Everyone's dream is to own a property. Obviously you need money to buy a property, but many recent instances of fraud and bogus selling of property is something that is beyond money alone.
If there is one important thing that gives legal protection to ownership of your property, it is the sale deed.
Understanding the basics of a sale deed can help you stay protected from getting duped. Let us see the basics of a sale deed, its importance, how it is prepared, what does it contain and how does it work! Read on . . .
What is sale deed?
A sale deed is one of the most valuable legal documents in a purchase or sale of a property. It is governed by the Registration Act and is an important document for both the buyer or the transferee and the seller or the transferor.
The purchase or sale of property is not legally complete until a sale deed is signed between the buyer and the seller. Usually a sale deed is signed only after both the parties are satisfied and comply with the terms and conditions as said in the agreement.
How is it prepared?
To begin with the buyer and the seller agree to prepare a draft sale deed on non-judicial stamp paper. This value of the sale deed will differ from state to state in the country and as prescribed by the Stamp Act of the respective State.
Once the following details in the sale deed is agreed between the two parties the sale deed is ready to be signed. The sale deed would also require to be signed by at least two witnesses with all their details included.
What does it contain?
A sale deed has almost all the details required to carry out the purchase or sale of a property. Beginning with the basic details like the full names of the buyer and the seller, and their addresses, the other details in the draft sale deed would include the details of the property under sale such as its identification number, its exact location, the address, total area of the property, and the detail of the construction if it is a house.
Most importantly the sale deed would require the seller to certify that the property under sale is free from any encumbrance and without any lien.
If there is an existing loan taken against the property the seller should settle the loan and then only execute the sale deed. However, it is always better for the buyer to check this with the local registrar's office.
Besides these the draft sale deed would also include the total amount to be paid for the purchase/sale of the property, advance amount paid if any, the dates on which the payment are made, how it is paid, the time given for the payments, the details of the bank transactions of the payments, etc.
The sale deed would also mention about the receipt issued by the seller to the buyer for the money received towards the sale transaction.
It would also clearly mention the exact date on which the seller would hand over to the buyer the original property related documents and the date of subsequent possession of the property under sale.
The draft sale deed would also mention the indemnity provisions for the buyer and the seller.
How does it work?
The sale deed is registered at the jurisdictional sub-registrar's office. Apart from the buyer and seller of the property under sale the witnesses should also be present at the time of registration.
Sometimes if the buyer or seller is not in a position to be physically present his nominated agent empowered with a Power of Attorney is legally allowed to execute the sale deed.
The original documents related to the sale of the property should be produced within four months from the date the sale deed is to be executed. If this is not possible the registrar might allow a grace period of another four months to produce the original documents however this delay might attract a maximum penalty of 10 times the registration charges related to the property.
Usually, the buyer would pay the stamp duty and the registration charges. And the seller on his part should ensure that all payments related to the property such as property tax, cess, water and electricity charges, and others was paid before the sale deed is executed.
So the next time before you sign on the dotted lines make sure you are cross-checked all details.
Source: BankBazaar.com
Tuesday, January 19, 2010
Monday, January 26, 2009
How to evaluate a company's financial health !
(Source: in.rediff.com/money )
For companies, being able to meet short-term financial obligations is an integral part of maintaining operations and growing in the future. After all, if it's not able to meet today's debts, a company might not live to see another day! That's why it's essential for investors to know how to evaluate a company's short-term financial health. Here we take you through a few of the ratios that are the foremost tools for doing so.
The basics of liquidity
A large factor determining a company's short-term financial health is liquidity, the definition of which depends on context. In stock trading, liquidity is the degree to which the market is willing to buy a particular stock. As a characteristic of an asset, liquidity refers to the ease with which an asset can be converted into cash. This is the definition of liquidity we are interested in.
Let's compare two different kinds of assets: a building and a money market account. Even if these two assets are valued at $100,000 on a company's financial statement, their liquidities have different implications for the company's short-term health.
The money market account, an asset referred to as a cash equivalent, can be converted into cash within a day or two, if not immediately. The building, however, is very illiquid. For the company to get its cash, it must sell the building, which could take months, if not years.
Essentially, a company's short-term liquidity determines how well it can make its necessary payments (cash outflows) - which include employee wages, interest and supplier costs - given the revenue it generates (cash inflows). If a company has no cash equivalents, its inflows need to match or exceed cash outflows. So, if a company has a bad month and it has no supply of liquid assets like a money market account, it will be unable to make its necessary payments.
The current ratio:
The first ratio we will look at is the current ratio, which compares all of a company's current assets to all of its current liabilities. In general, the term "current" means less than one year. So, current assets include cash, accounts receivable, inventory, prepaid expenses and other assets that can be converted to cash within one year. Current liabilities include short-term debt, interest, accounts payable and any other outstanding liabilities that are due within a year's time.
When calculating this ratio, you are essentially trying to determine whether a company can meet its short-term obligations. It will likely be able to do so if the ratio is above 1; if the ratio is less than 1, the company is likely to fall short. We say "likely" because although a ratio of 1 or greater indicates that the company has more current assets than current liabilities, it may be inappropriate to judge certain industries by a rigid standard.
For industries that generally have a large portion of current assets tied up in inventory, a ratio of 1.5 or even 2 might be a better standard. When analyzing the current ratio, as when looking at any ratio, an investor should make comparisons between companies that operate in the same industry. Different industries have different business needs, so investors must modify their analyses accordingly.
Finally, bigger is not necessarily better in the case of the current ratio. A really high ratio, 10 for example, should probably sound some alarm bells, because it indicates that the company has a large amount of current assets that could - and probably should - be invested back into the company. Although a company with a very high current ratio may be stable in the short term, it probably has no means of sustaining its long-term growth and performance.
The acid test or quick ratio:
The acid test is a more rigorous version of the current ratio. It indicates whether a firm, without selling inventory, has enough short-term assets to cover its immediate liabilities. Companies with ratios of less than 1 cannot pay their current liabilities without selling inventories and should be viewed with extreme care. An acid test that is much lower than the current ratio signals that current assets are highly dependent on inventory - retail is a type of business in which this would occur. In general, a ratio of 1 is considered satisfactory, although, as with the current ratio, the acid test should be compared only within a similar industry.
Interest coverage:
Interest coverage indicates what portion of debt interest is covered by a company's cash flow. A ratio of less than 1 means the company is having problems generating enough cash flow to pay its interest expenses. Ideally, you want the ratio to be over 1.5.
A company with no long-term debt doesn't have any interest expense; this situation causes the current ratio to give enviable results. Companies with a poor interest coverage ratio can improve it by improving cash flow and/or lowering interest expenses by paying off debt.
This ratio is popular not only among investors, but also with creditors, who want to see that a company's short-term health is strong and that the company has sufficient cash flow to make principal and interest payments.
Another notable fact about the ratio is that sometimes different numerators will be used. For example, some analysts or creditors will use EBITDA in place of EBIT.
Activity ratios
There are a few different activity ratios, but essentially, their main function is to help determine the company's cash flow cycle, giving a picture of how efficiently assets are being used. Almost any current account can be analyzed in terms of this cycle, but the three most common activity ratios each measure one of the following:
How long a company takes to collect receivables
How long a company takes to sell inventory
How long it takes to pay suppliers
The calculation of activity ratios is a little complex, but to give you an idea of how these ratios work, we'll look at the activity ratio dedicated to accounts receivable. Suppose that a company has total credit sales of $22 million. At the beginning of the year, accounts receivable is at $4.5 million, and at the end it's $1.5 million. By using the accounts receivable turnover ratio we can determine that the company's receivables turn over at a rate of approximately 7.3 times per year. This means receivables remain outstanding for an average of 50 days. Here the calculations are represented mathematically:
Although we only demonstrate one activity ratio calculation here, the others are calculated in a similar fashion. All it takes is some research into the company and some number crunching.
Let's look at an example to put this all into context. Suppose that the above company has to pay suppliers within 90 days of purchase and suppose that, by calculating another activity ratio, we find the company holds inventory for 80 days.
As the company's accounts receivable remain outstanding for 50 days, we find it has a cash cycle of 130 days (80+50). In other words, from the time it purchases its product from the supplier, the company takes approximately 130 days to collect payment from the customer.
The supplier, however, requires a payment within 90 days of the purchase. This 40-day discrepancy may create short-term liquidity problems for the company. This means investors should conduct more research to determine whether there is justification for this difference, and whether it is likely to cause hardship for the company.
Examining activity ratios and determining a company's cash flow cycle are important elements of determining a company's short-term health and should be analyzed in conjunction with the other short-term liquidity ratios.
Conclusion
By honing in on crucial aspects of a company's financial health, ratios shed light on how well a company will do in the short term. More importantly, they help investors determine whether a company has the stability to get through unexpected problems today. If a company cannot maintain operations in the short term, it will not have the ability to provide investors with any benefits in the long term.
(Source: in.rediff.com/money )
For companies, being able to meet short-term financial obligations is an integral part of maintaining operations and growing in the future. After all, if it's not able to meet today's debts, a company might not live to see another day! That's why it's essential for investors to know how to evaluate a company's short-term financial health. Here we take you through a few of the ratios that are the foremost tools for doing so.
The basics of liquidity
A large factor determining a company's short-term financial health is liquidity, the definition of which depends on context. In stock trading, liquidity is the degree to which the market is willing to buy a particular stock. As a characteristic of an asset, liquidity refers to the ease with which an asset can be converted into cash. This is the definition of liquidity we are interested in.
Let's compare two different kinds of assets: a building and a money market account. Even if these two assets are valued at $100,000 on a company's financial statement, their liquidities have different implications for the company's short-term health.
The money market account, an asset referred to as a cash equivalent, can be converted into cash within a day or two, if not immediately. The building, however, is very illiquid. For the company to get its cash, it must sell the building, which could take months, if not years.
Essentially, a company's short-term liquidity determines how well it can make its necessary payments (cash outflows) - which include employee wages, interest and supplier costs - given the revenue it generates (cash inflows). If a company has no cash equivalents, its inflows need to match or exceed cash outflows. So, if a company has a bad month and it has no supply of liquid assets like a money market account, it will be unable to make its necessary payments.
The current ratio:
The first ratio we will look at is the current ratio, which compares all of a company's current assets to all of its current liabilities. In general, the term "current" means less than one year. So, current assets include cash, accounts receivable, inventory, prepaid expenses and other assets that can be converted to cash within one year. Current liabilities include short-term debt, interest, accounts payable and any other outstanding liabilities that are due within a year's time.
When calculating this ratio, you are essentially trying to determine whether a company can meet its short-term obligations. It will likely be able to do so if the ratio is above 1; if the ratio is less than 1, the company is likely to fall short. We say "likely" because although a ratio of 1 or greater indicates that the company has more current assets than current liabilities, it may be inappropriate to judge certain industries by a rigid standard.
For industries that generally have a large portion of current assets tied up in inventory, a ratio of 1.5 or even 2 might be a better standard. When analyzing the current ratio, as when looking at any ratio, an investor should make comparisons between companies that operate in the same industry. Different industries have different business needs, so investors must modify their analyses accordingly.
Finally, bigger is not necessarily better in the case of the current ratio. A really high ratio, 10 for example, should probably sound some alarm bells, because it indicates that the company has a large amount of current assets that could - and probably should - be invested back into the company. Although a company with a very high current ratio may be stable in the short term, it probably has no means of sustaining its long-term growth and performance.
The acid test or quick ratio:
The acid test is a more rigorous version of the current ratio. It indicates whether a firm, without selling inventory, has enough short-term assets to cover its immediate liabilities. Companies with ratios of less than 1 cannot pay their current liabilities without selling inventories and should be viewed with extreme care. An acid test that is much lower than the current ratio signals that current assets are highly dependent on inventory - retail is a type of business in which this would occur. In general, a ratio of 1 is considered satisfactory, although, as with the current ratio, the acid test should be compared only within a similar industry.
Interest coverage:
Interest coverage indicates what portion of debt interest is covered by a company's cash flow. A ratio of less than 1 means the company is having problems generating enough cash flow to pay its interest expenses. Ideally, you want the ratio to be over 1.5.
A company with no long-term debt doesn't have any interest expense; this situation causes the current ratio to give enviable results. Companies with a poor interest coverage ratio can improve it by improving cash flow and/or lowering interest expenses by paying off debt.
This ratio is popular not only among investors, but also with creditors, who want to see that a company's short-term health is strong and that the company has sufficient cash flow to make principal and interest payments.
Another notable fact about the ratio is that sometimes different numerators will be used. For example, some analysts or creditors will use EBITDA in place of EBIT.
Activity ratios
There are a few different activity ratios, but essentially, their main function is to help determine the company's cash flow cycle, giving a picture of how efficiently assets are being used. Almost any current account can be analyzed in terms of this cycle, but the three most common activity ratios each measure one of the following:
How long a company takes to collect receivables
How long a company takes to sell inventory
How long it takes to pay suppliers
The calculation of activity ratios is a little complex, but to give you an idea of how these ratios work, we'll look at the activity ratio dedicated to accounts receivable. Suppose that a company has total credit sales of $22 million. At the beginning of the year, accounts receivable is at $4.5 million, and at the end it's $1.5 million. By using the accounts receivable turnover ratio we can determine that the company's receivables turn over at a rate of approximately 7.3 times per year. This means receivables remain outstanding for an average of 50 days. Here the calculations are represented mathematically:
Although we only demonstrate one activity ratio calculation here, the others are calculated in a similar fashion. All it takes is some research into the company and some number crunching.
Let's look at an example to put this all into context. Suppose that the above company has to pay suppliers within 90 days of purchase and suppose that, by calculating another activity ratio, we find the company holds inventory for 80 days.
As the company's accounts receivable remain outstanding for 50 days, we find it has a cash cycle of 130 days (80+50). In other words, from the time it purchases its product from the supplier, the company takes approximately 130 days to collect payment from the customer.
The supplier, however, requires a payment within 90 days of the purchase. This 40-day discrepancy may create short-term liquidity problems for the company. This means investors should conduct more research to determine whether there is justification for this difference, and whether it is likely to cause hardship for the company.
Examining activity ratios and determining a company's cash flow cycle are important elements of determining a company's short-term health and should be analyzed in conjunction with the other short-term liquidity ratios.
Conclusion
By honing in on crucial aspects of a company's financial health, ratios shed light on how well a company will do in the short term. More importantly, they help investors determine whether a company has the stability to get through unexpected problems today. If a company cannot maintain operations in the short term, it will not have the ability to provide investors with any benefits in the long term.
(Source: in.rediff.com/money )
Saturday, September 6, 2008
10 Calculations to know
1. Compound Interest
I want to take a loan of Rs 1 lakh to buy a used car. How much will the car cost me at an annual interest rate of 8 per cent for four years?
The compound interest formula can be used here to calculate the final cost, which would include the loan amount and the interest paid. The amount that is actually paid for Rs 1 lakh is Rs 1,36,048.90. The total amount of interest charged for borrowing Rs 1 lakh is Rs 36,048.90.
Formula: Future value = P(1 + R)^N
Type in: =100000(1+8%)^4 and hit enter. P: amount borrowed; R: rate of interest; N: time in years.
Also used for: Calculating the maturity value on lumpsum investment (bank fixed deposits and National Savings Certificate, for example) over a fixed period at a certain rate of interest.
2. Compound Annualised Growth Rate
I had invested Rs 1 lakh in a mutual fund five years back at an NAV of Rs 20. Now the NAV is Rs 70. How should I calculate my returns on an annual basis?
Compound annualised growth rate (CAGR) will be used here to calculate the growth over a period of time. The gain of Rs 50 over five years on the initial NAV of Rs 20 is a simple return of 250 per cent (50/20 * 100). However, it should not be construed as 50 per cent average return over five years.
Formula: CAGR = {[(M/I)^(1/N)] � 1} * 100
Type in: =(((70/20)^(1/5))-1)*100 and hit enter. M: maturity value; I: initial value; N: time in years. CAGR here is 28.47%.
Also used for: Calculating the annualised returns on a lumpsum investment in shares.
3. Internal Rate of Return
I paid Rs 18,572 every year on a moneyback insurance policy bought 20 years back. Every fifth year, I received Rs 40,000 back and Rs 4.5 lakh on maturity. What was my rate of return?
The internal rate of return (IRR) has to be calculated here. It is the interest rate accrued on an investment that has outflows and inflows at the same regular periods.
In the excel page type Rs 18,572 as a negative figure (-18572), as it is an outflow, in the first cell. Paste the same figure till the twentieth cell.
Then, as every fifth year has an inflow of Rs 40,000, type in Rs 21,428 (40,000-18,572) in every fifth cell. In the twentieth cell, type in �18572. In the twenty first cell, type in Rs 4,50,000, which is the maturity value of the policy.
Then click on the cell below it and type: = IRR(A1:A21) and hit enter.
5.28% will show in the cell. This is your internal rate of return.
Also used for: Calculating returns on insurance endowment policies.
4. XIRR
I bought 500 shares on 1 January 2007 at Rs 220, 100 shares on 10 January at Rs 185 and 50 shares at Rs 165 on 18 May 2008. On 21 June 2008, I sold off all the 650 shares at Rs 655. What is the return on my investment?
XIRR is used to determine the IRR when the outflows and inflows are at different periods. Calculation is similar to IRR's. Transaction date is mentioned on the left of the transaction.
In an excel sheet type out the data from the top most cell as shown here. Outflows figures are in negative and inflows in positive. In the cell below with the figure 4,25,750, type out
=XIRR (B1:B4,A1:A4)*100
Hit enter. The cell will show 122.95%, the total return on investment.
Also used for: Calculating MF returns, especially SIP, or that for unit-linked insurance plans.
5. Post-Tax Return
My father wants a bank FD at 10 per cent return for five years. He pays income tax. What will be the returns?
The post-tax return has to be calculated here. The idea is to know the final returns on a fully taxable income. Interest income from the bank is taxed as per your tax slab.
Formula: ROI � (ROI * TR)=Post-tax return
Type in: =10 � (10 * 30.9%) and hit enter. You will get 6.91%
ROI: rate of interest; TR: tax rate (depends on tax slab)
Also used for: Calculating post-tax returns of national savings certificates, post-office time deposits, and Senior Citizens' Savings Scheme.
6. Pre-Tax Yield
My brother says that the investment in public provident fund (PPF), which gives 8 per cent, is the best. Isn't 8 per cent a low rate of return?
An investment's pre-tax yield tells us if its return is high or low. The return on PPF (8 per cent) is tax-free. Also, this has to compared with returns of a taxable income to estimate its worth. For someone paying a tax of 30.9 per cent, the pre-tax yield in PPF is 11.57 per cent. At present, there is no fixed, safe and assured-return option that has 11.57 per cent return and a post-tax return comparable to PPF's 8 per cent.
Formula: Pre-tax yield = ROI / (100-TR)*100
Type in: =8/(100-30.9)*100 and hit enter. You will get 11.57%. ROI: rate of interest, TR: tax rate, (depends on tax slab)
Also used for: Calculating the yield on an Employees' Provident Fund or any other tax-free
7. Inflation
My family's monthly expense is Rs 50,000. At an inflation rate of 5 per cent, how much will I need 20 years hence with the same expenses?
The required amount can be calculated using the standard future value formula. Inflation means that over a period of time, you need more money to fund the same expense.
Formula: Required amt.=Present amt. *(1+inflation) ^no. of years
Type in: =50000*(1+5% or .05)^20 and hit enter. You will get Rs 1,32,664 as the answer, which is the required amount.
Also used for: Calculating maturity value on an investment.
8. Purchasing Power
My family's monthly expense is Rs 50,000. At an inflation rate of 5 per cent, how much will be the purchasing value of that amount after 20 years?
Inflation increases the amount you need to spend to fetch the same article and in a way reduces the purchasing power of the rupee. Here, Rs 50,000 after 20 years at an inflation of 5 per cent will be able to buy goods worth Rs 18,844 only.
Formula: Reduced amt.= Present amt. / (1 + inflation) ^no. of yrs
Type in: =50000/(1+5%)^20 and hit enter. You will get Rs 18,844, which is the reduced amount.
9. Real Rate of Return
My father wants to make a one-year bank FD at 9 per cent. On maturity, he says, the capital will be preserved and he would get assured return on it.
It is true that fixed deposit is safe and gives assured returns. However, after adjusting for inflation, the real rate of return can be negative.
Formula: Real rate of return=[(1+ROR)/(1+i)-1]*100
Type in: =((1+9%)/(1+11%)-1)*100 and hit enter. -1.8% is the real rate of return. ROR: Rate of return per annum; i: rate of inflation (11 per cent here).
10. Doubling, Tripling of Money
I can get 12 per cent return on my equity investments. In how many years can I double or even triple my money?
Formula: No. of years to double = 72/expected return
Type in: =72/12 and hit enter. You will get 6 years. For tripling, type in: =114/12 and hit enter. You will get 9.5 years. For quadrupling, type in: =144/12 and hit enter to get 12 years.
Source: http://www.rediff.com/money/
Wednesday, June 25, 2008
Effecient Gas Mileage Tips
Drive Sensibly
Aggressive driving (speeding, rapid acceleration and braking) wastes gas. It can lower your gas mileage by 33 percent at highway speeds and by 5 percent around town. Sensible driving is also safer for you and others, so you may save more than gas money.
Fuel Economy Benefit: 5-33%
Equivalent Gasoline Savings: $0.20-$1.35/gallon
Observe the Speed Limit
While each vehicle reaches its optimal fuel economy at a different speed (or range of speeds), gas mileage usually decreases rapidly at speeds above 60 mph.
You can assume that each 5 mph you drive over 60 mph is like paying an additional $0.30 per gallon for gas.
Observing the speed limit is also safer.
Fuel Economy Benefit: 7-23%
Equivalent Gasoline Savings: $0.29-$0.94/gallon
Remove Excess Weight
Avoid keeping unnecessary items in your vehicle, especially heavy ones. An extra 100 pounds in your vehicle could reduce your MPG by up to 2%. The reduction is based on the percentage of extra weight relative to the vehicle's weight and affects smaller vehicles more than larger ones.
Fuel Economy Benefit: 1-2%/100 lbs
Equivalent Gasoline Savings: $0.04-$0.08/gallon
Avoid Excessive Idling
Idling gets 0 miles per gallon. Cars with larger engines typically waste more gas at idle than do cars with smaller engines.
Use Cruise Control
Using cruise control on the highway helps you maintain a constant speed and, in most cases, will save gas.
Use Overdrive Gears
When you use overdrive gearing, your car's engine speed goes down. This saves gas and reduces engine wear.
Source: fueleconomy.gov
Aggressive driving (speeding, rapid acceleration and braking) wastes gas. It can lower your gas mileage by 33 percent at highway speeds and by 5 percent around town. Sensible driving is also safer for you and others, so you may save more than gas money.
Fuel Economy Benefit: 5-33%
Equivalent Gasoline Savings: $0.20-$1.35/gallon
Observe the Speed Limit
While each vehicle reaches its optimal fuel economy at a different speed (or range of speeds), gas mileage usually decreases rapidly at speeds above 60 mph.
You can assume that each 5 mph you drive over 60 mph is like paying an additional $0.30 per gallon for gas.
Observing the speed limit is also safer.
Fuel Economy Benefit: 7-23%
Equivalent Gasoline Savings: $0.29-$0.94/gallon
Remove Excess Weight
Avoid keeping unnecessary items in your vehicle, especially heavy ones. An extra 100 pounds in your vehicle could reduce your MPG by up to 2%. The reduction is based on the percentage of extra weight relative to the vehicle's weight and affects smaller vehicles more than larger ones.
Fuel Economy Benefit: 1-2%/100 lbs
Equivalent Gasoline Savings: $0.04-$0.08/gallon
Avoid Excessive Idling
Idling gets 0 miles per gallon. Cars with larger engines typically waste more gas at idle than do cars with smaller engines.
Use Cruise Control
Using cruise control on the highway helps you maintain a constant speed and, in most cases, will save gas.
Use Overdrive Gears
When you use overdrive gearing, your car's engine speed goes down. This saves gas and reduces engine wear.
Source: fueleconomy.gov
'The people of India are for the nuclear deal'
'The people of India are for the nuclear deal'Ajit Jain June 25, 2008 13:14 IST
The Indian Merchants Chamber, Mumbai, sponsored what was by far the biggest Indian business delegation specific to Canada. It was led by Union Science and Technology Minister Kapil Sibal.
In an exclusive interview with Rediff India Abroad Senior Editor Ajit Jain, Sibal said he was hopeful of signing the 123 Agreement that would help India to get rid of the denial regime, and emergence from nuclear apartheid.
What's the status on the Canada-India science and technology agreement?
That's moving forward. There's already a commitment of $17 million, about $8.5 million on each side. Already 17 projects have been cleared. I have suggested Indo-Canadian collaboration in nanotechnology.
Governments can only do so much. It is ultimately the private sector which has to take the relationship forward. There's a very strong Indo-Canadian community here, which is almost 3 per cent of the population. This is the entity which will gather momentum as this relationship moves forward.
Of course, we are hoping when we will sign the 123 Agreement (with the United States) there's going to be a lot of potential in the nuclear technology area. Canada is a great source of uranium, which is in very short supply in India. Our defense establishment is opening up. Geo-space technology is very, very strong in this country. That sector is now opening up in India. So, I think, there's great potential in this relationship.
Canada and India had a nuclear agreement. The Canadian authorities say they are waiting to see what happens between India and the US.
It (the Canada-India agreement) is linked up for the simple reason that we haven't signed the NPT ( nuclear Non-Proliferation Treaty); we haven't signed the CTBT (Comprehensive Test Ban Treaty). And, of course, we continue to be in the denial regime. We are among the three countries who didn't participate in the overall global acceptance of the NPT and the CTBT.
So in the context of that denial regime, especially after our experiment of 1998, no country is willing to supply us nuclear technology or raw material in the form of uranium till such time as we come to terms with the International Atomic Energy Agency, as well as the Nuclear Suppliers Group.
In the NSG there's an understanding that they will not trade with any country that hasn't signed these global treaties. So, no country which is part of the NSG can individually supply raw material to us, or nuclear technology or know-how. So, it is not a question of India-Canada bilateral relationship. It is a multilateral agreement and in that context of multilateral agreement, there's a multilateral embargo. Therefore, we want to break actually this embargo, get rid of this denial regime, (and) not be subject to nuclear apartheid.
That's why Prime Minister Dr Manmohan Singh has been saying time and time again that the 123 Agreement is good for India. It will open up a lot of possibilities. It will help in shoring the tremendous shortfall in energy in India. In the context of global warming, this source is clean. Many of our plants are now starving of uranium, and we need uranium. There's no other way to get uranium except by entering the mainstream.
The prime minister said even the other day that he's hopeful of moving forward. Let us see what happens in trying to convince our coalition partners, specially our Left partners.
Is there optimism within India?
Yes. The country by and large supports the deal. I am not talking about the politicians who are taking political positions in Parliament. That doesn't necessarily represent the mood of the country. I believe the people of India are for the deal.
If people are for the deal, why are politicians against it?
We understand the political position that the BJP (Bharatiya Janata Party) has taken. Their position has always been consistent: When in government do one thing, when in Opposition do the opposite. They were opposed to the insurance sector being liberalised. Ultimately, they passed the bill which we had presented and they had opposed when in the Opposition.
They had opposed the Patents Act, and in fact didn't allow it to be passed earlier. We missed another window of opportunity. When they came to power they passed the same Patents Act that they had opposed. The same thing they are doing with the nuclear agreement.
They are the ones who started strategic relationship through strategic dialogue. And they are the ones who took the initiative. You heard what Strobe Talbott says. You heard others say. You heard what (then) prime minister (Atal Bihari) Vajpayee said in the (United Nations) general assembly that India doesn't want to test again; we are not opposed to signing the CTBT, and it is a matter of months we will sign the CTBT.
Here's a party whose leader, then the prime minister of India, publicly stated that they don't want to test any more as they don't need to test any more. This is the very reason today L K Advani is opposing the deal -- that we don't want to give up the right to test, which their leader and prime minister had already given up way back.
So, we understand the BJP politics but I believe on certain issues national interest should come first and partisan politics should come later. Unfortunately, this has not happened.
Is Canada's being an NSG member holding it back?
This is not the position of Canada alone. This is the position of most of NSG members, most of the countries that we have had dialogues (with) are hoping that the 123 deal with the US goes through. France is very keen to supply us nuclear reactors. More than 70 percent of energy in France comes from nuclear energy but they can't do business with India till such time 123 is signed.
We are part of a global nuclear embargo. We are subject to global nuclear apartheid. And we want to move on, so that our people get the opportunities that they deserve in the context of another option in the energy sector.
It is not the question of only supply of uranium to India. It is also the question of our exporting our own technology. We, over the years, because of (nuclear) apartheid, developed our own technology. We have developed our nuclear reactors which we can sell to smaller countries in the world.
Unfortunately, we can't do that as long as we are not part of the mainstream. So, there's lot of profits to be made by our entrepreneurs through our own technology and as we develop and collaborate with the West, once we are part of the mainstream, we will develop our own technology that will help us to trade in nuclear reactors and to supply energy to countries which are short of it.
Education in India is a key focus area now.
Education is not the correct terminology in the context of the 21st century. We are in the knowledge century. And any avenue for gaining knowledge is part of human resource, which is part of raw material for the 21st century. We must get access to that raw material wherever in the world that might be accessible. Knowledge and technology are two sides of the same coin.
Second, considering the population in India of less than 25 years of age is more than the entire population of Europe, it is time for us to make sure that we empower those young people. The only way to empower them is human resource development, and the only way human resource development would take place is to ensure that there's 100 per cent primary education for our children, and as they move up into higher education, that larger number of people go to the university system.
This cannot be done by the State alone. The State does not have resources and the facilities to meet the kind of needs that India has in the context of demands on education. It is essential for us to realise (that) private cooperation is exceptionally important in education.
We must open up our universities, our education system, to direct foreign investment. We had drafted a bill for foreign institutions in India. Unfortunately, that hasn't been passed in Parliament yet.
York University wanted to open a campus in Mumbai or Pune. It hasn't materialised yet.
It is not just the question of the Schulich School of Business at York University, it is a question of opening up the education sector to foreign direct investment. The moment you do that, a lot of foreign money and foreign institutions will come in. It will be very difficult to regulate the quality. There will be one institution of very high quality but nine of them of very poor quality. We have seen that happening.
Also, whatever little faculty we have within the system will then be bought, or rather will be outsourced. They will shift to the foreign institutions. Our own people would be left without faculty. And foreign institutions will charge exorbitant money sitting in India. Therefore, it will become a profit making enterprise. I am giving you the other side of the argument.
I read in the brochure somewhere that the Schulich School was thinking of charging $30,000.
How many people in India can afford $30,000? Education is a sector which must give access to all even if they don't have the capacity to pay.
So, if $30,000 is the fee, we need to make sure that everyone has access to it. Then we will have to subsidise our poor students. India doesn't have resources to do that. So, we haven't yet found the right balance in the context in which all this can be allowed. I think we are trying to find that balance. I am all for foreign direct investment in education.
But what about the existing quality of education in India? There are a lot of institutions that just give degrees.
I agree. Half a million graduates come out each year. Are all of them employable? I am not too sure. When we talk to many of our companies, they say they have to give them extra training. Quantity and quality must go hand in hand. In the knowledge era, we need quality education. We don't just need numbers. We need skills training institutions.
The finance minister this year has launched a programme for skills development and put in a lot of money. This will be done in a public-private partnership. This government has realised the importance of skills training, the importance of technical education, the importance of quality in education.
If you bring in foreign direct investment in the education sector, it will have impact on the quality of education as well. Apart from FDI in education, what's even more important is restructuring our educational system, allowing much greater freedom to our educational institutions, allowing them to collaborate with others, and playing the markets along with others. In that context, only the quality institutions will survive and not those who don't deliver.
Source: Rediff.com
The Indian Merchants Chamber, Mumbai, sponsored what was by far the biggest Indian business delegation specific to Canada. It was led by Union Science and Technology Minister Kapil Sibal.
In an exclusive interview with Rediff India Abroad Senior Editor Ajit Jain, Sibal said he was hopeful of signing the 123 Agreement that would help India to get rid of the denial regime, and emergence from nuclear apartheid.
What's the status on the Canada-India science and technology agreement?
That's moving forward. There's already a commitment of $17 million, about $8.5 million on each side. Already 17 projects have been cleared. I have suggested Indo-Canadian collaboration in nanotechnology.
Governments can only do so much. It is ultimately the private sector which has to take the relationship forward. There's a very strong Indo-Canadian community here, which is almost 3 per cent of the population. This is the entity which will gather momentum as this relationship moves forward.
Of course, we are hoping when we will sign the 123 Agreement (with the United States) there's going to be a lot of potential in the nuclear technology area. Canada is a great source of uranium, which is in very short supply in India. Our defense establishment is opening up. Geo-space technology is very, very strong in this country. That sector is now opening up in India. So, I think, there's great potential in this relationship.
Canada and India had a nuclear agreement. The Canadian authorities say they are waiting to see what happens between India and the US.
It (the Canada-India agreement) is linked up for the simple reason that we haven't signed the NPT ( nuclear Non-Proliferation Treaty); we haven't signed the CTBT (Comprehensive Test Ban Treaty). And, of course, we continue to be in the denial regime. We are among the three countries who didn't participate in the overall global acceptance of the NPT and the CTBT.
So in the context of that denial regime, especially after our experiment of 1998, no country is willing to supply us nuclear technology or raw material in the form of uranium till such time as we come to terms with the International Atomic Energy Agency, as well as the Nuclear Suppliers Group.
In the NSG there's an understanding that they will not trade with any country that hasn't signed these global treaties. So, no country which is part of the NSG can individually supply raw material to us, or nuclear technology or know-how. So, it is not a question of India-Canada bilateral relationship. It is a multilateral agreement and in that context of multilateral agreement, there's a multilateral embargo. Therefore, we want to break actually this embargo, get rid of this denial regime, (and) not be subject to nuclear apartheid.
That's why Prime Minister Dr Manmohan Singh has been saying time and time again that the 123 Agreement is good for India. It will open up a lot of possibilities. It will help in shoring the tremendous shortfall in energy in India. In the context of global warming, this source is clean. Many of our plants are now starving of uranium, and we need uranium. There's no other way to get uranium except by entering the mainstream.
The prime minister said even the other day that he's hopeful of moving forward. Let us see what happens in trying to convince our coalition partners, specially our Left partners.
Is there optimism within India?
Yes. The country by and large supports the deal. I am not talking about the politicians who are taking political positions in Parliament. That doesn't necessarily represent the mood of the country. I believe the people of India are for the deal.
If people are for the deal, why are politicians against it?
We understand the political position that the BJP (Bharatiya Janata Party) has taken. Their position has always been consistent: When in government do one thing, when in Opposition do the opposite. They were opposed to the insurance sector being liberalised. Ultimately, they passed the bill which we had presented and they had opposed when in the Opposition.
They had opposed the Patents Act, and in fact didn't allow it to be passed earlier. We missed another window of opportunity. When they came to power they passed the same Patents Act that they had opposed. The same thing they are doing with the nuclear agreement.
They are the ones who started strategic relationship through strategic dialogue. And they are the ones who took the initiative. You heard what Strobe Talbott says. You heard others say. You heard what (then) prime minister (Atal Bihari) Vajpayee said in the (United Nations) general assembly that India doesn't want to test again; we are not opposed to signing the CTBT, and it is a matter of months we will sign the CTBT.
Here's a party whose leader, then the prime minister of India, publicly stated that they don't want to test any more as they don't need to test any more. This is the very reason today L K Advani is opposing the deal -- that we don't want to give up the right to test, which their leader and prime minister had already given up way back.
So, we understand the BJP politics but I believe on certain issues national interest should come first and partisan politics should come later. Unfortunately, this has not happened.
Is Canada's being an NSG member holding it back?
This is not the position of Canada alone. This is the position of most of NSG members, most of the countries that we have had dialogues (with) are hoping that the 123 deal with the US goes through. France is very keen to supply us nuclear reactors. More than 70 percent of energy in France comes from nuclear energy but they can't do business with India till such time 123 is signed.
We are part of a global nuclear embargo. We are subject to global nuclear apartheid. And we want to move on, so that our people get the opportunities that they deserve in the context of another option in the energy sector.
It is not the question of only supply of uranium to India. It is also the question of our exporting our own technology. We, over the years, because of (nuclear) apartheid, developed our own technology. We have developed our nuclear reactors which we can sell to smaller countries in the world.
Unfortunately, we can't do that as long as we are not part of the mainstream. So, there's lot of profits to be made by our entrepreneurs through our own technology and as we develop and collaborate with the West, once we are part of the mainstream, we will develop our own technology that will help us to trade in nuclear reactors and to supply energy to countries which are short of it.
Education in India is a key focus area now.
Education is not the correct terminology in the context of the 21st century. We are in the knowledge century. And any avenue for gaining knowledge is part of human resource, which is part of raw material for the 21st century. We must get access to that raw material wherever in the world that might be accessible. Knowledge and technology are two sides of the same coin.
Second, considering the population in India of less than 25 years of age is more than the entire population of Europe, it is time for us to make sure that we empower those young people. The only way to empower them is human resource development, and the only way human resource development would take place is to ensure that there's 100 per cent primary education for our children, and as they move up into higher education, that larger number of people go to the university system.
This cannot be done by the State alone. The State does not have resources and the facilities to meet the kind of needs that India has in the context of demands on education. It is essential for us to realise (that) private cooperation is exceptionally important in education.
We must open up our universities, our education system, to direct foreign investment. We had drafted a bill for foreign institutions in India. Unfortunately, that hasn't been passed in Parliament yet.
York University wanted to open a campus in Mumbai or Pune. It hasn't materialised yet.
It is not just the question of the Schulich School of Business at York University, it is a question of opening up the education sector to foreign direct investment. The moment you do that, a lot of foreign money and foreign institutions will come in. It will be very difficult to regulate the quality. There will be one institution of very high quality but nine of them of very poor quality. We have seen that happening.
Also, whatever little faculty we have within the system will then be bought, or rather will be outsourced. They will shift to the foreign institutions. Our own people would be left without faculty. And foreign institutions will charge exorbitant money sitting in India. Therefore, it will become a profit making enterprise. I am giving you the other side of the argument.
I read in the brochure somewhere that the Schulich School was thinking of charging $30,000.
How many people in India can afford $30,000? Education is a sector which must give access to all even if they don't have the capacity to pay.
So, if $30,000 is the fee, we need to make sure that everyone has access to it. Then we will have to subsidise our poor students. India doesn't have resources to do that. So, we haven't yet found the right balance in the context in which all this can be allowed. I think we are trying to find that balance. I am all for foreign direct investment in education.
But what about the existing quality of education in India? There are a lot of institutions that just give degrees.
I agree. Half a million graduates come out each year. Are all of them employable? I am not too sure. When we talk to many of our companies, they say they have to give them extra training. Quantity and quality must go hand in hand. In the knowledge era, we need quality education. We don't just need numbers. We need skills training institutions.
The finance minister this year has launched a programme for skills development and put in a lot of money. This will be done in a public-private partnership. This government has realised the importance of skills training, the importance of technical education, the importance of quality in education.
If you bring in foreign direct investment in the education sector, it will have impact on the quality of education as well. Apart from FDI in education, what's even more important is restructuring our educational system, allowing much greater freedom to our educational institutions, allowing them to collaborate with others, and playing the markets along with others. In that context, only the quality institutions will survive and not those who don't deliver.
Source: Rediff.com
Friday, February 29, 2008
Taxpayers may gain up to Rs 44,000 per year
The increase in tax slabs in undoubtedly great news for the salaried. The news gets even better for those in the higher tax brackets. The adjustment for the income tax slabs has been done in such a way that people in the high income category – say above Rs 2.5 lakhs per annum - stand to gain even more. To put this in numbers, a person who had a taxable income of Rs 5 lakhs would have be paying a tax of Rs 99,000 – before any cess on his income in the income tax slabs that prevailed till now. However, under the new income tax slabs, his tax liability would come down to Rs 55,000 translating into cool tax savings of Rs 44,000 per year. That is a huge amount of money. So, how has this magic come about? To consider this, look at the tax slabs. The minimum exemption limit has gone up by Rs 40,000. That’s good enough. What is better is that the next slab of 20% which earlier kicked in from Rs 1, 50,000 and extended till Rs 2, 50,000 will now only kick in from Rs 3 lakh onwards. The good news does not end here; in the prevailing regime the 30% tax bracket started from Rs 2.5 lakh onwards. In the latest budget, the 30% tax bracket only starts from Rs 5 lakhs onwards. This is the revision that will do the magic for the high income earners. And, all this is not taking into account the impact of deduction on account of Section 80C. The huge jump in interim slabs means that many people will just fall out of the highest tax slab into the tax slab below after they start claiming deductions they are entitled to under Section 80C. This is one budget middle class salary earners are unlikely to forget. So what does the revision in the tax slabs mean for various tax payers. For a person whose taxable income after all deductions was Rs 2.5 lakh, tax savings could be around Rs 14,000; for someone with an income of Rs 5 lakh, it could be around Rs 45,000; for someone with a salary income of Rs 7.5 lakh, tax saving would be Rs 44,000. Taxpayers having salary of above 10,00,000 will have to pay the surcharge of 10% and the education cess of 3%. When these are put together the gain will come to Rs.49,852.
The old tax slabs were:
Upto Rs 1,10,000 – Nil
Rs 1,10,001 – Rs 1,50,000 – 10%
Rs 1,50,001 – Rs 2,50,000 – 20%
Above Rs. 2,50,000 – 30%
The new tax slabs are:
Upto Rs 1,50,000 - Nil
Rs 1,50,001 – Rs 3,00,000 – 10%
Rs 3,00,001 – Rs 5,00,000 – 20%
Above Rs 5,00,000 – 30%
(source:economictimes.com)
The old tax slabs were:
Upto Rs 1,10,000 – Nil
Rs 1,10,001 – Rs 1,50,000 – 10%
Rs 1,50,001 – Rs 2,50,000 – 20%
Above Rs. 2,50,000 – 30%
The new tax slabs are:
Upto Rs 1,50,000 - Nil
Rs 1,50,001 – Rs 3,00,000 – 10%
Rs 3,00,001 – Rs 5,00,000 – 20%
Above Rs 5,00,000 – 30%
(source:economictimes.com)
Wednesday, February 27, 2008
10 golden rules to become rich!
Once you decide to put your money to work to build long-term wealth, you have to decide, not whether to take risk, but what kind of risk you wish to take. Here are 10 investing rules that can make you rich:
1. There's no escaping risk
Once you decide to put your money to work to build long-term wealth, you have to decide, not whether to take risk, but what kind of risk you wish to take.
Yes, money in a savings account is dollar-safe, but those safe dollars are apt to be substantially eroded by inflation, a risk that almost guarantees you will fail to reach your wealth goals.
And yes, money in the stock market is very risky over the short-term, but, if well-diversified, should provide remarkable growth with a high degree of consistency over the long term.
2. Buy right and hold tight
The most critical decision you face is arriving at the proper allocation of assets in your investment portfolio -- stocks for growth of capital and growth of income, bonds for conservation of capital and current income.
Once you get your balance right, then just hold tight, no matter how high a greedy stock market flies, nor how low a frightened market plunges. Change the allocation only as your investment profile changes. Begin by considering a 50/50 stock/bond-cash balance, then raise the stock allocation if:
You have many years remaining to accumulate wealth.
The amount of capital you have at stake is modest.
You don't have much need for current income from your investments.
You have the courage to ride out the stock market booms and busts with reasonable equanimity.
As these factors are reversed, reduce the 50 per cent stock allocation accordingly.
3. Time is your friend, impulse your enemy
Think long term, and don't allow transitory changes in stock prices to alter your investment program. There is a lot of noise in the daily volatility of the stock market, which too often is 'a tale told by an idiot, full of sound and fury, signifying nothing'.
Stocks may remain overvalued, or undervalued, for years. Realize that one of the greatest sins of investing is to be captured by the siren song of the market, luring you into buying stocks when they are soaring and selling when they are plunging.
Impulse is your enemy. Why? Because market timing is impossible. Even if you turn out to be right when you sold stocks just before a decline (a rare occurrence!), where on earth would you ever get the insight that tells you the right time to get back in? One correct decision is tough enough. Two correct decisions are nigh on impossible.
Time is your friend. If, over the next 25 years, stocks produce a 10% return and a savings account produces a 5% return, $10,000 would grow to $108,000 in stocks vs. $34,000 in savings. (After 3% inflation, $54,000 vs $16,000). Give yourself all the time you can.
4. Realistic expectations: the bagel and the doughnut
These two different kinds of baked goods symbolize the two distinctively different elements of stock market returns.
It is hardly farfetched to consider that investment return -- dividend yields and earnings growth -- is the bagel of the stock market, for the investment return on stocks reflects their underlying character: nutritious, crusty and hard-boiled.
By the same token, speculative return -- wrought by any change in the price that investors are willing to pay for each dollar of earnings -- is the spongy doughnut of the market, reflecting changing public opinion about stock valuations, from the soft sweetness of optimism to the acid sourness of pessimism.
The substantive bagel-like economics of investing are almost inevitably productive, but the flaky, doughnut-like emotions of investors are anything but steady -- sometimes productive, sometimes counterproductive.
In the long run, it is investment return that rules the day. In the past 40 years, the speculative return on US stocks has been zero, with the annual investment return of 11.2% precisely equal to the stock market's total return of 11.2% per year.
But in the first 20 of those years, investors were sour on the economy's prospects, and a tumbling price-earnings ratio provided a speculative return of minus 4.6% per year, reducing the nutritious annual investment return of 12.1% to a market return of just 7.5%. From 1981 to 2001, however, the outlook sweetened, and a soaring P/E ratio produced a sugary 5% speculative boost to the investment return of 10.3%.
Result: The market return leaped to 15.3% -- double the return of the prior two decades.
The lesson: Enjoy the bagel's healthy nutrients, and don't count on the doughnut's sweetness to enhance them.
5. Why look for the needle in the haystack? Buy the haystack!
Experience confirms that buying the right stocks, betting on the right investment style, and picking the right money manager -- in each case, in advance -- is like looking for a needle in a haystack.
Investing in equities entails four risks: stock risk, style risk, manager risk, and market risk. The first three of these risks can easily be eliminated, simply by owning the entire stock market -- owning the haystack, as it were -- and holding it forever.
Owning the entire stock market is the ultimate diversifier. If you can't find the needle, buy the haystack.
6. Minimize the croupier's take
The resemblance of the stock market to the casino is not far-fetched. Yes, the stock market is a positive-sum game and the gambling casino is a zero-sum game . . . but only before the costs of playing each game are deducted. After the heavy costs of financial intermediaries (commissions, management fees, taxes, etc.) are deducted, beating the stock market is inevitably a loser's game. Just as, after the croupiers' wide rake descends, beating the casino is inevitably a loser's game. All investors as a group must earn the market's return before costs, and lose to the market after costs, and by the exact amount of those costs.
Your greatest chance of earning the market's return, therefore, is to reduce the croupiers' take to the bare-bones minimum. When you read about stock market returns, realize that the financial markets are not for sale, except at a high price.
The difference is crucial. If the market's return is 10% before costs, and intermediation costs are approximately 2%, then investors earn 8%. Compounded over 50 years, 8% takes $10,000 to $469,000. But at 10%, the final value leaps to $1,170,000 -- nearly three times as much . . . just by eliminating the croupier's take.
7. Beware of fighting the last war
Too many investors -- individuals and institutions alike -- are constantly making investment decisions based on the lessons of the recent, or even the extended, past. They seek technology stocks after they have emerged victorious from the last war; they worry about inflation after it becomes the accepted bogeyman, they buy bonds after the stock market has plunged.
You should not ignore the past, but neither should you assume that a particular cyclical trend will last forever. None does. Just because some investors insist on 'fighting the last war,' you don't need to do so yourself. It doesn't work for very long.
8. Sir Isaac Newton's revenge on Wall Street -- return to the mean
Through all history, investments have been subject to a sort of law of gravity: What goes up must go down, and, oddly enough, what goes down must go up. Not always of course (companies that die rarely live again), and not necessarily in the absolute sense, but relative to the overall market norm.
For example, stock market returns that substantially exceed the investment returns generated by earnings and dividends during one period tend to revert and fall well short of that norm during the next period. Like a pendulum, stock prices swing far above their underlying values, only to swing back to fair value and then far below it.
Another example: From the start of 1997 through March 2000, Nasdaq stocks (+230%) soared past NYSE-listed stocks (+20%), only to come to a screeching halt. During the subsequent year, Nasdaq stocks lost 67% of their value, while NYSE stocks lost just 7%, reverting to the original market value relationship (about one to five) between the so-called 'new economy' and the 'old economy.'
Reversion to the mean is found everywhere in the financial jungle, for the mean is a powerful magnet that, in the long run, finally draws everything back to it.
9. The hedgehog bests the fox
The Greek philosopher Archilochus tells us, 'The fox knows many things, but the hedgehog knows one great thing.' The fox -- artful, sly, and astute -- represents the financial institution that knows many things about complex markets and sophisticated marketing.
The hedgehog -- whose sharp spines give it almost impregnable armour when it curls into a ball -- is the financial institution that knows only one great thing: long-term investment success is based on simplicity.
The wily foxes of the financial world justify their existence by propagating the notion that an investor can survive only with the benefit of their artful knowledge and expertise. Such assistance, alas, does not come cheap, and the costs it entails tend to consume more value-added performance than even the most cunning of foxes can provide.
Result: The annual returns earned for investors by financial intermediaries such as mutual funds have averaged less than 80% of the stock market's annual return.
The hedgehog, on the other hand, knows that the truly great investment strategy succeeds, not because of its complexity or cleverness, but because of its simplicity and low cost. The hedgehog diversifies broadly, buys and holds, and keeps expenses to the bare-bones minimum.
The ultimate hedgehog: The all-market index fund, operated at minimal cost and with minimal portfolio turnover, virtually guarantees nearly 100% of the market's return to the investor.
In the field of investment management, foxes come and go, but hedgehogs are forever.
10. Stay the course: the secret of investing is that there is no secret
When you consider these previous nine rules, realize that they are about neither magic and legerdemain, nor about forecasting the unforecastable, nor about betting at long and ultimately unsurmountable odds, nor about learning some great secret of successful investing.
In fact, there is no great secret, only the majesty of simplicity. These rules are about elementary arithmetic, about fundamental and unarguable principles, and about that most uncommon of all attributes, common sense.
Owning the entire stock market through an index fund -- all the while balancing your portfolio with an appropriate allocation to an all bond market index fund -- with its cost-efficiency, its tax-efficiency, and its assurance of earning for you the market's return, is by definition a winning strategy.
But if only you follow one final rule for successful investing, perhaps the most important principle of all investment wisdom: Stay the course!
(source:visionbooksindia.com)
1. There's no escaping risk
Once you decide to put your money to work to build long-term wealth, you have to decide, not whether to take risk, but what kind of risk you wish to take.
Yes, money in a savings account is dollar-safe, but those safe dollars are apt to be substantially eroded by inflation, a risk that almost guarantees you will fail to reach your wealth goals.
And yes, money in the stock market is very risky over the short-term, but, if well-diversified, should provide remarkable growth with a high degree of consistency over the long term.
2. Buy right and hold tight
The most critical decision you face is arriving at the proper allocation of assets in your investment portfolio -- stocks for growth of capital and growth of income, bonds for conservation of capital and current income.
Once you get your balance right, then just hold tight, no matter how high a greedy stock market flies, nor how low a frightened market plunges. Change the allocation only as your investment profile changes. Begin by considering a 50/50 stock/bond-cash balance, then raise the stock allocation if:
You have many years remaining to accumulate wealth.
The amount of capital you have at stake is modest.
You don't have much need for current income from your investments.
You have the courage to ride out the stock market booms and busts with reasonable equanimity.
As these factors are reversed, reduce the 50 per cent stock allocation accordingly.
3. Time is your friend, impulse your enemy
Think long term, and don't allow transitory changes in stock prices to alter your investment program. There is a lot of noise in the daily volatility of the stock market, which too often is 'a tale told by an idiot, full of sound and fury, signifying nothing'.
Stocks may remain overvalued, or undervalued, for years. Realize that one of the greatest sins of investing is to be captured by the siren song of the market, luring you into buying stocks when they are soaring and selling when they are plunging.
Impulse is your enemy. Why? Because market timing is impossible. Even if you turn out to be right when you sold stocks just before a decline (a rare occurrence!), where on earth would you ever get the insight that tells you the right time to get back in? One correct decision is tough enough. Two correct decisions are nigh on impossible.
Time is your friend. If, over the next 25 years, stocks produce a 10% return and a savings account produces a 5% return, $10,000 would grow to $108,000 in stocks vs. $34,000 in savings. (After 3% inflation, $54,000 vs $16,000). Give yourself all the time you can.
4. Realistic expectations: the bagel and the doughnut
These two different kinds of baked goods symbolize the two distinctively different elements of stock market returns.
It is hardly farfetched to consider that investment return -- dividend yields and earnings growth -- is the bagel of the stock market, for the investment return on stocks reflects their underlying character: nutritious, crusty and hard-boiled.
By the same token, speculative return -- wrought by any change in the price that investors are willing to pay for each dollar of earnings -- is the spongy doughnut of the market, reflecting changing public opinion about stock valuations, from the soft sweetness of optimism to the acid sourness of pessimism.
The substantive bagel-like economics of investing are almost inevitably productive, but the flaky, doughnut-like emotions of investors are anything but steady -- sometimes productive, sometimes counterproductive.
In the long run, it is investment return that rules the day. In the past 40 years, the speculative return on US stocks has been zero, with the annual investment return of 11.2% precisely equal to the stock market's total return of 11.2% per year.
But in the first 20 of those years, investors were sour on the economy's prospects, and a tumbling price-earnings ratio provided a speculative return of minus 4.6% per year, reducing the nutritious annual investment return of 12.1% to a market return of just 7.5%. From 1981 to 2001, however, the outlook sweetened, and a soaring P/E ratio produced a sugary 5% speculative boost to the investment return of 10.3%.
Result: The market return leaped to 15.3% -- double the return of the prior two decades.
The lesson: Enjoy the bagel's healthy nutrients, and don't count on the doughnut's sweetness to enhance them.
5. Why look for the needle in the haystack? Buy the haystack!
Experience confirms that buying the right stocks, betting on the right investment style, and picking the right money manager -- in each case, in advance -- is like looking for a needle in a haystack.
Investing in equities entails four risks: stock risk, style risk, manager risk, and market risk. The first three of these risks can easily be eliminated, simply by owning the entire stock market -- owning the haystack, as it were -- and holding it forever.
Owning the entire stock market is the ultimate diversifier. If you can't find the needle, buy the haystack.
6. Minimize the croupier's take
The resemblance of the stock market to the casino is not far-fetched. Yes, the stock market is a positive-sum game and the gambling casino is a zero-sum game . . . but only before the costs of playing each game are deducted. After the heavy costs of financial intermediaries (commissions, management fees, taxes, etc.) are deducted, beating the stock market is inevitably a loser's game. Just as, after the croupiers' wide rake descends, beating the casino is inevitably a loser's game. All investors as a group must earn the market's return before costs, and lose to the market after costs, and by the exact amount of those costs.
Your greatest chance of earning the market's return, therefore, is to reduce the croupiers' take to the bare-bones minimum. When you read about stock market returns, realize that the financial markets are not for sale, except at a high price.
The difference is crucial. If the market's return is 10% before costs, and intermediation costs are approximately 2%, then investors earn 8%. Compounded over 50 years, 8% takes $10,000 to $469,000. But at 10%, the final value leaps to $1,170,000 -- nearly three times as much . . . just by eliminating the croupier's take.
7. Beware of fighting the last war
Too many investors -- individuals and institutions alike -- are constantly making investment decisions based on the lessons of the recent, or even the extended, past. They seek technology stocks after they have emerged victorious from the last war; they worry about inflation after it becomes the accepted bogeyman, they buy bonds after the stock market has plunged.
You should not ignore the past, but neither should you assume that a particular cyclical trend will last forever. None does. Just because some investors insist on 'fighting the last war,' you don't need to do so yourself. It doesn't work for very long.
8. Sir Isaac Newton's revenge on Wall Street -- return to the mean
Through all history, investments have been subject to a sort of law of gravity: What goes up must go down, and, oddly enough, what goes down must go up. Not always of course (companies that die rarely live again), and not necessarily in the absolute sense, but relative to the overall market norm.
For example, stock market returns that substantially exceed the investment returns generated by earnings and dividends during one period tend to revert and fall well short of that norm during the next period. Like a pendulum, stock prices swing far above their underlying values, only to swing back to fair value and then far below it.
Another example: From the start of 1997 through March 2000, Nasdaq stocks (+230%) soared past NYSE-listed stocks (+20%), only to come to a screeching halt. During the subsequent year, Nasdaq stocks lost 67% of their value, while NYSE stocks lost just 7%, reverting to the original market value relationship (about one to five) between the so-called 'new economy' and the 'old economy.'
Reversion to the mean is found everywhere in the financial jungle, for the mean is a powerful magnet that, in the long run, finally draws everything back to it.
9. The hedgehog bests the fox
The Greek philosopher Archilochus tells us, 'The fox knows many things, but the hedgehog knows one great thing.' The fox -- artful, sly, and astute -- represents the financial institution that knows many things about complex markets and sophisticated marketing.
The hedgehog -- whose sharp spines give it almost impregnable armour when it curls into a ball -- is the financial institution that knows only one great thing: long-term investment success is based on simplicity.
The wily foxes of the financial world justify their existence by propagating the notion that an investor can survive only with the benefit of their artful knowledge and expertise. Such assistance, alas, does not come cheap, and the costs it entails tend to consume more value-added performance than even the most cunning of foxes can provide.
Result: The annual returns earned for investors by financial intermediaries such as mutual funds have averaged less than 80% of the stock market's annual return.
The hedgehog, on the other hand, knows that the truly great investment strategy succeeds, not because of its complexity or cleverness, but because of its simplicity and low cost. The hedgehog diversifies broadly, buys and holds, and keeps expenses to the bare-bones minimum.
The ultimate hedgehog: The all-market index fund, operated at minimal cost and with minimal portfolio turnover, virtually guarantees nearly 100% of the market's return to the investor.
In the field of investment management, foxes come and go, but hedgehogs are forever.
10. Stay the course: the secret of investing is that there is no secret
When you consider these previous nine rules, realize that they are about neither magic and legerdemain, nor about forecasting the unforecastable, nor about betting at long and ultimately unsurmountable odds, nor about learning some great secret of successful investing.
In fact, there is no great secret, only the majesty of simplicity. These rules are about elementary arithmetic, about fundamental and unarguable principles, and about that most uncommon of all attributes, common sense.
Owning the entire stock market through an index fund -- all the while balancing your portfolio with an appropriate allocation to an all bond market index fund -- with its cost-efficiency, its tax-efficiency, and its assurance of earning for you the market's return, is by definition a winning strategy.
But if only you follow one final rule for successful investing, perhaps the most important principle of all investment wisdom: Stay the course!
(source:visionbooksindia.com)
Tuesday, February 26, 2008
Evergreen Investments Wins Prestigious NQR and DALBAR Awards
Wachovia has once again earned national recognition for customer service. This time, Evergreen Investments took home the honors.
Evergreen received top sales and customer service recognition for its 2007 performance from the National Quality Review and DALBAR, Inc., two of the nation’s leading benchmarks for customer service in the financial services industry.
“We continue to set extremely high standards for our firm – leveraging the best-in-class benchmarks that NQR and DALBAR have set – to pursue our vision of being a leader in the investment management industry,” said Dennis Ferro, president and chief executive officer of Evergreen Investments.
This is the third year Evergreen has been named a DALBAR "Triple Crown" winner for having achieved excellence in all three of the organization’s categories. The DALBAR Awards symbolize achievement of the highest tier of service within the mutual fund industry and are awarded only to those firms that exceed industry norms.
Also, Evergreen Service Company's Transaction Processing and Client Services Teams were among a select group of firms that received a 5-Star performance rating – the highest possible for 2007 – from the National Quality Review’s Transaction Processing Review and Telephone Customer Service. The service analyzes the accuracy and timeliness of transactions processed by financial service organizations. “These distinguished recognitions underscore our commitment to providing a consultative, collaborative client experience,” Ferro said. “They show our dedication to our goal of delivering excellent client service and products through experienced and knowledgeable investment professionals.”
For the ninth year in a row, and the tenth year overall, Evergreen received a DALBAR Mutual Fund Service Award for service provided to shareholders, maintaining the firm’s fifth place ranking.
For the fifth consecutive year, Evergreen Retail Sales Company joined the Evergreen Service Company in receiving recognition of outstanding achievement as a recipient of the DALBAR FISQE (Financial Intermediary Services Quality Evaluation) Pre-Sales Award for sales support provided to investment professionals, maintaining the firm’s sixth place ranking.
For the third consecutive year, Evergreen Service Company received the Service Award for FISQE Post-Sale service support provided to investment professionals. The firm moved up one spot from its 2006 ranking to place seventh for 2007.
The DALBAR Performance Evaluation of Mutual Fund Services Program measures and evaluates the call center service provided to mutual fund shareholders. The DALBAR FISQE Program measures and evaluates sales support delivered to financial advisors. Both programs focus on key areas of customer service, including accommodation, attitude and expertise of representatives.
Evergreen’s awards follow the recent announcement that Wachovia was ranked No. 1 in the American Customer Satisfaction Index for the seventh year in a row.
(source:www.evergreeninvestments.com)
Evergreen received top sales and customer service recognition for its 2007 performance from the National Quality Review and DALBAR, Inc., two of the nation’s leading benchmarks for customer service in the financial services industry.
“We continue to set extremely high standards for our firm – leveraging the best-in-class benchmarks that NQR and DALBAR have set – to pursue our vision of being a leader in the investment management industry,” said Dennis Ferro, president and chief executive officer of Evergreen Investments.
This is the third year Evergreen has been named a DALBAR "Triple Crown" winner for having achieved excellence in all three of the organization’s categories. The DALBAR Awards symbolize achievement of the highest tier of service within the mutual fund industry and are awarded only to those firms that exceed industry norms.
Also, Evergreen Service Company's Transaction Processing and Client Services Teams were among a select group of firms that received a 5-Star performance rating – the highest possible for 2007 – from the National Quality Review’s Transaction Processing Review and Telephone Customer Service. The service analyzes the accuracy and timeliness of transactions processed by financial service organizations. “These distinguished recognitions underscore our commitment to providing a consultative, collaborative client experience,” Ferro said. “They show our dedication to our goal of delivering excellent client service and products through experienced and knowledgeable investment professionals.”
For the ninth year in a row, and the tenth year overall, Evergreen received a DALBAR Mutual Fund Service Award for service provided to shareholders, maintaining the firm’s fifth place ranking.
For the fifth consecutive year, Evergreen Retail Sales Company joined the Evergreen Service Company in receiving recognition of outstanding achievement as a recipient of the DALBAR FISQE (Financial Intermediary Services Quality Evaluation) Pre-Sales Award for sales support provided to investment professionals, maintaining the firm’s sixth place ranking.
For the third consecutive year, Evergreen Service Company received the Service Award for FISQE Post-Sale service support provided to investment professionals. The firm moved up one spot from its 2006 ranking to place seventh for 2007.
The DALBAR Performance Evaluation of Mutual Fund Services Program measures and evaluates the call center service provided to mutual fund shareholders. The DALBAR FISQE Program measures and evaluates sales support delivered to financial advisors. Both programs focus on key areas of customer service, including accommodation, attitude and expertise of representatives.
Evergreen’s awards follow the recent announcement that Wachovia was ranked No. 1 in the American Customer Satisfaction Index for the seventh year in a row.
(source:www.evergreeninvestments.com)
Monday, February 25, 2008
Larsen & Toubro CMD Naik conferred Danish knighthood
Larsen & Toubro Chairman and Managing Director A M Naik has been appointed as Knight of the Order of the Dannerbrog (name of Danish flag) by Queen Margarethe of Denmark. The Knight Cross was formally presented to Naik by ambassador of Denmark Ole Lansmann Poulsen here today. It is in recognition of contribution made by Naik in Indo-Danish relationship. The ambassador said it is a rare honour and very few foreigners have received it. Naik is currently also the consul general of Denmark in Mumbai. Poulsen said there is large potential for enhancing trade relations between Denmark and India. So far 75 Danish companies have made investment in India making Denmark 19th biggest investor in the country. Meanwhile, Naik said the company has zeroed in on Hazira in Gujarat to set up its power plant where it will make boilers and turbines. The foundation stone will be laid in one month and plant will be commissioned over the next 24 months, he said.
(source : Economic Times)
(source : Economic Times)
Sunday, February 24, 2008
India's 'in-a-hurry' young generation - Steve Hamm, BusinessWeek.com
Ravikiran's parents took the safe route. In post-colonial India, even though they had college degrees, they chose low-paying but secure government jobs. Today, they live with their three sons in a modest concrete house in a working-class section of Bangalore.
While colorful paintings of Hindu gods adorn their walls, the furniture is mostly plastic chairs and steel cots. For Ravikiran M.S., their eldest son, security and stability simply aren't enough. The 24-year-old programmer is brimming with ambition.
He rides a motorbike to work and hopes to buy a car. And he expects quick promotions, dreaming of becoming a CEO. "I want the posh life," he declares.
Ravikiran is typical of India's in-a-hurry younger generation. With the tech-services boom, the country's college grads are coming of age in a time of economic optimism, and unlike their parents and grandparents, this group has vibrant job prospects and high hopes.
The challenge for companies is to harness their energy while reining in inflated expectations. If these young people feel they're being short-changed in terms of either salary or advancement, the best and brightest will find work elsewhere, shift careers, or leave the country. "It's a very different generation," says S Gopalakrishnan, chief executive of Indian tech giant Infosys Technologies. "They want immediate rewards."
Proving ground
This pattern will be repeated in other emerging nations as prosperity spreads. So India is becoming a proving ground for managing the global workforce, with companies developing new schemes to keep the younger generation engaged.
The likes of MindTree Consulting [Get Quote], Infosys [Get Quote], and IBM (IBM) have revamped their orientation programs to better engage young people, tapped men and women under 30 to serve on management committees, and launched mini-MBA programs for eager young managers.
"India is going to be a lab for lessons that we'll apply to other countries," says Lyndon Rego, manager of innovation at the Center for Creative Leadership in Greensboro, N.C., which develops leadership training programs in emerging markets.
The challenge for companies is to address both the desires and frustrations of the younger generation. These become abundantly evident in the cafes and bars of Bangalore. As the city has developed into India's Silicon Valley, it also has become the country's bar-hopping capital.
"We need capitalism with a human face," says P.B. Devaiah, a 20-year-old industrial engineering major at a local college. Sitting with friends at Java City, a crowded coffee shop, he complains that much of the programming in India is the equivalent of sweatshop labor, where new hires are expected to spend as much as 12 hours a day writing code. "We're being used as machines," Devaiah says.
When the conversation turns to social issues, India's young people are likely to erupt in grousing about arranged marriage, the caste system, and interactions with Westerners -- all of which should concern employers. Caste attitudes, for instance, clash with merit-based corporate values, and young techies sometimes feel they're treated poorly by American and European clients.
"We're not Martians. We're human beings," says a young woman engineer at a Bangalore tech firm.
One of the biggest concerns is the changing role of women. The tech industry was once almost exclusively male, but by last year about 35% of employees were women.
Nasscom, the software industry trade group, says that will rise to 45% by 2010. The rise of women in tech has taken companies by surprise, and they're scrambling to react. At software and research outfit MindTree, for instance, 40% of new hires last fall were female, compared with just 23% of the company's overall workforce of 5,500.
And these young women tend to be more outspoken than their male counterparts. At MindTree, a council run by a top female scientist now addresses gender issues.
"They have to learn to adjust"
Veena Parashuram is one of this new generation of Indian women. The 26-year-old engineer grew up in a village so primitive that she never used a spoon, fork, or napkin until she went away to boarding school at age 10.
When a teacher told her girls could become anything they wanted, "my mind opened up," she says. Although her parents wanted her to submit to an arranged marriage and settle in their village, she went to engineering school in Bangalore and the Netherlands, where she met a German man.
The couple married to ease the difficulties of getting work permits, but Parashuram says "the concept of marriage is pretty weird." While she's planning a traditional Indian wedding, she says, she doesn't "like to follow rules that were set down hundreds of years ago."
Companies are starting to coddle this new generation from Day One, helping to smooth the transition between school and work.
MindTree, for instance, revamped its initiation process because young hires felt "they got lost in a sea of people," says HR chief Puneet Jetli. Under the new program, called Orchard, each new hire is placed in one of three groups called "houses" and assigned to a manager called a PAL, or "parent, anchor, and leader."
The company redesigned an entire floor of a Bangalore building to give each house an assembly space, lockers, and classrooms. On a recent visit, a small group clustered around a young man strumming a guitar and singing Hotel California. The houses begin and end their days in these rooms with meetings and the occasional Q&A with a top MindTree executive.
"The senior people at MindTree are very caring," says Deepthi R. Halbhavi, a young woman who completed the eight-week induction program last fall. "They treat us like we're their children."
Still, there are plenty of tensions between companies and young employees. Many Indian engineers are fascinated with cutting-edge technologies, yet much of the work for clients calls for tried-and-true techniques.
And while young people are eager to get promotions and overseas assignments, there are practical limits to how quickly they can advance. "They have to learn to adjust," says T.V. Mohandas Pai, director of human resources at Infosys. "It's almost like growing up."
It's also a two-way street. Infosys executives understand that they can't simply empathize with their young employees, but must also learn from them.
So Infosys set up something called the Voice of Youth Council: a dozen people under 30 who sit on the executive management committee, which deals with business strategy and HR policies. The youth contingent was instrumental in establishing a program for spotting and nurturing innovation. Being in the group is "very empowering," says Bela Gupta, 24, the council's youngest member.
While not every ambitious young Indian will sit on a management council or become a boss, there's huge pressure on companies to identify and train those with leadership potential.
Facing a shortage of competent managers, IBM last year devised an in-house mini-MBA, called ProPel, aimed at keeping hungry recruits on board and giving them the training they need to oversee a growing staff. The program consists of testing, seminars, on-the-job training, databases for sharing the tricks of the trade, and e-mail quizzes about the appropriate response to workplace problems.
The program might be a good match for the likes of Ravikiran, the Bangalore programmer who wants a "posh life" as an executive. He got a master's degree in computer applications before going to work a year ago at software shop Torry Harris Business Solutions.
When Ravikiran's father landed a job in the government engineering office, he stuck around for 37 years. Ravikiran, by contrast, is already plotting his next career move. "I don't want to be lost in the crowd," he vows. "I envision a path, and I go for it."
Nerd herding
What's the key to wooing software geeks in developing countries? Harnessing the Global N-Gen Talent Pool, a July report by Toronto consultancy New Paradigm Learning (newparadigm.com), recommends managers find out whether pay or location is more important to far-flung employees.
Example: In India, young workers often want to stay close to mom and dad, so companies should locate in smaller cities and offer benefits to extended family members. That may cost less than competing for talent in larger locales -- and make for more loyal workers.
While colorful paintings of Hindu gods adorn their walls, the furniture is mostly plastic chairs and steel cots. For Ravikiran M.S., their eldest son, security and stability simply aren't enough. The 24-year-old programmer is brimming with ambition.
He rides a motorbike to work and hopes to buy a car. And he expects quick promotions, dreaming of becoming a CEO. "I want the posh life," he declares.
Ravikiran is typical of India's in-a-hurry younger generation. With the tech-services boom, the country's college grads are coming of age in a time of economic optimism, and unlike their parents and grandparents, this group has vibrant job prospects and high hopes.
The challenge for companies is to harness their energy while reining in inflated expectations. If these young people feel they're being short-changed in terms of either salary or advancement, the best and brightest will find work elsewhere, shift careers, or leave the country. "It's a very different generation," says S Gopalakrishnan, chief executive of Indian tech giant Infosys Technologies. "They want immediate rewards."
Proving ground
This pattern will be repeated in other emerging nations as prosperity spreads. So India is becoming a proving ground for managing the global workforce, with companies developing new schemes to keep the younger generation engaged.
The likes of MindTree Consulting [Get Quote], Infosys [Get Quote], and IBM (IBM) have revamped their orientation programs to better engage young people, tapped men and women under 30 to serve on management committees, and launched mini-MBA programs for eager young managers.
"India is going to be a lab for lessons that we'll apply to other countries," says Lyndon Rego, manager of innovation at the Center for Creative Leadership in Greensboro, N.C., which develops leadership training programs in emerging markets.
The challenge for companies is to address both the desires and frustrations of the younger generation. These become abundantly evident in the cafes and bars of Bangalore. As the city has developed into India's Silicon Valley, it also has become the country's bar-hopping capital.
"We need capitalism with a human face," says P.B. Devaiah, a 20-year-old industrial engineering major at a local college. Sitting with friends at Java City, a crowded coffee shop, he complains that much of the programming in India is the equivalent of sweatshop labor, where new hires are expected to spend as much as 12 hours a day writing code. "We're being used as machines," Devaiah says.
When the conversation turns to social issues, India's young people are likely to erupt in grousing about arranged marriage, the caste system, and interactions with Westerners -- all of which should concern employers. Caste attitudes, for instance, clash with merit-based corporate values, and young techies sometimes feel they're treated poorly by American and European clients.
"We're not Martians. We're human beings," says a young woman engineer at a Bangalore tech firm.
One of the biggest concerns is the changing role of women. The tech industry was once almost exclusively male, but by last year about 35% of employees were women.
Nasscom, the software industry trade group, says that will rise to 45% by 2010. The rise of women in tech has taken companies by surprise, and they're scrambling to react. At software and research outfit MindTree, for instance, 40% of new hires last fall were female, compared with just 23% of the company's overall workforce of 5,500.
And these young women tend to be more outspoken than their male counterparts. At MindTree, a council run by a top female scientist now addresses gender issues.
"They have to learn to adjust"
Veena Parashuram is one of this new generation of Indian women. The 26-year-old engineer grew up in a village so primitive that she never used a spoon, fork, or napkin until she went away to boarding school at age 10.
When a teacher told her girls could become anything they wanted, "my mind opened up," she says. Although her parents wanted her to submit to an arranged marriage and settle in their village, she went to engineering school in Bangalore and the Netherlands, where she met a German man.
The couple married to ease the difficulties of getting work permits, but Parashuram says "the concept of marriage is pretty weird." While she's planning a traditional Indian wedding, she says, she doesn't "like to follow rules that were set down hundreds of years ago."
Companies are starting to coddle this new generation from Day One, helping to smooth the transition between school and work.
MindTree, for instance, revamped its initiation process because young hires felt "they got lost in a sea of people," says HR chief Puneet Jetli. Under the new program, called Orchard, each new hire is placed in one of three groups called "houses" and assigned to a manager called a PAL, or "parent, anchor, and leader."
The company redesigned an entire floor of a Bangalore building to give each house an assembly space, lockers, and classrooms. On a recent visit, a small group clustered around a young man strumming a guitar and singing Hotel California. The houses begin and end their days in these rooms with meetings and the occasional Q&A with a top MindTree executive.
"The senior people at MindTree are very caring," says Deepthi R. Halbhavi, a young woman who completed the eight-week induction program last fall. "They treat us like we're their children."
Still, there are plenty of tensions between companies and young employees. Many Indian engineers are fascinated with cutting-edge technologies, yet much of the work for clients calls for tried-and-true techniques.
And while young people are eager to get promotions and overseas assignments, there are practical limits to how quickly they can advance. "They have to learn to adjust," says T.V. Mohandas Pai, director of human resources at Infosys. "It's almost like growing up."
It's also a two-way street. Infosys executives understand that they can't simply empathize with their young employees, but must also learn from them.
So Infosys set up something called the Voice of Youth Council: a dozen people under 30 who sit on the executive management committee, which deals with business strategy and HR policies. The youth contingent was instrumental in establishing a program for spotting and nurturing innovation. Being in the group is "very empowering," says Bela Gupta, 24, the council's youngest member.
While not every ambitious young Indian will sit on a management council or become a boss, there's huge pressure on companies to identify and train those with leadership potential.
Facing a shortage of competent managers, IBM last year devised an in-house mini-MBA, called ProPel, aimed at keeping hungry recruits on board and giving them the training they need to oversee a growing staff. The program consists of testing, seminars, on-the-job training, databases for sharing the tricks of the trade, and e-mail quizzes about the appropriate response to workplace problems.
The program might be a good match for the likes of Ravikiran, the Bangalore programmer who wants a "posh life" as an executive. He got a master's degree in computer applications before going to work a year ago at software shop Torry Harris Business Solutions.
When Ravikiran's father landed a job in the government engineering office, he stuck around for 37 years. Ravikiran, by contrast, is already plotting his next career move. "I don't want to be lost in the crowd," he vows. "I envision a path, and I go for it."
Nerd herding
What's the key to wooing software geeks in developing countries? Harnessing the Global N-Gen Talent Pool, a July report by Toronto consultancy New Paradigm Learning (newparadigm.com), recommends managers find out whether pay or location is more important to far-flung employees.
Example: In India, young workers often want to stay close to mom and dad, so companies should locate in smaller cities and offer benefits to extended family members. That may cost less than competing for talent in larger locales -- and make for more loyal workers.
Saturday, February 23, 2008
India General Budget - 1 (source: Economic Times)
Income tax payers are likely to get a major relief in the Budget 2008-09, as the government prepares itself to please the middle class in the election year. Finance Minister P Chidambaram can give a marginal but visible relief to personal income tax assessees this year, as tax collections have substantially improved over the past three years, sources said. With buoyant tax collections in 2007-08, there is significant pressure on Chidambaram to reduce the effective rates. The Minister himself has acknowledged that with better tax compliance, there could be a case for cut in rates. The minimum income threshold limit for income tax payer could be raised from Rs 1,10,000 to Rs 1,25,000 or Rs 1,30,000, sources said. Similarly, the income threshold for 30 per cent tax rate could be raised from the current Rs 2,50,000 per annum, sources said, adding that this had been kept constant since fiscal year 2005-06.
Tax payers would get a relief of Rs 1,500 to Rs 2,000 even if the Finance Minister decides to raise the minimum income threshold limit of income tax by Rs 15,000 to Rs 20,000 to offset the impact of inflation and submission of Sixth Pay Commission report later this year. An announcement on the new income tax code is also expected in the Budget. The Finance Minister had earlier said that the code, aimed at simplifying the tax laws, would be put for public comments shortly. Apart from pleasing his party colleagues and voters, the tax relief will also help Chidambaram to address the recent slow down in industrial production. More income in the pockets of consumers will boost demand for consumer goods as well as household savings for investment. Another option before the Finance Minister, the sources said, could be to increase the ceiling limit for savings under section 80C from Rs 1,00,000 to a more reasonable level of Rs 1,25,000. The increased limit could be specified for investment in infrastructure sector, which requires around 500 billion dollars investment over the next five years. According to tax consultancy firm KPMG, India needs to realign its income tax slabs to attract more investment. In neighbouring China, although the maximum marginal tax rate is 45 per cent, it is applicable on income over RMB 1,00,000 per month which translates to Rs 5,47,000 approximately. China has also said it would lower income tax rates this year to attract more investment. KPMG also pointed out that the Indian economy has witnessed a year-on-year inflation rate of more than 4 per cent every year in the last three years, which means that effectively the minimum threshold of real income on which the maximum marginal rate sets in is all the more lower. Another benefit which could be relooked at is the tax sop on interest payable in case of loans taken for purchase of house property. Presently, interest up to Rs 1,50,000 per annum is allowed as a tax deduction if the property is used for self occupation.
Tax payers would get a relief of Rs 1,500 to Rs 2,000 even if the Finance Minister decides to raise the minimum income threshold limit of income tax by Rs 15,000 to Rs 20,000 to offset the impact of inflation and submission of Sixth Pay Commission report later this year. An announcement on the new income tax code is also expected in the Budget. The Finance Minister had earlier said that the code, aimed at simplifying the tax laws, would be put for public comments shortly. Apart from pleasing his party colleagues and voters, the tax relief will also help Chidambaram to address the recent slow down in industrial production. More income in the pockets of consumers will boost demand for consumer goods as well as household savings for investment. Another option before the Finance Minister, the sources said, could be to increase the ceiling limit for savings under section 80C from Rs 1,00,000 to a more reasonable level of Rs 1,25,000. The increased limit could be specified for investment in infrastructure sector, which requires around 500 billion dollars investment over the next five years. According to tax consultancy firm KPMG, India needs to realign its income tax slabs to attract more investment. In neighbouring China, although the maximum marginal tax rate is 45 per cent, it is applicable on income over RMB 1,00,000 per month which translates to Rs 5,47,000 approximately. China has also said it would lower income tax rates this year to attract more investment. KPMG also pointed out that the Indian economy has witnessed a year-on-year inflation rate of more than 4 per cent every year in the last three years, which means that effectively the minimum threshold of real income on which the maximum marginal rate sets in is all the more lower. Another benefit which could be relooked at is the tax sop on interest payable in case of loans taken for purchase of house property. Presently, interest up to Rs 1,50,000 per annum is allowed as a tax deduction if the property is used for self occupation.
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