Archive for August, 2013

Book Profit in Gold

August 24, 2013

As per our automatic alert system, Gold reached the medium-term high value of 3000 Rupees.   Based on our previous buy strategy on Gold ETF, we now recommend you to exit @ profit.

GOLD BEES ETF went down around 2300 levels & now quoting around 3000.  Our initial buy was around 2500 levels.  (we were expecting 10% profits)

Remarks

Gold ETF is one strong scrip which cannot go to zero level, like other stock companies.  Thus, huge capital can be allocated during down times.  Historically, it had shown 20% yield every year, but on compounded basis. 

Those who have bought in 2300 levels might have gained 30% profits in 3 months.

5 Lakh Rupees invested would have yielded 1.5 Lakhs Profit, taking the average 1 Lakh Profit for sure.

Where to park the money?

Although the bears have pulled away from Gold, they are now busy destroying other assets around NIFTY, Banks etc.

For 100% gain in 2-3 years, one can take position in 50% down bank stocks, which are fundamentally good.

Taking a 3 from the stack, we have:

  1. State Bank of India This is a Blue Chip bank of India & we hesitated to touch our Value Stick on it, due to the high quoting price.  Now it have reached a historical 50% down level.
  2. Yes Bank This is another good stock which is down from 52 week high by 50%
  3. Bank of Baroda is another banking stock with almost 50% crashed from it s 52 week high.

The strategy we are following is switching the Gold Profit to these banking stocks in percentage of 50% for SBI, 25% for Yes Bank & BoB

How this strategy works?

We are again using the Guard Band principle to cover the stocks.  Here SBI stock will serve as the guard band for other stocks.  Again, if we are switching gold profits, there is no loss indeed.   In the short run, the stocks may go down another 25%, but given the turnover period of 2-3 years, this should come back.

Where NIFTY is heading?

The NIFTY PE Ratio is going around 15 & it is closer to bear mark of 13.  If NIFTY PE Ratio reaches 13, then it is a Year 2008 scenario where mad people will yell at stocks & sell them  at lower levels.  Iterating that, only 5% people makes money in stock market, they are the long term thinkers.  They control their emotion over short-term bursts. 

If NIFTY PE Ratio reaching 13 level, we will come up with a new set of blue chips playing in the ground level.  Surely a risk free bet of 5X profits in 2-3 years. 

(we believe 2016-2017 would be a Bull Run period for global economy taking the 8.4 year cycle)

We cannot predict, how much it can go down or up, but we can predict it will come up again! (through historical cycles)

Disclaimer

Please analyze yourself & take responsibility of your positions.

More

We have kept value alerts for Gold & other scrips, Time goes by, we will get the trigger & inform you for more risk-free opportunities.

http://www.futurecaps.com/UserAlerts/Main.aspx

Are the any completely-risk-free opportunity?

No! In life we have to take risks, so take calculated risks.  After all, taking no-risks at all is the HIGH-RISK situation! Smile

How LIC is eating your money?

August 3, 2013

The recent market crash had made people switch from stocks to LIC & Debt funds.  I would say, please understand the facts before moving to LIC.

Inflation

Inflation is value corrosion to Indian Rupee.  If we purchase 100 Rs. goods today, after one year we might need to spend 104 Rs. to purchase the same.

Inflation on average standard is taken as 2% to 4%, compounded.

What LIC is doing?

LIC is also working for profits, the profit they take is the loss you make!

Taking a traditional 20 year plan with whole amount paid on maturity, I can give the following table.

Here you are paying 25 thousand rupees per year, for 20 years.  You pay 5 Lakhs & you receive 5 Lakhs after 5 years.

See the value corrosion.

image

So you can see that you paid 5 Lakhs Value & you received 3.5 Lakhs Value.  There is a loss of 1.5 Lakhs in Value!

In the case of 4 year money back plan, you need to adjust the corrosion every 4 years.  Some LIC policies, will take care of free insurance after the maturity periods.  You need to do careful analysis in evaluating them.

Go for Term Plan

I would say, Term Insurance Plan is the best insurance plan as it purely deal with the RISK.

A term plan of 500 rs. per year would yield the same 5 lakh coverage.  The rest 24500 rs. can be invested on 10% interest yielding bonds or deposits.  Tax advantage of LIC can be achieved through these too.

You can see the difference here:

image

The term insurance plans are less promoted by agents as the COMMISSION is less.

Think again, the LIC is an institution, their business is to pool money, invest, multiply & give the deflate money back to you.

Please understand the other side before proceeding.

Back to Stocks

I would still recommend stocks as it fights well with Inflation.  Through proper diversification & buying the under-valued stocks, in the long term we can accumulate massive wealth.

All the top riches in the world are made through Stock Market.

  1. Warren Buffet through Berkshire Hathaway
  2. Bill Gates through Microsoft stocks

Our Portfolio

Even in the midst of crash, our portfolio is showing 5% profit.  Few months back, It was on 30% profit.

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Summary

Think Long Term We believe in long term investing & will continue to buy good quality stocks @ right prices.  We cannot see any single opportunity other than NIFTY crossing PE Ratio limit for selling the stocks.  We need to hold patience till 2016-17 at least.

Invest Monthly Every month, 25% of savings can be diverted to stock market. 

See Opportunity on Crash If market goes further down, it is a great opportunity to buy 10 Rupee Material spending 5 Rupee!

Continue Learning Knowledge is the key to success.  Learn, Think & Act smart 🙂