REPOST: What is your excuse for not saving and investing?

Most people say that saving and investing are essential components of financial planning, yet many of them are still reluctant to open an account or not place them among their top priorities. The article below from LiveMint lists some common justifications people use to explain the delay:

The biggest hurdle to financial security is your reluctance to start saving and investing. Here are some common justifications people use to explain the delay. Identify your excuses and see how you can work around them so that you don’t put your goals and needs at risk.

It is complicated

Investing may seem to be a complicated process, with many formalities for each type of investment or service. But when you break it down, broadly the same set of formalities have to be followed: you need to establish your identity and provide proof of address, provide your bank account details to route payments and receive investment proceeds and fill up the application form related to the investment or financial service. The central Know Your Customer (KYC) process to establish the identity and address of investors makes complying with the KYC norms a one-time exercise across the financial sector. Application forms typically require standard information to be provided and include details such as name, address and contact details, age, status, bank information and such. Compile this information as a one-time exercise and you are all set to make investments.

I don’t have the skills

The need to identify, evaluate and select investments and financial service providers may be a barrier to people with limited skills and information in this area. But it is possible to keep it simple so that this does not become an obstacle to investing. Use the goal horizon to decide how your investments should be distributed between equity, debt, real estate, gold and other assets for growth, income and liquidity. Once you determine the asset allocation, select simple vanilla products where the evaluation needs are minimal in each category. Go with bank deposits and savings schemes of the government, and bonds with superior credit rating for debt products. For equity investments, stay with lower-cost index products where you earn returns in line with the market without the risk of selection and expectations.

Sovereign Gold Bonds issued by the Government of India are a convenient way to invest in gold without the storage risks associated with holding physical gold. The bonds have a fixed tenure (the 2017-18 Series I had a tenure of 8 years) and are denominated in multiples of grams of gold with a basic unit of 1 gram. The price at which gold bonds are issued and redeemed reflect the prevalent market price and the bonds also carry a nominal coupon paid twice a year. Limit real estate to residential needs and postpone investment in it till the finances are more secure. Make changes to the asset allocation to reflect changes in the needs and goal horizons, and don’t let recent return numbers or market movements influence you. Stay with the basic products till you become better acquainted with the risks and returns in investments. After that, move to managed investments such as mutual funds for better returns.

One way to make better investments, without the long process described above, is to use the services of a financial adviser: to make your financial and investment plans.

My savings are insignificant

If your goals are important to you then you need better control over your expenses and income. Start with a budget and assign at least 10% of your take home income to savings before you meet expenses.

Stay with the budget. Even if you fail initially, build the discipline to live within your means. No savings is too small to invest. Most investments—including deposits with banks and the post office, small savings schemes, mutual fund investments and stock market investments—can be made with amounts as low as Rs1,000.

Apart from reducing expenses, also explore options to increase your income. Use the skills and talent you may have to generate additional income in your spare time. Start small and set targets to increase savings at steady intervals.

I have outstanding debt

Debt and investments both have claims on your income. You need to deal with the debt because it can corrode your financial situation. But ignoring investments will leave you unprepared to meet the future. Balance and prioritize between the two.

First, contribute to mandatory savings such as the provident fund and retirement account to the maximum extent possible. Next, deal with high-cost debts such as credit card debt and personal loans on an emergency basis. For other debts, especially lower-cost loans with tax benefits, such as home loans and educational loans, focus on meeting repayment obligations rather than on closing them early to have money for investments. Along with meeting debt obligation, assign savings and lump sum funds such as bonus to build an emergency fund. Stay up-to-date on servicing your debt and don’t add to it. As your income expands, increase the allocation to investments to catch up on the time lost when you had to focus on debt.

Investments can wait

This excuse can cost you a lot. Even when some goals are way into the future, postponing savings and investments may mean that your contribution to the goal from savings will have to be much larger than what it would be if you had started early. For example, if you delayed saving for retirement by 10 years, then your monthly contribution to reach the same goal value will be three times higher because, over time, compounding accounts for a significant portion of the corpus. And there is no way to recover lost time. You may have to settle for less if you are not able to make higher contribution to your goals and needs. To give your investments the benefit of time and compounding, start saving early. Maximize your contributions to mandatory savings schemes, which remain invested for the long term. Don’t let funds remain idle in low-earning accounts such as savings accounts. Set up systems to regularly invest surpluses, such as by signing up for systematic investment plans and other facilities offered by banks to move the surplus over a set limit to higher-earning products. Build an emergency fund so that you do not have to break into your long-term investments to meet urgent needs.

Recognise what is holding you back from your investment goals. Once you identify the problem, take simple doable steps to correct it and make it a habit. Over time, you will develop the financial discipline that prevents poor habits and beliefs from affecting your financial security.

REPOST: Euro zone growth revised up to highest rate in a year in first quarter

The Eurozone economic growth in the first quarter of 2017 reached its highest rate in more than a year, according to a revised reading by the EU statistics agency, Eurostat. Reuters has the full story:

Workers are seen in silhouette as they construct scaffolding in the port of Cannes, France, April 4, 2016. REUTERS/Eric Gaillard


The euro zone economy grew by more than previously estimated in the first quarter and at its fastest rate in a year, EU statistics agency Eurostat said on Thursday, ahead of a European Central Bank meeting likely to keep policy unchanged.

Eurostat said the 19-country euro zone expanded by 0.6 percent quarter-on-quarter and by 1.9 percent year-on-year. That compared with earlier estimates of 0.5 and 1.7 percent respectively.

On an annualized basis, the euro zone economy was expanding at a rate of 2.3 percent in the Jan-March period, far outstripping the 1.2 percent rate of the United States.

Solid economy growth but subdued inflation has left the ECB in a quandary. ECB President Mario Draghi is yet to be convinced that a recent rebound of inflation is durable because wage growth remains sluggish.

The ECB is widely expected to keep policy unchanged on Thursday, including its 2.3 trillion euro ($2.6 trillion) bond-buying program and sub-zero interest rates, despite resistance from cash-rich Germany.

However, the robust growth could lead the ECB to remove a reference to “downside risks” in its statement.

Eurostat said household consumption contributed 0.2 percentage points and gross fixed capital formation 0.3 points and government consumption 0.1 points to the first-quarter growth figure. The contributions of external trade and inventories was neutral.

REPOST: Warren Buffett’s winning investing strategy can be applied to any purchase you make

Warren Buffett’s core principle in investing can be applied to almost every purchase we make: Invest for the long-term. Read more on this CNBC article:

Daniel Acker/Bloomberg | Getty Images


Warren Buffett knows a thing or two about choosing worthwhile investments.

When deciding whether or not to invest in a company, he and his partners follow a few simple guidelines. One of those is trying to determine the company’s longevity.

“We sort of know it when we see it,” Buffett said during the the Berkshire Hathaway 2017 Annual Shareholders Meeting. “It would tend to be a business that for one reason or another we can look out five or 10 or 20 years, and decide that the competitive advantage that it had at the present would last over that period.”

Simply put, Buffett decides a business is worth investing in because it will last. He purchased See’s Candies with longtime business partner Charlie Munger in 1972 and spent more than $1 billion on Coca-Cola stock in 1988 — both of which turned out to be good bets and both of which he still owns today.


Contributor | Bloomberg | Getty Images
Warren Buffett drinks several cans of Coke a day.


“His approach is to be really sure of something before he buys it, and one of the ways he exercises that discipline is to sort of almost never sell. Not never sell, because he does sell stocks, but he sort of says to himself, ‘I know I’m almost never going to sell it, I’ve really got to like it before I get into it,” Buffett’s biographer Roger Lowenstein, author of “Buffett: The Making of an American Capitalist,” explained to Yahoo’s Alexis Christoforous.

“It’s not the not selling that makes these so good, it’s that discipline to buy things only when he really, really likes them,” Lowenstein says.

While not everyone will garner the same results as Buffett on the stock market, his core principle can be applied to almost every purchase we make: Invest for the long-term.

Continue reading HERE.

How to Use Basic Fundamental Analysis for Stock Picking

There are many schools of thought as to how an investor should intelligently choose the companies and stocks he will invest in. Some believe in fundamental analysis as the best way to go about this. Others rely on technical analysis of historical volume and price movements as represented by charts. Still, there are those who promote a combination of the two.

In this post, we’ll look at fundamental analysis as a basis for picking stocks.

Fundamental analysis basically means you look at the profitability of the business or the company represented by a stock which LOM does pretty well. You consider its past, current and projected performance in terms of earnings. You also try to understand the nature of the business – its customers and revenue sources, its competitors, its business processes, the management and owners, the company’s strengths and weaknesses, opportunities and threats, even macroeconomic and geopolitical / social factors that can affect it both the short and long term.

In a way, the fundamental investor, will take the viewpoint of someone buying into the business – as if he will actually be a owning a majority of the company. Someone in such a position would usually be investing for the long haul. Warren Buffet, for instance, is often quoted as saying that he buys a stock based on the assumption that the stock market will close the next day and not reopen for another five years. He also says that if you aren’t willing to hold a stock for ten years, you shouldn’t even think about owning it for ten minutes. If you want to follow Warren Buffet’s advice, then you need to do fundamental analysis on the stock you plan to buy.

Aside from long-term investors, value investors also need to apply fundamental analysis. The value investor believes that the market price does not always reflect a company’s true or intrinsic value. Market price frequently fluctuates – daily and even by the second at times. But the real value of the stock is relatively stable. So the value investor looks for price points where the market price falls far below the real value of a stock – and buys at such discount prices. He uses fundamental analysis to determine the real value – analyzing the financial statements published by a business quarterly and annually, also looking at financial projections based on revenue and cost data.

To do basic fundamental analysis you need the following Financial Statements, which are publicly available for all listed companies:

  1. Statement of Comprehensive Income or Income Statement
  2. Statement of Financial Position or Balance Sheet
  3. Statement of Changes in Equity
  4. Statement of Cash Flows


From these Financial Statements, you need to get the following data:

  1. Net Income (which can be found near the bottom part of the Income Statement)
  2. Revenue (which can be found near the top part of the Income Statement)
  3. Stockholders’ Equity (which is located near the bottom of the Statement of Changes in Equity)
  4. Outstanding Shares of Stock (which may be found in the Statement of Changes in Equity or in the Notes to the Financial Statements)


Equipped with the above data, you can then compute for the following financial ratios:


  1. Earnings per share (EPS) – compute this by dividing Net Income by Outstanding Shares of Stock. As a fundamental investor, you are concerned if the business is making money or not. So you look at the Net Income. By dividing Net Income by the number of outstanding shares, you convert the total Net Income figure on a per share basis. Thus you can compare different sized companies’ apples to apples just by comparing their EPS. The higher the EPS, the better.


  1. Profit margin– compute this by dividing Net Income by Revenue. Revenue is what a company gets paid for its products or services. Once you subtract from Revenue the costs that were incurred by the company, you get the Net Income. Profit margin shows how a company controls its costs. Assume two companies in the same industry. Company A has a net income of $1000. Company B has net income of $500. But then, Company had to earn revenues of $10,000 so it could earn the $1,000 net income. Meanwhile, Company B only needed revenues of $2000 to end up with the $500 net income. Company A has a profit margin of 10% while Company B has profit margin of 50%. Company B has better cost control and it is reflected in the higher profit margin. The higher the profit margin, the better.



  1. Return on equity (ROE)– compute this by dividing Net Income by Stockholders’ Equity. This ratio shows how effective a company is in generating profits using the capital it has. When comparing the ROE of two companies, the one with higher ROE made more profits out of the same capital invested or made the same profits out of less capital invested by the owners or stockholders. So the higher the ROE, the better.


  1. Price to earnings (P/E)– compute this by dividing the Market Price by Earnings Per Share. This ratio is used to compare companies within the same industry, especially since benchmark PE ratios differ from industry to industry. The higher the PE, the more expensive the stock. PE ratio basically means, how much an investor has to pay for the earnings of a share of stock. Comparing the PE ratio to the industry standard will help you determined if a stock is overvalued or undervalued.

Equipped with these simple ratios, you can already do basic fundamental analysis on any company you are considering for investment.

Miss Universe and Why Owning Up to Your Mistakes Can Make You a Better Investor


Beauty pageants don’t usually teach us some really heavy life lessons. But this year, at the 2015 Miss Universe Pageant, the audience witnessed something extraordinary that kept people talking about the event long after it was over.

Miss Universe has been running since 1952 as one of the most popular beauty pageants held internationally each year. Donald Trump used to co-own the Miss Universe Organization with NBC. However early this year, NBC boycotted the pageant after Donald Trump made some inflammatory statements about illegal aliens from Mexico. Trump bought the entire stock of Miss Universe Organization and later on sold it to WWE/IMG. Although not as popular in most western countries, the Miss Universe Pageant is a big affair for third world countries like Colombia and the Philippines.

So what was so special about this year’s Miss Universe? Well after the contestants were finally whittled down to two – Miss Colombia and Miss Philippines – the host, Steve Harvey, was supposed to finally announce the winner. But of all the horrible mistakes one can make, Steve Hervey, announced the wrong winner. So here was Miss Colombia, the Miss Universe sash and crown upon her, tears of joy streaming down her eyes, taking her first walk as Miss Universe 2015, waving to the crowd and the crowd going wild. In South America, the Colombians are already shouting on the rooftops, lighting fireworks and cheering for joy over their national victory.

Then, three minutes into all that, Steve Harvey goes back on the stage in Las Vegas and says to the entire audience that he made a terrible, terrible mistake. Miss Colombia was only the first runner up. Miss Philippines was actually the winner. The most awkward, unbelievable situation then befalls Miss Colombia. The crown had to be taken from her and transferred to Miss Philippines’ head. It was a live telecast via satellite so everything that went wrong was witnessed by the entire world, or should we say “universe.”

This is where the lesson comes in. Steve Harvey, as stupid as his mistake may have been, was a big man that night. It takes a big man to admit you’re wrong. And Steve Harvey did that in front of an arena, and the whole world for that, humiliating himself. When he admitted his mistake, he faced the possibility of ending his career, earning the ire of the world (particularly the Colombians), and hurting the feelings and embarrassing such a beautiful girl as Miss Colombia. He still did it though.

Are you like that when your investments go wrong? Different investors react in different ways when a stock they buy, for example, fails to perform as they expected. Some find it easier than others to admit that they made a mistake. The wise investors cut their losses ruthlessly, regardless of the initial pain. It hurts a lot when a paper loss becomes a realized loss. But after that, there’s also a feeling of relief and release. Release from worrying about your investment and wondering whether your loss will get even bigger. These investor types know how to accept the truth and move on.

Some investor types, however, can’t seem to sell their losing stocks. Some seem to be “in love” with their investment, thinking that they made the right analysis and chose the best – regardless of actual performance. They continue hoping that the price will rise in the end. Days turn into years and the investment stays stuck in their portfolio. These investors continue to deceive themselves and refuse to face the truth.

When Steve Harvey was going back up on stage to rectify his mistake, he seemed to walk around in a circle at first. He looked awfully nervous and hesitant, like he was trying to force himself to do something he found humiliating. But he still did it, however painful it was for him and everyone else. After he made the truth clear, and righted what he did wrong, there seemed to be an expression of relief that washed over his face. He got it over with. He did what he had to do.

Sensing that the audience was still confused and in shock, especially Miss Colombia and Miss Philippines, Steve Harvey even went further to tell the crowd that he was taking full responsibility for the awful thing that took place. That’s a brave man.

As investors, we also need to take full responsibility for our investment decisions. Don’t blame the underwriter or the research analyst or Vladimir Putin. Own up to your investment mistakes and learn from them. That’s the only way you can move on and shift to a better investment that might even help offset your losses. Win some, lose some. Cutting a loss means admitting you were wrong and owning up to your mistake.