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Thursday, July 23, 2015

Key Personal Financial Terms Everyone Should Know

Key Personal Financial Terms Everyone Should Know

Financial TermsIt does not matter whether you hire an accountant or an advisor to handle your finances, understanding basic financial concepts will only help you manage your investments better.
Below is a glossary that describes the frequently used financial jargons.
#1: Inflation
Defined as a sustained increase in the general level of prices for goods and services, inflation reflects a reduction in the purchasing power per unit of money. The value of money is observed in terms of purchasing power, so the higher the rate of inflation, the lower is your purchasing power.
While it influences the economy it also affects the investors. It tells investors exactly how much of a return their investments need to make for them to maintain their standard of living. For example – if a certain stock returned 4% and inflation was 5%, then the real return on investment would be minus 1% (5%-4%). In India the inflation rate averaged 8.98 percent from 2012 until 2014.
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Generating earnings from previous earnings is referred to as compounding. In Scripbox terms, making your money work hard.
For example, let’s say you invested INR 10,000 and it earned an interest if INR 1000 in the first year. Now, for the second year, if you don’t make any more investments and assuming the interest rate remains the same at 10%, you will generate an interest amount of INR 1100 for second year. The interest earned in the first year, generated additional interest in the second year. This way, your money keeps on growing until withdrawn. This is called compounding. It is one of the fundamental ways to build wealth.
Related reading
Interest Rate (Floating, Fixed, and Reducing)
An interest rate is the rate at which interest is paid by borrowers for the use of money that they borrow from lenders.
A fixed interest rate stays constant throughout the duration of the loan however.
A floating interest rate is based on a base rate which is controlled by the RBI and can change over the duration of the loan. Floating interest rates can affect your interest payable and could increase/decrease your monthly instalment amount.
A reducing or diminishing interest rate is calculated on the outstanding loan balance every month. Interest Payable per Installment = Interest Rate per Installment * Remaining Loan Amount.
Time value of money
Time value of money is a concept based on the idea that the value of money available at the present time is worth more than the same amount in the future.
For example, INR 100 invested today for one year at a 5% interest rate will be worth INR 105 in the next year, therefore, INR 100 paid now and INR 105 paid one year later have exactly the same value.
Related Reading
Market volatility
Volatility refers to the amount of uncertainty or fluctuation in the value of an investment. In other words, volatility refers to the amount of uncertainty or risk about the size of changes in a security’s value.
It is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time.
Asset allocation
It is an investment strategy which aims to balance risk and reward. In other words, it is the process of deciding the proportion of your portfolio dedicated to various assets based on your goals, risk tolerance, and time sphere.
The three major asset classes include equity, real estate, and fixed income. Each of these classes reacts differently to different economic conditions. Hence it is wise to diversify your portfolio and spread your investments across multiple asset classes.
Recommended related reading
Net worth
The difference between your assets and liabilities is referred to as net worth. You can calculate your overall financial health by adding up all of the money and investments and subtracting all the debt from the grand total. The resulting amount is your net worth.
Credit Score
Credit score is a numeric representation of a person’s credit files and defines a person’s creditworthiness. It is used by lenders to assess whether the person will be able to clear off his debts.
Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. The score ranges from 300 to 850 – the higher the number, the more creditworthy the person is deemed to be.
Capital gains
The increase in the value of an asset or investment, like a stock or real estate, above its original purchase price is called a capital gain.
Rebalancing involves buying or selling assets periodically to maintain your desired asset allocation.
For example, if your target allocation is 60% stocks, 20% bonds and 20% cash, and the stock market has performed particularly well over the past year, your allocation may now have shifted to 70% stocks, 10% bonds and 20% cash. To rebalance your portfolio, you could sell some of your stocks and reinvest the amount in bonds and rebalance your portfolio.
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Stocks are a type of investment or security which gives you part-ownership in a company. Also referred to as shares or equity, stocks give you a claim on part of the company’s assets and earnings. The more stocks you own, the higher is your ownership stake in the company.
There are two types of stocks, common and preferred. A common stockholder can vote at shareholders meetings and receive dividends. Preferred stockholders have a higher claim on assets and earnings than owners of common stock but do not have any voting rights.
A bond is a debt investment or a loan issued to a corporate or governmental entity for the purpose of raising capital. A bond is a promise to repay the principal along with the fixed interest for a defined period of time. Some bonds do not pay interest, but all bonds require a repayment of principal.
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An equity investment generally refers to the buying and holding of shares of stock in anticipation of income from dividends and capital gains. However, in the context of real estate, it is the difference between the current market value of the property and the amount the owner still owes on the mortgage. In other words, it is the difference between the current value of the property and the amount that the owner owes against it.
Related Reading
Term Insurance
Term insurance is a traditional form of life insurance which offers life coverage for a specified duration of time or a specified “term” of years. Term insurance provides only insurance cover and does not offer money back on maturity.
Available for a range of 10-30 years, term insurance is the cheapest and most recommended type of life insurance policy.
Premium for Life Insurance
A premium is an amount to be paid periodically for a contract of insurance. The premium amount is calculated based on several parameters like age, type of employment, medical condition of the insured person, etc. The premium amount can be paid in monthly, quarterly or annually for a defined period of time.

Weak market unsettles Lodha Developers

Weak market unsettles Lodha Developers

Group hobbled by ratings downgrade, notices, delayed payments, and rising debt; but it says things under control
Raghavendra Kamath  |  Mumbai  
July 7, 2015 Last Updated at 00:50 IST
Lodha Developers, the biggest property developer in the country in terms of sales, has been making headlines in recent times of the kind it would wish to do without.

Two global rating agencies, Moody’s and Fitch, have downgraded the outlook on Lodha’s ratings from ‘stable’ to ‘negative’, due to weaker operating performance. And, the enforcement directorate has sought details about its foreign investments. There has also been a buzz about payment delays to suppliers and contractors.

What happened to the company that beat DLF, the largest listed developer, in terms of sales in 2014-15? According to Moody’s Investors Service, the company made collections of Rs 5,400 crore in FY15 against expectations of Rs 7,500-8,000 crore, and five per cent lower than those in FY14. Sales were Rs 7,800 crore in FY15 against expected Rs 8,000-8,500 crore but the mix did not support high cash collection levels, Moody’s said. “The projects sold had fairly low levels of mature inventory, which usually boost collection levels,” it observed.

“'The change in outlook reflects the company's weaker-than-expected cash collection for FY15, which makes it less likely that Lodha Developers will improve its credit metrics to a ratings-appropriate level by FY17," said Vikas Halan, vice-president at Moody's.

Lodha used debt to fund nearly Rs 3,000 crore in land payments. This increased its borrowings by about Rs 2,600 crore, bringing the total debt to Rs 12,000 crore as on March 31.

Many in the sector believe most of Lodha’s problems have to do with the subdued property market in the region in and around this city. Last year, the Mumbai Metropolitan Region (MMR) saw a 23 per cent dip in sales on a yearly basis and 35 per cent down from 2011, which was a considerably better period for the real estate market, according to real estate research firm PropEquity.

High prices and lack of affordability had pushed Mumbai to accumulate the highest number of unsold homes in the country, about 200,000 in December 2014. Lodha, founded in 1980, made 13.2 per cent of home sales in Mumbai’s metropolitan region in FY14, according to the company’s US bond prospectus.

“Markets are bad and things are down. Besides, Lodha is a pure residential player, which gets cash flows only if it sells,” said an executive at the Mumbai-based Raheja group, adding residential markets will improve only if developers go for a sharp price cut. “People have got single-digit salary hikes and do not have much of surplus funds. Investors are struggling with their investments,” he added.

According to consultants, Mumbai property markets are expected to remain subdued for the next one to two years. A chief executive of a Mumbai-based private equity firm calls this an issue of “asset-rich but cash-poor companies”. “It is an industry problem. Cash flows are not meeting developers’ obligations as sales are down. The only option is to sell assets. If they don’t, problems will aggregate,” the executive adds.

Some find flaws in Lodha’s strategy. For instance, the head of a housing finance company says, Lodha has spread itself too thin and across various levels, from luxury to value housing. He notes it has a luxury project in South Mumbai and an affordable housing one at Dombivali, on the outskirts. “They have done all types of projects, without any clear positioning. Oberoi and Hiranandani do only premium projects,” he said.

Lodha defence

“In spite of the general lack of momentum in the economy, we marginally grew our sales. We believe this reflects the success of our strategy to focus on high-quality housing and office space across all segments, and ensure all our customers can have access to high-quality housing,” said Abhisheck Lodha, managing director, in an e-mailed response.

On delay in payments to suppliers, Lodha said: “We are currently undergoing a business process transformation and technology upgrade across all our business verticals, due to which there has been an implementation delay in our payment systems, as well. We are doing all it takes to complete the upgrade successfully and have also informed our esteemed partners and vendors of the same.”

As on June 30, the company said, it had Rs 1,500 crore of cash and cash equivalent, one of the highest levels in their history and in line with targets. Lodha said it had got strong responses to recent launches, such as demand for 1,800 units at its latest launch in the Thane area. The MD expects these would be be fully sold in the first phase. He said Lodha had five focus projects, each with a top line of over $2.5 billion, across the city – two in central Mumbai, one on the Eastern Freeway, one in Thane and one in the extended suburbs (Palava).

“Last year, we spent over Rs 2,500 crore on construction and delivered over 6,000 units to our customers. This shows the strength of our delivery system, on the back of which we can continue to develop and sell large values and volumes across multiple projects,” he said.

Adding: “We are focused on ensuring that FY15-16 is a record year for us  on sales and deliveries. We have targets of sales of over Rs 10,000 crore and deliveries of almost 7,000 units.”

Though the agencies have assigned 'junk' status to Lodha’s US bonds, Goldman Sachs has put Lodha among its top junk-bond bets, due to coupon rates of 12 per cent, which the US bank says is the highest coupon of any Indian offshore debt

Rahul Yadav’s exit from has proven beneficial for other employees in more ways than one

Rahul Yadav’s exit from has proven beneficial for other employees in more ways than one

As per a report published in the Economic Times, all the employees have been ensured by the senior level executives and investors that Housing is still capable of growing into a billion-dollar company.BI India Bureau  |  08 July 2015, 8:08 AM IST
After sacking its most infamous employee, Rahul Yadav, management called up a meeting of all employees in Mumbai to address their concerns.

As per a report published in the Economic Times, all the employees have been ensured by the senior level executives and investors that Housing is still capable of growing into a billion-dollar company. Discarding the reports of Quikr buying the real-estate website, the officials said that many companies were interested in buying

The meeting, attended by as much as 700 employees, lasted for about 3 hours. Questions like why Rahul Yadav, despite being a good product manager, was fired emerged during the meet and here is how company's chief HR officer Ajay Nair answered it: "Decision was not taken with regard to his performance but because of lack of discipline."

Yadav was fired on July 1 for sending scornful emails to investors, his own board members, and a resignation drama, scandalous posts on social media and for instigating a number of controversies. employees, after the Yadav episode asked the management about job security and also about the shares Yadav had issued in favor of them earlier.

The three-year-old online real-estate firm, which competes with CommonFloor, 99Acres and MagicBricks, has attracted more than $120 million (Rs 760 crore) in funding and is valued at over Rs 1,500 crore.

Image: indiatimes 

Dubai plans world's first 3D printed office building

Dubai plans world's first 3D printed office building

Dubai's one-storey prototype building, with about 2,000 square feet of floor space, will be printed layer-by-layer using a 20-foot tall printer.Reuters  |  01 July 2015, 8:37 AM IST
DUBAI: Dubai said it would construct a small office building using a 3D printer for the first time, in a drive to develop technology that would cut costs and save time as the city grows.

3D printing, which uses a printer to make three-dimensional objects from a digital design, is taking off in manufacturing industries around the world but has so far been used little in construction.

Dubai's one-storey prototype building, with about 2,000 square feet (185 square metres) of floor space, will be printed layer-by-layer using a 20-foot tall printer, Mohamed Al Gergawi, the United Arab Emirates Minister of Cabinet Affairs, said on Tuesday.

It would then be assembled on site within a few weeks. Interior furniture and structural components would also be built through 3D printing with reinforced concrete, gypsum reinforced with glass fibre, and plastic.

The project is a tie-up between Dubai and Winsun, a Chinese company that has been pioneering the use of 3D printers to build houses. Gergawi cited studies estimating the technique could cut building time by 50-70 percent and labour costs by 50-80 percent.

10 WhatsApp tips & tricks you must know

10 WhatsApp tips & tricks you must know

Techradar / July 09,2015
10 WhatsApp tips & tricks you must know
WhatsApp just keeps on growing, adding new features and users all the time. The prospect of sending texts and making calls for free has tempted a whopping 800 million people onto the Facebook-owned app at last count.

If you're one of them, chances are there are a few elements of the app that still seem bewildering or annoying – the good news is many of them can be fixed if you know where to look.

So sit back, check out these WhatsApp tips and tricks and you'll be chucking messages to your buddies left, right and centre without having to worry about getting yourself tangled in a web of pointless chatting.

1. Check when your WhatsApp message was read

July 09,2015
Check when your WhatsApp message was read
You can tell when your message has been read in WhatsApp when the two ticks next to it in the chat window turn blue. Sometimes you may want to get a little extra detail.

Just tap and hold on the message and then tap the Info icon, and you'll get a precise time. In iOS, you can also tap and drag the message to the left to get the time.

2. Switch phones without losing chats

July 09,2015
Switch phones without losing chats
When you switch to a newer iPhone or replace your old Android, you can take your chat history with you. If you use a microSD card, it's as simple as Menu > Settings > Chat settings > Backup conversations.

Move the card over to the new phone, install WhatsApp, and Restore when prompted. If the backup is on internal storage, you can use a file explorer to find the /sdcard/WhatsApp/ folder and move the contents manually.

Support for backing up to Google Drive is likely to be added in the next build. Check the Apple website for iOS instructions.

3. Send messages in bulk

July 09,2015
Send messages in bulk
You might want to save some time by sending out a bulk message, but that doesn't necessarily mean that you want all the recipients to know it's a group message.

The broadcast feature lets you send out the same message to multiple contacts, but it will appear as a private message between the two of you for them. In Android, tap Menu, and then ‘New Broadcast’. In iOS, tap Broadcast Lists on the Chats screen, and then tap ‘New List’.

If they reply, it will only go to you, not the full list.

4. Get back deleted messages

May 19,2015
Get back deleted messages
WhatsApp backs up messages on your device every morning at 4AM. The easiest way to recover a recently deleted message is to uninstall the app and reinstall it.

During the process it will ask if you want to restore from backup. This will cover the last seven days. If you want to restore an older chat on Android, use an app like ES File Explorer and go to sdcard/WhatsApp/Databases to see your backups.

Rename the file you want to msgstore.db.crypt and then go to Settings > Apps > WhatsApp > Clear data, then start it up and restore when prompted.

This tip only works for Android. If there are certain chats that you return to every day, it might be a time saver to set up a shortcut on your home screen that goes directly to them.

5. Use WhatsApp on your computer

July 09,2015
Use WhatsApp on your computer
If you have Google Chrome browser installed on your computer or laptop, then go to WhatsApp Web and follow the instructions for your phone.

You'll need to make sure your phone is connected to the internet, ideally through Wi-Fi because the web app still syncs everything from your phone. Open WhatsApp, find the WhatsApp Web option in the menu, and scan the QR code in the browser.

You can now start chats and get notifications right there on your computer.

Sorry iPhone users, it doesn't work on iOS.

6. Stop WhatsApp images from showing in your camera roll

July 09,2015
Stop WhatsApp images from showing in your camera roll
You probably don't want all the images from WhatsApp to appear in your Camera Roll on iOS, or in your Gallery or Photos app on Android.

It's easy to sort on iOS, just go to Settings > Privacy > Photos and toggle WhatsApp off.

On Android, use a file manager like ES File Explorer, and go to sdcard/WhatsApp/Media,then tap New at the bottom left in any folder you don't want shared, and create a file called .nomedia. Your images won't pop up in the gallery anymore.

7. Create a shortcut for chats

July 09,2015
Create a shortcut for chats
All you need to do is tap and hold on the chat in question, and then choose Add conversation shortcut from the pop-up menu.

It will appear in a space on your home screen. You can tap and hold on it to drag it around, just like an app icon or widget.

8. Mute group chat notifications

July 09,2015
Mute group chat notifications
Sometimes group conversations create a lot of noise. You may not want to leave the conversation, but you probably don't want a notification every time someone chips in.

If you're using an iPhone, then open the group chat, tap the subject to get the Group Info screen, and then tap Mute.

In Android, open the chat, tap the Menu button, and then tap Mute. You can specify a time period, or you can remove the tick in the Show notifications box to turn them off permanently.

9. Lock the WhatsApp app

July 09,2015
Lock the WhatsApp app
There's no way to do this on iOS without jailbreaking, but on Android you have a wide choice of security apps that will enable you to password or PIN protect your WhatsApp chats.

Try Messenger and Chat Block, AppLock, or Smart AppLock. Some of these apps will even snap a photo if someone tries to access the app without the right PIN, so you can catch snoopers.

On Windows Phone you can try WhatsApp Locker. If you're on BlackBerry, then try Lock for Whats Messenger.

10. Hide ‘Last Seen’ time stamp

July 09,2015
Hide ‘Last Seen’ time stamp
When you look at a contact on WhatsApp there's usually a "last seen" time under their name, which tells you when they last checked the app. If you don't want people to be able to see when you're using WhatsApp, you can set your "last seen" to Nobody. 

Go to Settings > Account > Privacy, but be aware that it will also prevent you from being able to see other people's last seen time. You can also hide your profile photo, status, and turn off read receipts in the Privacy menu.