusinesswillfizzleoutinnotime.Experts,therefore,advisetonailitfirstandthenscaleitupstartsmall,haveshort
termgoals,perfecttheproductandtherevenuemodel,andthenscaleup.
Notkeepingtabsonexpenses
Keepingtheoverheadcostslowisessentialforastartup.Whetheritisonfurnishingtheofficeorbuyingmachinery,youhavetobeasfrugalasyoucanbe.Ifyouare
smartlikePritamHans,youcanfindacheaperoptionthatisactuallybetter.Insteadofsettlingforasmallofficeforhisfledglingrealestateconsultancybusinessonthe
outskirtsofthecity,hehasrentedaplushsharedofficeatanupscalelocationinsouthDelhi."Asmallofficespacewouldhavecostme12,000amonth,butintheshared
accommodation,Iampayingonly6,000amonthforafullyfunctionalofficewithallamenities,"hesays.
Anotherareawhereyoucancutcostsiswhilebuildingyourwebsite.Ifyouarelowonbudgetorjustneedabasicwebsite,youcanusevariousplatformsavailableonthe
Nettocreateit.Also,whilethereistheconstantneedtomeetclients,donotspendheavilyonit.Talktothemthroughvideoconferencingormeetthemintheiroffice.
Then,thereisthechallengeofstickingtoyourseedcapitalandreiningineveryexpensetoensurethatyoudonotgooverboard.JainofMastKalandardecidedthatno
matterwhat,hewouldnotexceedhisseedcapitalof18lakh.Thismeantthathehadtocompromiseontheinteriorsofhisfirstoutlet.However,Jaindoesnotregretthis
onebit."Itwasmoreaboutdiscipline,thefactthatundernocircumstanceIwillcrossmybudget,"hesays.Infact,healsopointsoutthatwhilehisbusinessturned
profitable,hehadtodependonhiscontingencyfund,sohecutoffeverypossiblediscretionaryexpensefromhisbudget.SmitaRajgopal,whorunsacreativedesign
studio,Smitten,keptcostsdownbyworkingwithconsultants."Intheearlydays,itmakesmoresensetohireconsultantsasyoucanpaythemonaprojecttoproject
basis.Thisalsosavesyouthetroubleofpayingsalarieseverymonth,"shesays.
Underestimatingmanpowerneeds
Thegoldenruleofentrepreneurshipisnottowastetimeonsomethingthatcanbedonebysomeoneinafaster,betterand,perhaps,cheapermanner.Torunthebusiness,
youneedateamthatcantakecareofvariousperipheralaspectsandleaveyouwiththecorefunctions.
BeEmpowered.BeatCapgemini!CapgeminiIndia
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RecommendedByColombia
Youcanalsotapyourprofessionalnetworkforexpertise.BijaeiJayaraj,founderofLoyaltyRewardzManagement,acompanythatmanagestheloyaltyprogrammesof
debitandcreditcards,exploitedhisalumnusandfriendlisttosetupan'advisoryboard'tohelphimsailthroughhisfirstyear."Thesewerepeoplewhohadaround15
yearsofexperience,wereinimportantpositions,andhadlargenetworks.Itwasveryusefulforagroupwithsuchpeopletocometogetherandhelpsetupandgrowthe
business,"saysJayaraj.Whetheryouhirefulltimeemployeesorworkwithconsultantsdependsonthekindofindustryyouoperatein.ChawlaofKoolkartbelievesthat
inanecommerceindustry,hiringfulltimeworkersalwaysmakessenseifthefinancesallowit."Althoughyoudonotseeyourcustomer,theremustalwaysbepeople
whocanhandletheirgrievancesquickly.Nothingwillkillanecommercefasterthanbadcustomerfeedback,"hesays.Butifyouareshortoncash,oryourmonthly
operationsarenotgeneratingenoughcashtosustainemployees,itisadvisabletostartwithconsultants.
Notmaintainingafinancialbuffer
Manypeoplehesitatetostartaventurebecausetheyarethesolebreadwinnersfortheirfamiliesandthelossofaregularmonthlyincomecanposeproblems.Aworking
spousecaneasethepressure.AskBhaskarChattopadhyay,whostartedArtSquareinNovember2012withaseedcapitalof3lakh."Mywife'sincometookcareofthe
dailyexpenses,whichwasabighelpandallowedmetofocusonthebusiness,"hesays.Thegestationperiodofabusinessventurecanbelong.Jainhadtowaitforthree
yearsbeforehecouldpayhimselfthefirstsalary.
Thisiswhyyoumustestimatehowlongitwillitbebeforethebusinesscanearnmoney.Expertssayyoushouldhaveacontingencyfundtotakecareof68monthsof
expenses.Ifpossible,prepayanyoutstandingloans.Ifprepayingisn'tanoption,makesureyouatleasthavetheliabilityinsured.Beingdebtfreewillalsohelpyouin
caseyouneedfundingforyourventure.Theoverallportfoliomixwillalsoneedarejigwhenyoustartabusiness.Trytoreducetheriskinyourportfolioandsticktoa
conservativemix.Remember,youhavealreadyinvestedinyourownbusiness,sothereisenoughequityintheoverallportfolio.Shiftthefocusofyourinvestment
portfoliofromequitytodebt.Youcanshiftbacktoequityoncethebusinesspickup.Sinceweareplayingdefensive,itisgoodtohavesomecashreserveinyourPPF
account,asitistheonlyinvestmentthatwillnotbeattachedevenifyougobankrupt.
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Secrettofinanciallystablemarriedlife
MohanJayaraman|Feb26,2014,06.38AMIST
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Beingmarriedinvolveshavingasharedvisionaboutthefuture.Spousesshouldalwaysplantheirindividual,aswellasjointfinances.Ifnotappropriatelyplanned,this
couldtakeatollonthecouple'sfinancialhealth.
Marriedcouplesgenerallymaintaintwoseparatecreditrecordsandhistories.Thus,bothhusbandandwifeshouldobtaintheirindividualcreditinformationreports(CIR)
fromarecognizedcreditinformationcompanyandchecktheirrespectivereports.MostmarriedcouplesinIndiamovefromanindividualisticcreditoutlooktoajointone
postmarriage.Insuchsituations,itwouldbeprudenttoanalyseboththeindividualCIRsandtakeaconsolidatedactiononwhatisneededtomaketheirfinancial
situationbetter.
Maintainingagoodcreditscoreiseasiersaidthandone.Afewsimplestepscangoalongwayinkeepingacheckonyourcredithistory.
Alwayspayasagreed
AllrepaymentsandmissedonesarerecordedonyourCIR.Missedpaymentsandhighoutstandingamountsnegativelyimpactyourcredithistoryandcreditscore.Pay
yourEMIsandcreditcardduesontimeandasagreedtothelender.
Jointandguarantorcredita/cs
Monitoryourjointloansorloanswhereyouaretheguarantorregularly,sinceyouareheldequallyliableformissedpayments.Jointholder'snegligencecouldaffectyour
abilitytoaccesscredit/loanwhenyouneedit.Alsoevaluatethepossibilityofmovinganindividualloantoajointmode.Inthisway,bothofthemcanavailadditionaltax
benefitswhichinturnwillresultinfamilysavings.Suchopportunitiesalsoprovideeachpartnertomonitorthefinancialsituationofthefamilyandtotaloutstanding.
Credit/loanapplications
Inquiriesmadebylendersbecauseofanapplicationyoumadeforcreditorloancanaffectyourscore.Toomanyinquiriesmightmeanthatyou'retakingontoomuchloan
orthatyou'reinsomekindoffinancialtroubleandarelookingforcredittohelpyouout.Inmostofthecases,itwillbeprudenttoapplyfortheloanasjointholders
ratherthanindividualpersons.
Howtoimproveyourscore?
Recencyoftheoccurrenceofthedefaultisconsideredbythelenders.Asaresult,thoughdefaultsmayhavesomeimpactonyouroverallcreditrating,itshouldnot
preventyoufromavailingofanewloanifyourpaymentbehaviorsubsequentlyhasbeenregularacrosstheloansandcreditcardsyouhold.However,incaseofcouples,
oneofthemhavingabetterthanexpectedscorecancompensatetohavingslightlypoorscoreoftheother.Suchscoreswillbeviewedcomplementaryincaseofjoint
liabilitywhencouplesapplyforaloan.
Thecreditscoreisimpactedbyacombinationofbothnegativeandpositiveevents.Manybanksallowcustomerstorebuildtheircreditrecordwithasecuredcredit
productandthecreditcardwithadepositsecuringitisanexample.Thisisdefinitelyagoodmeansofrebuildingagoodtrackrecord.
ThewriterisMD,ExperianCreditInformationCoofIndia
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Rightportfoliomixneedstobecustomized,notgeneralized
MukundSeshadri|Feb26,2014,06.28AMIST
Oftenfinancialplannersareaskedquestionslike'whereshouldIinvest?','HowmuchshouldIinvest?','Doesinvestingingoldstillmakessenseorisrealestatethenext
bigsector?','Whatshouldbemyassetallocationgivenmyageandprofile?'andsoon.However,thereisnogenericanswertoanyofthem,becauseforeachindividual,
dependingonseveralfactors,theanswercouldbedifferent.Itislikeaskingadoctorwhichmedicineoneshouldtakewithoutactuallyknowingwhattheillnessis.Aright
portfoliomixishighlyspecifictoeachindividual/familyandhastobecustomizedandnotgeneralized.Herewewilltrytolookathowonecangoaboutchoosingthe
rightportfoliomix.
WhyshouldIinvest?
OftenpeoplehaveablanklookwhenIaskthisquestionasmostpeoplearenotclearaboutthegoalsforwhichtheyshouldinvest.Investingonlyforreturnscannotbea
singlepointagendabecauseyourmilestoneswilldecidetheamountofinvestment,themagnitudeofriskthatyoucantakeandthevolatilitythatyoucanbear.Sothefirst
stepistopendownyourgoals,whyyouneedtoinvestandwhendoyouneedthemoney.Thebasicruleisthatyoucan'tkeepyourinvestmentsinvolatileassetswhen
youarenearingyourgoals.
Understandnatureofassets
Understandingthebehaviorofanassetclassisverycrucialinassetallocation.Theyarebroadlyclassifiedasfollows:
Equity:Investinginequityislikeinvestinginabusinessventure.Itisvolatileintheshorttermbutinthelongtermitgenerallytendstobeatinflationandineffecthelpus
buildwealth.However,thisassetshouldbelookedatfromalongtermperspectiveonly,thatisfiveyearsormore.Investinginthisassetsystematicallymakesawholelot
ofdifferenceingeneratingabetterriskadjustedreturnandshouldbethepreferredmodeofinvesting.
Debt:Theseareassetswhichmoreorlessgiveanassuredreturn,likefixeddeposits(FDs),recurringdeposits(RDs)etc.However,notalldebtproductsgiveaguarantee
anddependinguponthenatureoftheassetcouldbequitevolatileaswell.Debtischosenfortheirstabilityandliquiditybuttheytendtogeneratereturnsbelowinflation
inmostofthecasesandsotoomuchexposureinthisassetclasscanactuallyerodewealthinthelongterm.
Gold:
ThisseemstoalwaysretainitslusterinIndia.However,ifthisassetisboughtasajewelryitcomeswithahugeemotionalquotientandisgenerallynottraded.Hence
investmentsviathegoldETFroutecouldbemoreproductive.Goldishighlyliquidandcanhelpbalancetheportfolio.Soitisimportantthattheproportionshouldbe
maintainedtoamaximumof5%inonesportfolio.
Realestate:
Thisisacompletelynonregulatedmarketandpricesmoveaspertheseller'sperspectiveofhisproperty.Itcangivegoodappreciationbutisextremelyilliquidandthe
taximplicationsshouldbeknownbeforeoneinvestsinrealestate.
Liquidmoney:
Thisisthemoneylyinginsavingsaccountwhichistobeusedfordaytodayexpenses.Althoughhighlyliquid,itattractsverylowinterestrate.
Combineassetswithmilestones
Thisisthemostcrucialstepintheentireexerciseandtheservicesofaplannermaycomeinhandyinhavingafinancialplan.Themostimportantaspectoffinancial
planningisthatassetsgetlinkedwithgoalsandmoneyneedstobeavailablereadilytofundthemoncethemilestonescomeclose.Amismatchinthesamecanbe
harmfultotheentirefinancialplanningexercise.Forexample,arealestateisassignedtoachild'sfutureeducationbutwhenthegoalcomescloseeithertheassetmaynot
getareadybuyerortheamountneededfallsshortofthepropertyvalue.Insuchcasestherecouldbeadistresssaleandthecustomermightenduppayinghugecapital
gainsonthesame.
Arightportfoliomixisindeedcrucialforthewellbeingofafinancialplanbutthishastobeawellthoughtoutplankeepingthefinalgoalsinmind.Elsetoomuch
allocationtooneassetclassmightgivegoodreturnsbutmightalsojeopardizetheentirefinancialplanningprocess.
Thewriterisfounderpartner,MSVenturesFinancialPlanners
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Singledemataccounttoboostinvestmentculture
ParthaSinha|TNN|Feb26,2014,06.23AMIST
OnFebruary17,whenfinanceministerPChidambaramplacedtheInterimBudgetintheLokSabha,itwasclearthattherewasnomajortakeawaysforinvestors.
However,amongseveraleconomicandtaxationrelatedproposals,therewasonesentencethatmarketplayersbelievehasthepotentialtochangehowpeoplemaintain
theirinvestmentrecords,andinturnwouldalsoimproveefficiencyatalowercost.Theproposalrelatedtohavingasingledemataccountforallinvestments.
Beforewegetintothedetailsabouthowthisproposalcanchangetheinvestmentprocessandalsoimpactthefinancialservicesbusiness,wetakeabrieflookathow
investorscanlookatthevariouspartswithintheFM'sspeechthatispresentedeachyear.
AccordingtoKRamalingam,chieffinancialplanner,HolisticInvestment,somekeyindicatorsthatcometotheforeduringtheBudgetpresentationactaspointers
towardsinvestorexpectationsatleastfortheyear.Therearequiteafewmajorelementswhichshouldinterestinvestorsandcanhelpthemdrawuptheirownestimates
forthecomingfiscal.
WhentheFMmakesastatementonthegovernment'seconomicpolicy,italsoprovidesaglimpseoftheGDPestimatesforthecomingfiscalandalsotheoutlineofthe
strategytobefollowedformeetingthefiscaldeficittarget."Basedonthesefigures,theinvestorcanhaveafairidearegardingtheeffectivetaxcollectionsandthe
quantumofmarketborrowings,"Ramalingamsaid.Themarketborrowingfiguretheamountoffundsthatthegovernmentplantoborrowfromthemarketisalmost
alwaysadirectresultofthefiscaldeficitnumber,whichisoneofthechiefpointersthatshouldkeepinvestorsinterested.
Themarketborrowingisfigureusuallyhasadirectimpactontheequityandbondmarkets,andalsotherateofinterestintheeconomy.Iftheborrowingamountismuch
highercomparedtothepreviousyear,thatisanindicationthattheinterestratewouldmovenorthwardsincetoborrowmorethegovernmentmostprobablyhavetopaya
higherrateofinterest,whichinturnwouldpushuprateofinterestforeveryoneinthesystem.Thiswillhaveanimpactontherateofinterestpaidonhome,car,
consumerandotherloans,andalsotheFDratesthatinvestorsgetontheirdeposits.
"Globalinvestors(too)aregoingtofollowthedeficitnumberscloselyandtheyareunlikelyignoreitandthisisexpectedhaveanimpactontheoverallfinancialhealth
andtheenvironmentofthecountry,"Ramalingamsaid.Regardingtaxes,thefinanceministerhassaidthatitpossibletocutexcisedutyandservicetaxwithoutthe
parliament'sapprovalbyissuinganotification,andsoinvestorscanexpectsuchastepwillbetaken.
Singledemataccount
InhisInterimBudgetspeech,ChidambaramsaidthatanumberofstepshavebeenenvisagedtodeepentheIndianfinancialmarketsandoneofthemwasto"createone
recordforallfinancialassetsofeveryindividual".
Whatthismeansisthatforallyourinvestmentslikeshares,debentures,bonds,mutualfundsandalsoinsuranceandcommodityderivatives,etc,youcanhaveasingle
demataccount.
Marketplayerssaidthatsuchamovecouldbeagamechangerforthefinancialservicesindustryasawhole.Forone,sayforexample,ifyouwanttotakealoan,youcan
presentthelenderallthecollateralthatyoucanofferinonesinglestatement.
"This(onesingledemataccount)canmaketransactionsfaster,bringinmoretransparencyinthefinancialservicesspace,lowercostsoftransactionsandbringinbetter
efficiency,"saidAshishkumarChauhan,MD&CEO,BombayStockExchange."Thisisanexcellentinitiativewhichcanpromoteinvestmentcultureinthecountry,"he
said.
Oneoftheareaswherethismovecanbringinretailinvestorsisthegovernmentbondmarket.Atpresent,onlybanksandfinancialinstitutionsarepresentinthe
governmentbond(Gilt)marketandiftherearesomesuitablechangesaremadetotheruleslikereducingtheticketsizeforsmallinvestorsthatcanbringinretail
investorstothismarket,industryplayerssaid.
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IntherunuptoWomen'sDayonMarch8,inournexteditionwewilldealwithhowworkingwomenshouldapproachfinancialplanning.
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PSUstocks:Caughtinastorm
NarendraNathan|Feb24,2014,05.43AMIST
Ifthepriceofastockfalls95%inthreeyears,whatdoesthatsayaboutthepromotersofthecompany?Incompetent?Yes.Unconcerned?Maybe.Flybynightoperators?
Uhoh...thecompanyisMMTCandthepromoterisnootherthanthegovernmentofIndia.Thestockpricehasplummetedfrom1,030inFebruary2011to48.15now,a
dropof95%.
MMTCisonlytheproverbialtipoftheiceberg.PSUstockshaveslippedconsistentlysince2011.AstudybyETWealthshowsthatinthepastthreeyears,PSUstocks
havedestroyedinvestorwealthtothetuneof6,83,314crore(seetable).The10biggestwealthdestroyershavelostmorethanthetotalmarketcapitalisationofTCS,the
mostvaluablecompanyontheIndianbourses.ThetotalwealthdestroyedbyallPSUsismorethanthreetimesthetotalequityinvestmentofthemutualfundindustry.
PSUsasplaythings
ThereareseveralreasonsforthedownturninPSUstocks.Thebiggestproblemfacingthemistheinterferencebytheirpoliticalmasters.PSUsareplaythingsinthehands
ofpoliticiansheadingtheministriesthatcontrolthesecompanies.Asthelargestshareholderinthesecompanies,thegovernmentdoesnotseethemasbusiness
enterprises,butcharityorganisations."ThegovernmentthinksthatPSUsaretheretoservethenationalinterestandnotmakemoneyforshareholders,"saysSaurabh
Mukherjea,CEO,institutionalequities,AmbitCapital.
ThisexplainswhyPSUoilmarketingcompaniescontinuetobeartheoilsubsidyburden."Whyshouldalistedcompanythatalsohasminorityshareholdersbeforcedto
bearthissubsidyburden,"asksDevenChoksey,managingdirector,KRChokseySecurities.ThegovernmentforcingPSUstobearitssubsidybillisakintoapromoterof
aprivatecompanytakingoutmoneyfromthecompany'sreservestofoothispersonalexpenses.Thereisnoclarityonhowlongthissubsidyburdenwillcontinue.While
the50paisepermonthincreaseindieselisgood,theincreaseinthesubsidisedLPGcylinderswillnullifymostofthegains.
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Liketheoilsubsidyburden,companieshavebeenforcedtotakemanyothersuboptimalbusinessdecisionsthatultimatelyhurttheirprofitability.Forexample,several
PSUshavebeenforcedtorollbacktheirdecisiontodisinvestfollowingoppositionbytradeunions.Similarly,PSUsareforcedtopayjumbodividendseveryyear.Inthe
pastthreeyears,thegovernmenthasextracted91,793croreasdividendfromPSUs(seebox).Thereisalsointerferenceinawardingcontractstoprivatesectorcompanies.
Familysilveratadiscount
Anothermajorproblemisthegovernment'sdisinvestmenttarget.Inthe2013budget,theCentralgovernmenthadputafiscaldeficittargetof4.8%for201314.
However,thefiscaldeficithasreachedalmost95%ofthisfigureinthefirstninemonthsofthefinancialyear.Worse,thegovernment's40,000croredivestmenttargetis
wayoffthemark.Ithasmanagedtoraiseonlyaround4,600croretillnow.Around3,000crorewasgeneratedthroughthestakesaleinsixcompaniestomeettheSebi's
listingnormsandanother1,600crorecamefromthedisinvestmentofthePowerGridCorporation.
Astaxcollectionstooarebelowthetargetandtherevenueexpensesareballooning,thefiscaldeficitislikelytoexceedthe4.8%markin201314.Thegovernmentis
tryingseveraltrickstomeetthetargetsetinthebudgetandPSUsarethepawnsinthisgame.
Sinceapublicsaleofsharesthroughtheofferforsale(OFS)routeisvehementlyopposedbytherespectiveministries(theytreatPSUsastheirpersonalfiefdoms)and
employees,thegovernmentmaynotdosointhecomingmonths,especiallysincethegeneralelectionsareroundthecorner.Itmay,however,bridgethegapbyasking
cashrichPSUstobuyintoothergovernmentownedcompanies.Forexample,thegovernmenthasalreadyaskedtheprofitmakingONGCandOilIndiatobuyintothe
lossmakingIndianOilCorporation.
"Thecrossholdingisproposedmostlyinoilcompaniesandtheyneedcashfortheirowngrowth,"saysVibhavKapoor,groupCIO,IL&FS.Thoughthecompaniesthat
buythesesharesareallowedtogeneratemoneybysellingtheminthemarket,itisnotpractical."Thegovernment'sdivestmenttargetmaybeachievedthroughcross
holdinganddividendpayouts.However,thecompaniesthatacquirethesesharesmayendupholdingthemiftheyarenotabletogetgoodvaluations.MostofthePSUs
wereunabletoselltheearliercrossholdingsinthemarket,"saysRajeshCheruvu,CIO,RBSPrivateBanking.
Endofmonopolies
Thereisahistoricalreason,too,forthewoesofthePSUs.Mostofthesecompaniesweremonopoliesbeforetheeconomicliberalisationinthe1990s.However,they
couldnotwithstandthecompetitionandgraduallyslippedintoirrelevance.Eventheerstwhilegoodcompanies,suchasBSNL,MTNLandAirIndia,areclosetobeing
declaredsick.Thesestockswouldhavefetchedhandsomemoneyforthegovernmentiftheyhadbeensoldoffintheirheyday."BSNLwasvaluedat80,00090,000crore
then,buttodayisapaleselfofwhatitwas,"saysSandeepShenoy,executivedirector,AnandRathiInstitutionalEquity.Asimilarfatemaybeawaitingseveralcashrich
PSUcompaniesoncetheylosetheirmonopolystatus.
Tobefair,notalltheproblemsfacedbyPSUsarelinkedtothegovernment.Manyofthecompaniesarealsoonthewrongsideofthebusinesscycle.Forexample,heavy
engineeringmajorBHELhasbeenbadlyaffectedduetodelaysintheclearanceofpowerprojectsduetovariousreasons.Similarly,amajorportionoftheNPAsofthe
PSUbankscanbetracedtoinfrastructureprojectsthathavebecomeunviable.ThepowersectorreformsinitiatedbythegovernmentmaygetderailedaftertheAam
AAdmiPartydictateda50%powertariffcutinDelhi,followedbya20%copycatpowertariffcutinMaharashtra."ThePSUbanks'exposuretodistributioncompanies
inMaharashtraandDelhimaygetintoproblemsnow,"saysChoksey.Withotherstategovernmentsalsoexpectedtogetintothefreepowerbandwagon,thiscould
snowballintoabigmessinthecomingmonths.
AllthesefactorshavecombinedtopulldownthebottomlinesofPSUs.TheirconsolidatedfinancialratiosshowthattheprofitabilityofPSUshasgraduallydiminishedin
thepastfiveyears.Thereisnolightattheendofthistunnel."PSUswon'tbeabletoreporthighgrowthrates,especiallywhentheeconomyisgrowingonlyat5%dueto
thequalityofmanagementinthesecompanies,"saysLalitThakkar,managingdirector,institution,AngelBroking.
Whatinvestorsshoulddo
Inthepastfiveyears,too,thePSUshavegivenadismalperformance.WhiletheSensexhasgivenannualisedreturnsofover17%,theBSEPSUindexhasbarelygiven
2%returnsayear.ThetrendisreplicatedintheperformanceoftheBankBeESandthePSUBankBeESinthepastfiveyears.
Mostoftheexpertswespoketosaidthatinthecurrentscenario,PSUsshouldnotbepartofyourcoreportfolio."PSUsarenolongervaluecreatorsinthelongterm,"
saysCheruvu.Othersagree."Withthemajorityshareholderdoingthingsinitsownway,otherlongterminvestorscanonlysellasthereareoptionsgalore,"saysShenoy.
However,therearethosewhofeelthatthebeatendownPSUcountersareattractivelypricednow."Mostofthenegativesarealreadyintheprice,"assertsAmarAmbani,
headofresearch,IndiaInfoline.Sincethevaluationsarecheap,thedividendyieldofPSUstocksissignificantlyhigh.Thedividendyieldwillactasacushionforthese
stockssothedownsidewillbelimited,especiallysincewearegettingintoaturbulentphasetriggeredbythetaperingoftheUSstimulusprogramme.
Besides,thoughthecrossholdingswithinthePSUsdonotbodewellforlongterminvestors,ithassetatrestthefearsthatanexcesssupplyofPSUsharesthroughthe
OFSroutewouldputpressureontheshareprice.Expertsfeelsthatthisprovidessomestabilitytothecounters.
Hopespinnedonnewgovernment
WhatcanbethepossibletriggersforPSUstocks?"Strategicsaleofthegovernmentstakeisthebestoption.Itisgoodforthecompanybecausethenewmanagementcan
pursuethegrowthpathitchooses.CreationofcrossholdingsordividendstrippingfromPSUscouldconstrainthecapitalexpenditureorgrowthplansoftheacquiring
PSU,"saysCheruvu."TherecanbeahugereratingofPSUstocksifthenewgovernmentpressesaheadwithprivatisation,"saysThakkar.
Evenifthenewregimedoesn'tgoaheadwithastrategicsale,somepositivepolicyinitiation,alongwiththeexpectedeconomicrecovery,canhelpthebatteredPSU
stocks.MostoftheproblemsfacedbythePSUbanksnowaredirectlylinkedtothegovernment'spolicyflipflopsontheinfrastructureandpowersectors.Theasset
qualityissuesofthePSUbankscanberesolvedifthereisclarityinthegovernmentpolicy.Powersectorrevival,ifithappens,willbegoodforpowerequipment
manufacturerslikeBHEL.
TheRBIhashintedthatinterestratesmayremainstableinthecomingmonths.Withagoodmonsoonandonlymodestincreaseinminimumsupportpriceforriceand
wheat,theconsumerpricebasedinflationmayalsocomedowninthecomingmonths,allowingtheRBItocutrateslater."ThePSUbankswillbenefitfromtheexpected
fallininterestrates,"saysThakkar.ThevaluationgapbetweenPSUandprivatebanksistheotherreasonthatmakesPSUbanksattractive.
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RBIPSUBanksNarendraNathanBHEL
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Investingrowthassetstoretirecomfortably
UmaShashikant|Feb24,2014,05.41AMIST
Lastweek,Iwroteabouttheneedforretiredinvestorstohaveagrowthcomponentintheircorpustofightinflation.Inthefinancialadvisoryspace,it'sachallengeto
convinceretiredinvestorstotakerisksinordertoachievecapitalappreciationintheirportfolios.Manychooseacompromisedlifestyleandcurbtheirexpensesin
retirement.Whatshouldtheydoinstead?
Thereareonlytwowaystocreatealargecorpus:savingalargepartoftheincome,orinvestingthesavingingrowthassets.Inacountryofsavers,thefirsthasbeenthe
naturalchoice.However,theseconddeservesattention.
Aninvestorwhoissavingforretirementistryingtoreplacethehumanassetwithaninvestmentassetthatwillgeneratetherequiredincome.Thesalaryatthebeginning
oftheearningyearswillbeadequate,butseemtoosmall30yearslaterbeforeretirement.Similarly,thecorpusanditsfixedincomeatthetimeofretirementwillseem
adequate,butbecometoosmall2530yearsintoretirement.
Thisiswhythesavingssetasideforretirementneedslongtermcapitalappreciation.Itmaybewoefullyinadequateforthesavingsdeployedinfixedincomeassets,
yieldingjustabouttherateofinflationasannualreturn,tomeetthechallengesofretirement.Thisiswhy'safe'allocationintheaccumulationphaseisharmfulforthe
investor'swealth.
Itisnotasifsavershavenotlookedstrategicallyatgrowthassetsandinflationadjustedincomes.Manyhaveinvestedinasecondhousewiththeintentionofearninga
rentalincome.However,thisstrategyhasitsnegativeconsequences.First,manyretireesfindthemselvesassetrichandcashpoor,holdingpropertyboughtseveralyears
ago,whichfetchesamoderate,inadequaterent.Second,manyfinditcumbersometoapportionassetsamongheirswhenwealthisconcentratedinproperty.Despiteits
constraints,theoptionofcreatingarentalincomeisalsoachoiceavailableonlytoasmallproportionofinvestors,whomayhaveahigherdisposableincome,high
savingsandaccesstobankloans.
Itisforthisreasonthatthemandatorysavingprogrammesforalargerpopulationofinvestorsshouldincludegrowthassets.TheProvidentFund,whichisthedefault
choiceofthesalariedclass,haslonginvestedonlyinfixedincomeassets,consideringequityasrisky.Itisaninjusticetothesavingclassofordinaryinvestorsthat,inthe
garbofsafety,theirlongtermsavingsaredeniedtheopportunitytogrowinvalueovertimeandenableabetterqualityofretiredlife.
Thereisawidespreadconcernthatalongtermgoalsuchasretirementshouldnotbesubjectedtotherisksofgrowthassetslikeequityshares.Thisargumentprimarily
restsonthevolatilityofstockmarkets.Stockmarketsenableentrepreneursaccesstoriskcapital,buttheirdesignincludesamechanismforcontinuousevaluationof
businessesbasedonpubliclyavailableinformation.Thisnotonlycreatesvolatileprices,butalsotriggersbullandbearphases,wheninvestorsoverreacttoinformation
anditsimplicationfortheunknownfuture.Toinvestinthestockmarketsistoexposeoneselftothisvolatility.
Therisksarefurtheraccentuatedbythefactthattheinvestor'sneedforaccessingthecorpusmightcoincidewithabearmarket,whenpriceshavefallensteeply.Thereis
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nochoicebuttocarefullyconstructanaccumulationstrategyforbuildingaretirementcorpusforaninvestor.Thisresponsibilitylieswiththefinancialadviser.First,the
assetallocationneedstoalignwiththeinvestor'slifecycle.Second,thestrategicallocationneedstacticaltuningsothatthedownsiderisksarecontained.Third,acareful
selectionoffundsisneededtoensurethatthecorpusisinvestedindiversifiedportfoliosthatarewellmanaged.Thisrequiresskillsinfundselection.
Educatingandpersuadinginvestorstotakeastrategicviewofretirementplanningistoughwhentheyfailtopickwhatisgoodforthem,stickingtotraditionalchoices
eveniftheydon'twork.Thisisachallengeadvisershavetotakeon,especiallyduringthesechangingtimes,whentoday'sinvestorswillretirebutnotearnapension,and
refusetoseekfinancialsupportfromtheirchildren.
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retireinvestgrowthassets
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Debtfundsfacemarketriskstoo
PriyadarshiniDembla|TNN|Feb18,2014,07.35AMIST
Likeequityfunds,investorsmustlookatfactorsbeyondperformancewhileselectingdebtfunds.Thereareafewuniqueaspectsthatinvestorsmustcheckoutbefore
shortlistingdebtfundsformakinganinvestment.
Matchinvestmenthorizon
Sincedebtfundsarelargelycategorizedonthebasisoftimeperiods,investorsshouldselectthefundwhichmatchestheirinvestmenthorizon.Forinstance,foran
investmenthorizonoflessthanayear,investorscanselectanultrashorttermoraliquidfund,dependingonitsaptnessintheirportfolios.Likewise,foraninvestment
horizonofbetweenoneandthreeyears,shorttermfundswouldbemoreappropriate.However,theinvestorshouldbearinmindthathigherthematurityofdebtfunds,
morepronetheywillbetointerestraterisks.
Evaluatetheassociatedrisks
Thisisoneofthemostneglectedbutacriticalaspectofdebtfunds.Foralongtime,debtfundshavebeenperceivedtocarryverylowornorisk.Nothingcouldbefurther
fromthetruth.Debtfundscarrycertaininherentriskssuchasinterestrate,creditandliquidityrisks.Beforeinvestingindebtfunds,investorsmustbearinmindthatthese
riskscanhaveanadverseimpactonafund'sreturn.
Interestraterisk:Thisisoneofthemostprominentriskstowhichdebtfundsareexposedto.Itreferstoachangeinthepriceofabondduetoachangeintheprevailing
interestrate.Higherthedurationofthebond,moreitspricewilltendtofluctuatewiththechangeintheinterestrate.Hence,inarisinginterestratescenario,investors
mustconsiderselectingfundswithlowermaturityandvisaversa.
Creditrisk:Thequalityoftheportfoliooritscreditworthinessisanotherimportantparameterforselectingdebtfunds.Eachdebtinstrumentinafundisassignedacredit
rating.Higherthecreditratingofthefund'sunderlyinginstruments,lessexposedthefundwouldbetocreditdefaults.Creditriskisapplicabletocorporatebondfunds
andnottogovernmentbondfundssincethelatterhaveagovernmentbacking.
Liquidityrisk:Liquidityistheeasewithwhichafundmanagercansellaparticularsecurityinthemarket.Afundfacesliquidityriskifthefundmanagerisnotabletodo
soduetolackofdemandforthesecurity.Liquidityriskishighinfundshavingalowcreditqualityportfolio.
Accountforexpensesandevenexitloads
Giventhatreturnsfromdebtfundsaretypicallylower,highexpensescouldmakeahugedentonthereturns.Therefore,beforeselectingadebtfund,investorsmust
ensurethatthefundhasapragmaticexpensestructure.Further,variousdebtfundslevyanexitloadifinvestmentsareredeemedbeforeaspecifiedperiod.Theideaisto
detershorttermflowsintothefundinordertoenablebettermanagementoftheinvestments.Hence,aninvestorshouldlookintoexitloadscarefullybeforeinvesting
because,justincaseofanearlywithdrawal,thesecostscouldseverelyimpactreturns.
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Ensurethefundhassufficientassets
Thefundsizeisanimportantaspecttolookatindebtfundsbecausetheytypicallyseehugeamountsofassetsmovinginandoutofthemonadailybasis.Asufficiently
fundeddebtfundwouldenablethemanagertomeetredemptionpressureswithoutresortingtostresssellandkeeptheinvestorinterestintact.Thiswouldalsohelpthe
fundtostayafloatduringadversemarketconditionswhenredemptionpressureishigh.
Besidesthese,investorsshouldalsolookatthefund'sperformance(bothreturnsaswellasriskadjustedreturns)overalongperiod.Thiswillhelpthemunderstandhow
effectivelythemanagerhasbeenabletomanoeuvrethefundthroughmarketcycles.
Thewriterisresearchassociate,MorningstarIndia
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Trans&RectwinsorderworthRs96crfromAdaniGroup
Transformers&RectifiersIndiawinsorderfromAdaniGroupworthRs96crore.JitendraMamtora,Transformers&Rectifiers,talkstoETNowaboutthesame.
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EstablishaTrustforsuccessionplanning
TariqAboobaker|TNN|Feb18,2014,07.34AMIST
Everyfamilyisuniqueandsoaretheirrequirementsandneeds.However,onefactorcommontoallistheneedforassetprotectionandsuccessionplanning.LikeWills,a
Trustisalsoanextremelyusefulinstrumentinestateandsuccessionplanning.Itgivesyouthelibertytoprotectyourassetsandmakeuseofthemwhileyouarealiveand
decidewhocontrolsandbenefitsfromthem.
ATrustisarelationshipwherebybothmovableandimmovableassetsaretransferredbyoneparty(Settlor)tobeheldbyanotherparty(Trustee)forthebenefitofathird
party(Beneficiary).Trustscanberevocableorirrevocable.
InarevocableTrust,theassetsarebequeathedtotheTrustwheretheSettlorhasthelibertytorecallhisassetsatanypointoftime.Itismorecommonlyusedasan
alternativetoaWilltoavoidthehassleofProbateandthepossibilityofaWillbeingcontested.
InarevocableTrust,theassetsoftheTrustaredeemedtobethatoftheSettlor,whereasinanirrevocableTrust,assetsoncebequeathedtotheTrustandareconsideredas
theassetsoftheTrustforthebenefitofthebeneficiariesandgetpassedontothebeneficiary.AnirrevocableTrustiscommonlyusedforassetprotectionandringfencing
ofone'sassets.
ATrustcanholdalltypesofassetsthatcanbeheldbyanindividual,thatisfromshares,realestate,mutualfunds,demataccounts,fixeddeposits,bankaccounts,bank
lockerstoevenartandantiques.ItisalsoallowedtosellorrentTrustpropertyandpassontheincomefromthesametothebeneficiaries.
ATrustcanbeforamultiplenumberofyears.Itcaneitherbetimeframed,thatis'whenmychildturns18or25years',orobjectivedefined,thatis'onthebirthofmy
grandchildordeathofmygrandmother'.
IfeelaTrustisrequiredbyeachoneofusregardlessofageorsocialstanding.
Itcanbeusedandbenefittedbyall,beitparentswithyoungchildrenforthebenefitofthechild'seducation,individualswithafamilymemberwithspecialneedswhois
unabletomanageassetsonhisown,elderlymembersinneedofextramedicalcareorevensomeonewhocannotbetrustedwithalumpsumbequest.
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Alternativelyitcouldbeajointfamily,anuclearfamilyorcoupleswhoonlyhaveeachotherforsupportorsomeonewhowantstocontrolhispropertybecauseoffamily
dynamics.
BysettingupafamilyTrust,youcanbridgeallthegaps.TheTrustwouldhelpprotectassetsandavoidfamilyfeuds,protectfrombusinessrisksduringyourlifetime,
protectyourassetsfromgettingerodedasalimonyifyouoryourchildrendecidetocallforadivorceatalaterstage.ThroughaTrust,youcandeterminehowtohandle
themanagementofyourassetsforyourbenefitduringyourlifetimeandtofenceintheassetsforthebenefitofyourlovedones.ATrustiscertainlynotavehicleto
replaceyoubutitdefinitelyisatoolwhichwouldprotectandfulfilltheneedsofyourlovedonesinyourabsence.
ThewriterisMD,AmicorpTrustees(India).Thisisthethirdarticleinourmonthlyseriesonsuccessionplanning
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Sensexends192pointslowerNifty50at7,965
Benchmarkequityindices,BSESensexandNSENifty50,snappedatwodaywinningstreakaftertherupeefelltoarecordlow,dampeningmarketsentiment.The
BSESensexsank191.64points,or0.74percent,to25,860,whileNSE'sNifty50settled67.80points,or0.84percent,downat7,965.
Rupeehitsalltimelowof68.86againstUSdollar
Therupeefelltoitsrecordlowlevelof68.862duringtheintradaytradeonaccountofbuyingoftheUSdollarbythebanksandimporters.
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Correctportfoliomixcanincreasereturns
ParthaSinha|TNN|Feb18,2014,07.32AMIST
Tooptimizeaninvestor'sreturnsfromaportfolioandminimizetherisksinit,thereshouldbeacorrectmixofinvestmentoptions.Andsuchoptionscouldincludemutual
funds(bothdebtandequity),fixeddeposits(FDs),insurance,goldandrealestate.
Althougheachoftheseinvestmentproductsmaynotbesuitableforeveryindividual,theyarethepopularonesastheyconstitutemostinvestorportfolios.Financial
plannersandadviserssaythatwhiletryingtoreachtheperfectmixofinvestmentproductsinaportfolio,thebasicparameterslikeefficiency,diversification,risks,returns
andcostsshouldbekeptinmind.
Also,thereareseveralotherfactorsthatcouldinfluencethecompositionofaportfolio."Thereisalotofdynamisminthemarketandfactorskeepchangingallthetime.
Whatmightbegoodtodaymaynotbesoafterayear,"saysRamalingamK,director&chieffinancialplanner,HolisticInvestmentPlanners."Duecognizanceneedstobe
takenofmarketvolatilityandtheoveralleconomicoutlookwhichprovidestheoutlineforagoodinvestmentportfolio,"headds.
Beforewedelveintothecompositionofaportfolio,weshouldalsolookatthereasonsforhavingaportfoliothatisdiversifiedintothesefiveinvestmentproducts.
Allocateassets
AccordingtoTarunBirani,founder&CEO,TBNGCapitalAdvisors,therearefiveimportantreasonsthatcouldpromptaninvestortogoforassetallocation."Itworksas
arebalancingmechanismintheportfolio.Italsohelpsinreducingtheoverallvolatilityoftheportfolio,"saysBirani."Inaddition,assetallocationbringsin
diversificationtotheportfolio,bringsininvestordisciplineandthereductioninoverallvolatilityhelpsinachievingtheoverallfinancialgoalforthefamily,"headds.
FDsforlowerrisk
AccordingtoRamalingam,bankFDsareidealforinvestorswithalowriskappetite.Theyarebestsuitedforperiodsofuptooneyearorless.WhileinvestinginFDs,
youshouldrememberthatprematurewithdrawalscanattractapenalty,sotheinvestmenthorizonneedstobefinalizedbeforehand."Whenmarketsexperiencevolatility,
FDsarethebestplacetoparkfunds.Thoughthereturnsposttaxcouldonlybearound7%,FDswouldsafeguardagainsterosionofcapital,"hesaid.
YoucansetasideapercentageofyourcorpusforinvestmentsinFDs,andthatpercentagewilldependonthemarketconditions,yourpropensitytotakerisksandthe
overallinvestmentplan.
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MFsprovidestability,growth
Mutualfundscanprovidebothstabilityandgrowth,andtheyprovidesmallinvestorswithanopportunitytomakeinvestmentsinanarrayofstocksanddebtunderone
fundumbrella,andtheyarehandledbyaprofessionalfundmanagerwhoinvestsinthemarketbasedonanumberofparameters."Themajorbenefitsofmutualfund
investmentsarethattheyprovideasafetyblankettoinvestors'funds,diversificationisofferedandthefundsarehandledbythefundmanagerinatransparentmanner,"
saysRamalingam.
Formutualfundstoo,thepercentageofcorpustobeinvestedwilldependonpriorities,thestageoflifeinwhichtheinvestorisand,ofcourse,theriskpropensity,he
pointsout.
Insuranceisamust
Insuranceoffersyouaperfectriskmanagementplanandfinancialplannerssuggestoneshouldtaketheonlineterminsuranceoptionagainstfinanciallossfromthe
suddendemiseofthebreadwinner.Healthinsurancepoliciestakecareoftheunexpectedhospitalizationexpenses,whilepropertyinsurancecoversyoufromtheriskof
anynaturalperilsdestroyingyourproperty.
Goldactsasahedge
AccordingtoGurleenKaur,aDelhibasedfinancialconsultant,goldasanassetclassisaprotectionagainsteconomicdownturn."Goldisagooddiversificationtooland
italsoactsasatoolagainstinflation.Moreover,goldholdsanemotionalvaluemorethanitsfinancialvalueandisfoundinalmosteveryone'sportfolio,"saysKaur.
Accordingtoher,realestateisanotherimportantpartoftheportfolio."Generally,itisseenthatinIndia,realestateholdsasignificantcomponentofone'sinvestments
and,accordingtotrends,therealestateisgenerallytransferredfromgenerationtogeneration,"saysKaur.
Nextweek
Inournextedition,wewilltrytodecipherthetakeawaysforinvestorsfromtheVoteonAccountpresentedintheParliamentonMonday.
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