Home Loans are available by nationalized and private banks more easily than before .EMI on the home loans reduce than before and the loan refund time frame increase than before.
But this one is not only beneficial from point of view of debtors but also from the point of view of banks as banks get high-income.
As the interest rate reduce in the market therefore banks concentrate more on capital return than the interest rate return.
From the debtor point of view also get the benefits of the low EMI and long period to return debt which reduce the burden on the debtor.
There are some precaution need to measure before apply for the home loans from any banks.
1. Terms and Conditions: The whole terms and condition need to check before apply for the home loan.
Check that If there is any hidden charge on the loan.
2.Check the lowest interest rate : Check the lowest interest rate available in the market normally the interest rate are more or less fix, but its differ from bank to bank .As the 1% change is also a big matter .
3. EMI Amount: Emi generally charged 40% of the net disposal income as per the rule. As the future is uncertain it’s better to reduce the EMI 15% of the disposable income ,and save the certain amount as reserve.
4. Future Plan: People generally increase their EMI amount for the future as they think there total income increases in future .It’s true that after 5 years the total income of anyone more than the present income ,but on the same time there expenditure also increases with the time ,so its better t to keep the EMI in the same formate than to increases in future.
Related Info :
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Friday, June 18, 2010
Monday, June 7, 2010
Dollar becomes world currency and the large part of the foreign trade made in us dollar.
US dollar come into existence in the world market after the world war 2 .After the second world war most of industrial countries of Europe and Asia suffered a lot .Only the US industries has get the advantage of the huge demands of industrial goods between the second world war and after the second world war .US dollar is not become the world currency due this reason only.
Petroleum was playing the crucial role to get this advantage to the dollar.
USA is the highest energy consumer in the world after the Second World War and the 60% of the total consumption comes from import. It’s the US strategy which convinces the OPEC cartel to sell their petroleum in US dollar. Other countries need to sell their goods or sell their gold to get the dollar on the other hand US don’t need to sell their goods or to sell the gold.
US has to spent a lot to maintain the Army bases in the different part of the world ,spent a large portion of their GDP in the war ,but still the dollar value continue raising in the world there is some reason behind these .Petroleum play the main role and second one that all the OPEC countries are again deposited in the US or invest to purchase the US bonds ,these help a lot to get the US dollar a strong position in the world market.
US dollar close competitor is Euro .Euro comes in the world market after 1990.Euro is provide the new weapon to the European countries to fight against the US dollar supremacy in the world market .
US war against terror and Iraq, Iran and Middle East and Afghanistan war reduce the US influence in the Arabic countries and they are think to change their old pattern to invest in the US security market. It’s true that Euro work as competitor to the US dollar but still the US dollar is only currency used for petroleum trading.
So in near future there is very little chance that Euro get superiority over the US dollar in the Global market.
Petroleum was playing the crucial role to get this advantage to the dollar.
USA is the highest energy consumer in the world after the Second World War and the 60% of the total consumption comes from import. It’s the US strategy which convinces the OPEC cartel to sell their petroleum in US dollar. Other countries need to sell their goods or sell their gold to get the dollar on the other hand US don’t need to sell their goods or to sell the gold.
US has to spent a lot to maintain the Army bases in the different part of the world ,spent a large portion of their GDP in the war ,but still the dollar value continue raising in the world there is some reason behind these .Petroleum play the main role and second one that all the OPEC countries are again deposited in the US or invest to purchase the US bonds ,these help a lot to get the US dollar a strong position in the world market.
US dollar close competitor is Euro .Euro comes in the world market after 1990.Euro is provide the new weapon to the European countries to fight against the US dollar supremacy in the world market .
US war against terror and Iraq, Iran and Middle East and Afghanistan war reduce the US influence in the Arabic countries and they are think to change their old pattern to invest in the US security market. It’s true that Euro work as competitor to the US dollar but still the US dollar is only currency used for petroleum trading.
So in near future there is very little chance that Euro get superiority over the US dollar in the Global market.
Thursday, June 3, 2010
Basic criteria for valuing a financial institution
Financial Institution main business raise money from the public and lend this in the market ,Interest on the lending is the prime source of earning and the interest on deposited is the main expenditure .Now the whole ability of the management governed how the institute collect money from general public at low rate .
Basic criteria a financial analyst follow for valuing a financial institution as summed up by the CRAMEL model. In this model factors like Capital Adequacy Ratio, Resource raising ability, the quality of assets, the quality of the management, earning quality and leverage are analyzed and conclusion reached.
1.Capital Adequacy ratio: capital consist of assets, again assets divided in high risky and low risky. Risk of the assets increases with the risk of the assets.The ratio of the risk weighted assets of an Financial Institution referred to as Capital Assets Ratio.
2.Resource Raising Ability: Ability of the financial institution measures by their ability of raising fund from market at economic rate, and the fund raiser at short span of time.
3.Assets quality : when the financial institution lend their fund on that time they need to measure the riskiness of the assets .They need to check the credit worthiness of the institution where the fund invested also need to check how the fund used by the lending company and where the investment made by the lending institution.
4.Management Quality: Constitution of the Board of Director. Further the competence, technical expertise and objective of the senior management team, the management system like ALM management, portfolio and risk management and mechanism of the internal audit are also consider.
5.Earning Quality: Financial institution main source of income is the interest on the lending amount. Financial institution need to check that change in the interest rate has any affect on the income of the institution.
6.Liquidity : Liquidity of the Financial Institution effect on the business of the financial institution, keeping this in view its average borrowing tenure is always exceed the average tenure of the investment.
Under this category one may look at debt equity ratio, the interest coverage ratio, the borrowing profile and tenure of the investment.
Basic criteria a financial analyst follow for valuing a financial institution as summed up by the CRAMEL model. In this model factors like Capital Adequacy Ratio, Resource raising ability, the quality of assets, the quality of the management, earning quality and leverage are analyzed and conclusion reached.
1.Capital Adequacy ratio: capital consist of assets, again assets divided in high risky and low risky. Risk of the assets increases with the risk of the assets.The ratio of the risk weighted assets of an Financial Institution referred to as Capital Assets Ratio.
2.Resource Raising Ability: Ability of the financial institution measures by their ability of raising fund from market at economic rate, and the fund raiser at short span of time.
3.Assets quality : when the financial institution lend their fund on that time they need to measure the riskiness of the assets .They need to check the credit worthiness of the institution where the fund invested also need to check how the fund used by the lending company and where the investment made by the lending institution.
4.Management Quality: Constitution of the Board of Director. Further the competence, technical expertise and objective of the senior management team, the management system like ALM management, portfolio and risk management and mechanism of the internal audit are also consider.
5.Earning Quality: Financial institution main source of income is the interest on the lending amount. Financial institution need to check that change in the interest rate has any affect on the income of the institution.
6.Liquidity : Liquidity of the Financial Institution effect on the business of the financial institution, keeping this in view its average borrowing tenure is always exceed the average tenure of the investment.
Under this category one may look at debt equity ratio, the interest coverage ratio, the borrowing profile and tenure of the investment.
Tuesday, May 25, 2010
Indian stock market perform well than Chinese stock market
China’s growth rate is much greater than India, but its stock market not performing as same as the Indian stock market, there are lots of reason behind this.
1. Lack of Transparency:
In china Govt. has sole control on the all medium of information there for current status of the market not available to the investors, where in India this information available to every investor easily.
2. Socialistic pattern of investment:
It’s true that after 1970 China implemented some policy of open economy but still China is a socialist country and most of the economy depend on the public sector.
3. Violation of the copyright act:
In China the violation of the copyright act is the serious concern, which demotivate the investor as they are not able to protect goodwill of their product in the market.
4. Wrong data presented by the Govt. Agency:
As china is the socialist country true picture of the economy not available in the market therefore the investor are not ready to take the risk of investment in the stock market.
5. Major dependence on the Foreign Company:
In China most of the investment in the manufacturing sector done by the foreign investor .this is also create a problem of heavy dependence on the foreign company.
6. Unequal distribution of the income:
Growth of the Economy in China is not equal in all part of the country. Here poor become poor and rich become richer day by day which create social unrest in the country.
In India large portion of the investment are made by the Private investor here public as well as private investor are made the investment side by side .In India 2/3 of the total market investment made by the Indian industrialist or by the Indian Govt. dependence on the foreign investment is 1/3 of the total.
After Satyam scam the credibility of the Indian stock market reduce among the foreign investor.
Question arises for the credibility of the SEBI, but only the Satyam scam is not the best criteria to judge the performance of the SEBI.
1. Lack of Transparency:
In china Govt. has sole control on the all medium of information there for current status of the market not available to the investors, where in India this information available to every investor easily.
2. Socialistic pattern of investment:
It’s true that after 1970 China implemented some policy of open economy but still China is a socialist country and most of the economy depend on the public sector.
3. Violation of the copyright act:
In China the violation of the copyright act is the serious concern, which demotivate the investor as they are not able to protect goodwill of their product in the market.
4. Wrong data presented by the Govt. Agency:
As china is the socialist country true picture of the economy not available in the market therefore the investor are not ready to take the risk of investment in the stock market.
5. Major dependence on the Foreign Company:
In China most of the investment in the manufacturing sector done by the foreign investor .this is also create a problem of heavy dependence on the foreign company.
6. Unequal distribution of the income:
Growth of the Economy in China is not equal in all part of the country. Here poor become poor and rich become richer day by day which create social unrest in the country.
In India large portion of the investment are made by the Private investor here public as well as private investor are made the investment side by side .In India 2/3 of the total market investment made by the Indian industrialist or by the Indian Govt. dependence on the foreign investment is 1/3 of the total.
After Satyam scam the credibility of the Indian stock market reduce among the foreign investor.
Question arises for the credibility of the SEBI, but only the Satyam scam is not the best criteria to judge the performance of the SEBI.
Thursday, May 20, 2010
Hedge Fund
An Aggressive managed portfolio that use advanced I investment strategy to get more return than the general investment are called hedge fund investment .Hedge means the protection ,hedge investment help to get the shelter from the current market fall. Hedge investment or the hedge is give birth to the FRA (Future rate of agreement).FRA is the policy to transfer the agreement to the future to get the advantage of the general rise of the interest rate .Hedge funds investment is generally differ from the mutual fund investment as the mutual fund investment need to follow some rules and guideline for investment but the hedge fund are free from any rules and regulation for the investment. Hedge fund investment generally for the rich people as the investment are highly risk able .In the US there is a criteria for hedge investment that the investor has at least 1 million net worth of assets .Hedge fund generally need to protect the risk of interest but actually this means of investment for getting higher return .
Magegment fees are calculated on the NAV of the fund on the per annum basis but paid on the monthly or quarter basis and charged as 1% to 4 %.
Performance fees are charges on the net profit of the fund investment as there is no profit no need to pay the charges.
Main Risk:
Volatility: Hedge fund are highly elastic than other investment.
Lack of transparency: Hedge funds not follow the rules and regulation there for there is no governing body to check the performance of the hedge fund which means transparency of the investment is very low.
Lack of regulation: There are no specific rules or regulation for the hedge fund investment as a result the hedge fund manager decision is the last decision for the investment.
Magegment fees are calculated on the NAV of the fund on the per annum basis but paid on the monthly or quarter basis and charged as 1% to 4 %.
Performance fees are charges on the net profit of the fund investment as there is no profit no need to pay the charges.
Main Risk:
Volatility: Hedge fund are highly elastic than other investment.
Lack of transparency: Hedge funds not follow the rules and regulation there for there is no governing body to check the performance of the hedge fund which means transparency of the investment is very low.
Lack of regulation: There are no specific rules or regulation for the hedge fund investment as a result the hedge fund manager decision is the last decision for the investment.
Wednesday, May 12, 2010
Buy Back Of Equity Shares
Buy back of shares means reducing the total number of shares from the market.
Buy back of shares help to increase the goodwill of the company as well as help to increase the market value of shares .Buy back of shares require a large lump sum amount of liquid cash .Buy back help dispose the excess cash reserve of the company to protect the ownership of the company or to consolidate the ownership in the few of hands.Buy back has some condition also .In the different countries there are different rules need to follow when any company goes for the buyback policy .Company need to inform there shares holder in the general meeting that company goes for buyback process.Company need to get clearance from the governing body of that country.company not able to issue fresh equity three months after the buy back process.
Company purchase there own shares from the market at a premium amount ,but these condition not exist after a some time because the market price of the shares increase up to the shares price to get the advantage of the increase amount benefit.
Prime Objective to buy back are:
1.To reduce the outstanding equity capital:
To reduce the outstanding equity capital as a consequence of which the floating stock in the market reduced.Buy back help to minimize the total amount of equity capital from the market,which help to stabilize the market price of the share.
2.To increase the return on the remaining portion of the shares :
Buy back help to reduce the volume of equity capital in the market and the remaining equity holder get the higher return than before .Suppose the net profit of the company is 15 million dollar and the total number of equity share holder are 100000 holding total 1 million shares but after the buyback of share the total number of shares reduce to 50000 that means 15 million dollar distributed among the 50000 shares definitely the unit holder getting better return than before .
3.When the company has surplus cash and run out of favorable investment opportunity:
Buyback is only possible when the company has sufficient liquid assets in their reserve and the investment rate of return is less than the cost of equity than the company goes for the buyback policy.
4.Support the shares price:
Buy back help to increase the market value of the shares and to reduce the fluctuation in the shares price of that company.
Buy back of shares help to increase the goodwill of the company as well as help to increase the market value of shares .Buy back of shares require a large lump sum amount of liquid cash .Buy back help dispose the excess cash reserve of the company to protect the ownership of the company or to consolidate the ownership in the few of hands.Buy back has some condition also .In the different countries there are different rules need to follow when any company goes for the buyback policy .Company need to inform there shares holder in the general meeting that company goes for buyback process.Company need to get clearance from the governing body of that country.company not able to issue fresh equity three months after the buy back process.
Company purchase there own shares from the market at a premium amount ,but these condition not exist after a some time because the market price of the shares increase up to the shares price to get the advantage of the increase amount benefit.
Prime Objective to buy back are:
1.To reduce the outstanding equity capital:
To reduce the outstanding equity capital as a consequence of which the floating stock in the market reduced.Buy back help to minimize the total amount of equity capital from the market,which help to stabilize the market price of the share.
2.To increase the return on the remaining portion of the shares :
Buy back help to reduce the volume of equity capital in the market and the remaining equity holder get the higher return than before .Suppose the net profit of the company is 15 million dollar and the total number of equity share holder are 100000 holding total 1 million shares but after the buyback of share the total number of shares reduce to 50000 that means 15 million dollar distributed among the 50000 shares definitely the unit holder getting better return than before .
3.When the company has surplus cash and run out of favorable investment opportunity:
Buyback is only possible when the company has sufficient liquid assets in their reserve and the investment rate of return is less than the cost of equity than the company goes for the buyback policy.
4.Support the shares price:
Buy back help to increase the market value of the shares and to reduce the fluctuation in the shares price of that company.
Tuesday, May 4, 2010
Bonds are not totally risk free investment
Bonds are less risky than the equity but it doesn’t meant its risk averse bonds investment are default risk as well as the interest rate risk.
If the market down and recession than there is no option to save the investment by any means .
1.Default Risk:
Suppose any company become bankrupt than the investor lost there whole investment.is the some part paid in the future than also the investor loss the current market value of the rupee.
2.Interest rate risk:
Interest rate risk will arise with changing in the interest rate in the market.Bonds are not held till maturity ,in that case the investor get the low amount of there investment that means price loss.If the hold the bonds till maturity than the suffer from the capital loss if the market price of the bonds reduce.
Change in the price fluctuation caused by the interest rate elasticity of bonds .Increase in the interest rate has increase the interest income as well as the reinvestment of that income gives the higher income .Increase in the interest rate reduce the market value of the bonds menace the investor get lower return by resumption of the bonds .It menace that increase in the interest rate has positive reinvestment effect but negative price effect.On the other hand reduce in the interest rate ,reduce the reinvestment income but the resumption value of the bonds increase due to reduce in market interest rate,that means the reduce in the interest rate has negative effect on the reinvestment but positive price effect.
To protect the investment from the elasticity of interest rate change ,Bond immunization is the right way.
Bonds immunization not depend on redemption value(yield to maturity) of the bonds ,it depends on the duration of the bonds.
If a liability needs to be paid after a particular time period then the investor needs to go for the Bond immunization which is exactly of the same duration as liability period and here the interest rates are on compound basis.
Bonds immunization helps to protect from the fluctuating interest rate market.
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