Tuesday, January 25, 2011

The complexity of investing

Recently, somone asked the Oracle of Omaha (Warren Buffet), what was his opinion on Gold?
He replied in his usual characteristic simple way: "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"

This is the ultimate dilemma of investing and human life. How do you value anything? What we value today highly can be totally disregarded another day. Remember how a baby takes so much interest in a colourful spinning plastic "thingy" atop its cradle? Or how much we appreciate the 100 or 1000 bucks which was the first salary and later that amount just doesnt even excite us years later. How we value the last few minutes of the death bed of a loved one but never valued the hours we spent during the lifetime knowing very well that everyone will pass away someday.

All value is relative in life, and humans need to value millions of things in their life. Coming back to investing, most of the things in investing is based on what you believe and what you value. On the other hand of Buffet, we have another equally great stud, Mr.Jim Rogers, who has always believed in commodities and will always lobby for buying commodities. That is because he believes and he has his reasons to believe in it.

So at the beginning (and probably the end) of the day, what are you going to believe?

Saturday, January 22, 2011

The Paradox of Choices

Our needs and the understanding of our needs tends to be poles apart when it comes to choices. We get to choose from tens of flavours for a face wash (Does it really matter whether it was a peach flavoured one or an apricot) and keep changing them but when the big important things come, we hardly have much chance to change the choice (which city to settle, who to marry, which house to buy, which career line to choose). Not impossible but very difficult. Such are the forces the humankind is forced to.

Sunday, January 16, 2011

Mumbai is Happening!

Ever wondered what to do in Mumbai and not knowing what to do?
Ever wanted to try something new?
Want to just get out of boredom?
Wanted to meet new people sharing your interests and passions?
Mumbai provides you so many opportunities and at nominal prices.
All that is required from you is some effort to get off the couch and do something about it...

Races at Mahalaxmi race course
Plays: http://qtpthescript.blogspot.in/p/up-coming.html
Many a people say Mumbai is a happening place, now you know why!
If any of you know of more things, please do comment on this post.

Friday, January 7, 2011

Necessity to Change

It is not necessary to change. Survival is not mandatory. ~W. Edwards Deming


Thursday, January 6, 2011

Choosing a demat and trading account

There is a lot of confusion between a trading account and a demat account to a person new to the field of investing. The charges corresponding to them is even more confusing and many hidden(by marketers).
Let me first give a brief difference between the two and then explain the corresponding charges they have. Next, give a list of key criteria to consider which demat and/or trading account one should go for.
A demat account is like a savings bank account. It keeps your shares or rather the count of the shares of each scrip (A scrip is a company name whos shares you own!) you own. Just like your bank account keeps your money or rather a count of the amount of money you own.
A trading account is required for you to buy or sell shares.
The explanation of the charges is given here:

The key criteria for selecting these accounts are:
1. Your purpose/usage. In short, how frequently are you going to buy/sell and is it intraday or delivery based. Choose the Broker whose charges are lowest according to your transaction style.
2. Look at a complete solution and not just one individual product like a demat account. After all, the money in the savings account will be linked to your trading account for buying/selling shares and the trading account will be linked to your demat account for storing the shares. Suppose you have a Savings account with Financial group 1, and the trading account with financial group 2 and group2 trading account does not have a partnering arrangement with group 1, you will be forced to open a new savings account with Group 2 itself. Similar with the relationship between the trading account and the demat account. Usually, most non-bank brokerages have tie-ups with the popular banks for savings bank accounts and demat accounts, but brokerages in a banking group company may have only the same bank as its partner.
3. Internet based trading: Some of the brokerages try to make their websites very fancy and use hi-fi new web technologies(typical example is Flash on websites) or need some installation of their trading application on the user's side. But they don’t understand is that your company's internet browser may not be technologically enabled (say, no flash is installed) and you are not allowed to install softwares in the office. Then the whole point of getting a trading account and associated demat accounts/bank account linkages,etc are pretty much useless. Not totally useless as most/all brokerages have a trading desk that you can call and order them to buy/sell. Sometimes,  your call can be on hold when opportunities emerge in the markets for minutes only (Remember gains to be made on IPO listing when the price starts dropping after hitting a high).
4. Think long term. In case you have got yourself a demat account and you have existing shares in it and you want to move to another demat account, transfer of shares is not cheap. One of the demat accounts I checked was charging Rs.50  per company scrip that is to be transferred. If I have 20 companies, it is going to cost me 50*20=Rs.1000. Others may charge differently, based on number of shares or amount worth or anything. Please find out what this amount is, in case you are ever tired of useless service and you want to change the demat account. These transfer rates are never mentioned anywhere. Buyers beware!
5. Opening one of these: Bank account, Demat Account, trading account is not easy anymore. One needs address proof, identity proof, registered mobile number for instant authorisation, etc. Gone are the days when you can walk to a new city and get one of these as if you were getting a cup of coffee in a shop. Think about the long term implications before closing any of these. Can you ever open another one without much effort?
Happy account creations! :)