Friday, 26 April 2013

Warren Buffett Quotes

"I always attempt to be fearful when others are greedy and to be greedy only when others are fearful. "

"When a brilliant management tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."

"When you combine ignorance with debt, you get some pretty interesting results."

"Wide diversification is only required when investors don’t understand what they’re doing."

"My favorite holding period is forever."

"Price is what you pay. Value is what you get."

"There seems to be some perverse human characteristic that likes to make easy things difficult."

"Time is the friend of the great company, and the enemy of the mediocre."

"Value is what you get."

"We believe that calling institutions that actively trade, 'investors,' is like calling someone who repeatedly engages in one-night stands a 'romantic.' "

"I enjoy the process much more than the proceeds."

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

"Look at market fluctuations as your friend rather than your enemy; profit from folly instead of participating in it."

"Only when the tide goes out do you discover who's been swimming naked."

"Should you find yourself in a chronically leaking boat, the energy devoted to changing vessels is less daunting than the energy devoted to fixing consist leaks."

"Someone's sitting in the shade today because someone planted a tree a long time ago."

"The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective."

"It's better to associate with people better than you. Pick out people whose behavior is better than yours and you'll soon drift in that direction."

"In business, the windshield is always dirtier than the rearview mirror."

"Your reputation is like fine china, it takes 20 years to acquire and ten seconds to destroy."

"Risk presents itself when you don’t know what you're doing."

"Rule Number one: Never lose money. Rule Number two: Don’t forget Rule Number one."

"I never attempt to make money on the day to day change in the stock market. In fact, I purposely buy on the assumption that it’ll close tomorrow and not reopen for five years."

"If a business does well, the stock will always follow."

"In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497."

"A public-opinion poll is no substitute for thinking."

"Chains of habit are too light to feel until they’re too heavy to break."

"Derivatives are financial weapons of mass destruction."

"I don't like to jump over 7-foot bars. Instead, I look for 1-foot bars that I can step over."

Maruti Suzuki Q4 net jumps 80%; shares hit 52-wk high

India's largest passenger car maker Maruti Suzuki 's fourth quarter standalone net profit rose significantly better-than-expected 80 percent year-on-year to Rs 1,148 crore, sending its stock surging to a new 52-week high of Rs 1,693 on NSE.

Revenue was up 14 percent to Rs 13,304 crore in Jan-March, the maker of Alto, Swift hatchback and Ertiga multi-utility vehicle said on Friday.

The company's net profit including SPIL (Suzuki Powertrain India Ltd), which was merged during the last financial year, stood at Rs 1,240 crore for the quarter.

Analysts on an average were expecting it to report a net profit of Rs 700 crore, on revenues of Rs 12,750 crore, according to a CNBC-TV18 poll.

"The increase in net profit during the quarter was on account of higher sales of new models such as Ertiga, DZire (compact sedan) and Swift (premium hatcback), cost reduction and localization efforts and the benefit of a favourable exchange rate," Maruti said.

The company's total domestic vehicle sales fell 4 percent year-on-year but rose 15 percent sequentially to 3.09 lakh units in the fourth quarter.

It gained market share in what was a "challenging year" for the passenger vehicle industry, according to Shinzo Nakanishi, the outgoing MD of the company.

Maruti's market share is now at 39.1 percent, up 1 percent. Share of diesel vehicles also increased to 58 percent in FY2013, up from 48 percent a year ago.

Apart from increasing diesel vehicle sales, Maruti's earnings were also boosted by other income, which increased 34 percent YoY to Rs 399 crore.

Maruti Suzuki officials say short-term concerns continue for the Indian economy. But they remain positive on the long-term growth potential.

Its expansion plans are also on track, with the Manesar C plant and Gurgaon diesel engine plant, expected to be commissioned in the second half of this year, Nakanishi said.

Meanwhile, Maruti Suzuki's board on Friday approved the amalgamation of seven of its wholly owned subsidiaries. These include, Maruti Insurance Business Agency, Maruti Insurance Distribution Services and Maruti Insurance Broker Ltd among others.

At 14:00 hrs, Maruti Suzuki shares were trading at Rs 1,677.95 on NSE, up 5.5 percent.

U.S. Companies Are Back on Top

Stock Analysts Tell All ! By Jason Zweig

As law firms have recently been reminding their clients, Wall Street analysts can get in trouble if they obtain nonpublic information from the managers of the companies they follow. The Securities and Exchange Commission, under Regulation F-D, has strict rules that seek to limit the ability of any investor to get early or private information.

But you can still dream. Consider a new study of stock analysts by a team of accounting and finance professors: The analysts rank private phone calls with management as the most useful source of information for generating earnings forecasts. And promoting private access to corporate management remains one of the best ways for an analyst to get a rise out of clients.

As one analyst told the researchers, “If I call up a money manager, a hedge fund, whoever, and I’ve got a call to make on a stock, and I’m able to say, ‘Hey, by the way, we were able to spend 20-30 minutes talking to senior management,’ boom! Their ears are just straight up.”

Earlier this year, accounting professors Laurence Brown of Temple University, Andrew Call of the University of Georgia, Michael Clement of the University of Texas at Austin and Nathan Sharp of Texas A&M University surveyed 365 sell-side analysts and did 18 direct interviews, detailing how analysts do their work and view their roles. They made the results anonymous to ensure confidentiality.

Their study draws some striking conclusions:

Asked who was their most important group of clients, 81.5% of analysts picked “hedge funds.” Only 13.3% chose “retail brokerage clients.”
Fewer than a quarter of the analysts said that the “accuracy and timeliness” of their earnings forecasts were very important to their compensation. Only 35% said that the profitability of their stock recommendations was crucial in determining how much they earned. Their “standing in analyst rankings or broker votes,” however – essentially how they score in media surveys, “broker votes” and other annual popularity contests among clients – was very important in shaping compensation for 67% of the analysts.

“I came into the industry thinking [success] would be based on how well my stock picks do,” one analyst told the researchers. “But a lot of it ends up being, ‘What are your broker votes?’”Another reported, “25% of the allocation of our bonus pool is based on broker votes.”

Approximately one in four analysts has been pressured by a supervisor to lower earnings forecasts, presumably because that makes the forecasts easier for companies to beat – thereby pleasing investors and companies alike.
Only half of analysts said that primary research, like discussions with customers and suppliers, was very useful in forecasting earnings or recommending stocks.
Nearly 40% of analysts said that it was very likely that they would lose access to management or be “frozen out” of question-and-answer sessions on conference calls if they issued an earnings forecast well below the Wall Street average.

As one analyst put it, chillingly: “Most of the sell-side is worried more about what management thinks of them than they are about whether they’re doing a good job for investors.”

What would happen if analysts suspect a deliberate attempt by management to misrepresent a company’s financial statements? Most said they would respond by seeking additional information. But 4% of analysts said it isn’t at all likely that they would request any further explanation from management or investigate outside the company. And 7% said there was almost no chance that they would lower their earnings forecast or downgrade the stock.
More than two thirds said that private phone calls with management were far and away the most important factor in their work.
It’s customary for analysts to have private phone discussions – one-on-one – with a company’s chief financial officer shortly after the company’s public conference call to discuss its quarterly earnings.

“You get details that they’re not necessarily going to go into on a public call with investors,” said one analyst. “Then we can go to clients and say, ‘This is our understanding of the situation. This is what the company says; this is what we think.’” Added the analyst: “It’s a way for them to broadcast. We’re sort of like a megaphone for them.”

Wall Street firms will go to great lengths to try identifying the “tells” that are supposed to tip off listeners that someone is shading the truth or lying – even though much of this effort is little better than voodoo and psychobabble. One analyst said of private telephone calls with management: “You can read their body language -even on the phone – and get a feel for how optimistic they are or how realistic something might be.” One brokerage firm, said an analyst, brought in an FBI profiler who educated the research team for four hours on how to read subtle cues that can indicate deceptive behavior. (The FBI, on its website, points out that there’s no such thing as an “FBI profiler.”)

Any investor – especially any individual investor – still clinging to the delusion that Wall Street analysts provide an independent, objective and skeptical perspective on companies needs to read this study.

Thursday, 25 April 2013

Thomson Reuters announces winners of 2012 Zawya MENA Funds Ranking

Thomson Reuters , the world's leading source of intelligent information for businesses and professionals, today announced the Zawya MENA Funds Ranking for 2012.

The rankings are calculated on an annual basis and have a set of fixed criteria for a fund to take part in the analysis, of which a minimum USD 5 million in size and a minimum 3 years track record.

Russell Haworth, managing director, Middle East and North Africa, Thomson Reuters , said: "The Zawya Funds Ranking is an independent ranking system that addresses the rising demand for accurate information, unbiased research and analysis, as well as increased transparency in the MENA funds industry through its emphasis on compliance and disclosure. For the year 2012, we have 26 ranked categories of which the winners were announced at the Zawya Funds Awards Gala dinner on 24th of April 2013."

Zawya Funds Ranking Awards:

Best Egypt Balanced Fund Of 2012: Al Massy Fund, EFG-Hermes Holding

Best Egypt Equity Fund Of 2012: EFG-Hermes Egypt Fund , EFG-Hermes Holding

Best Egypt Equity Islamic Fund Of 2012: EFG-Hermes Al Baraka Bank Egypt Fund, EFG-Hermes Holding

Best Egypt Money Market Fund Of 2012: Blom Bank Money Market Fund, CI Asset Management

Best Equity GCC Fund Of 2012 : LHV Persian Gulf Fund (A Share), LHV Asset Management

Best Equity MENA Fund Of 2012: T. Rowe Price Africa and Middle East Fund, T. Rowe Price International

Best GCC Equity Islamic Fund Of 2012: HSBC Amanah GCC Equity Fund, HSBC Saudi Arabia Limited

Best Kuwait Equity Fund Of 2012: Al Wasm Fund, Kuwait Finance and Investment Company

Best Kuwait Equity Islamic Fund Of 2012: Markaz Islamic Fund, Kuwait Financial Centre ( Markaz )

Best Lebanon Fixed Income Fund Of 2012: Beirut Golden Income Fund II, Bank of Beirut Invest s.a.l.

Best Morocco Balanced Fund Of 2012: CDG Izdihar, CDG Capital Gestion

Best Morocco Equity Fund Of 2012: Wineo Actions, Winéo Gestion

Best Morocco Fixed Income Fund Of 2012: CDG Monetaire Plus, CDG Capital Gestion

Best Morocco Money Market Fund Of 2012: Upline Perennite, Upline Capital

Best Oman Equity Fund Of 2012: Vision Emerging Oman Fund, Vision Investment Services Company

Best Qatar Equity Fund Of 2012: Al Waseela Fund (F Class), EFG-Hermes Holding

Best Saudi Arabia Equity Fund Of 2012: Saudi Istithmar Fund, Saudi Fransi Capital

Best Saudi Arabia Equity Islamic Fund Of 2012: Al-Saffa Saudi Equity Trading Fund, Saudi Fransi Capital

Best Saudi Arabia Islamic Fund Of Funds Of 2012: HSBC Amanah Multi-Assets Growth Fund, HSBC Saudi Arabia Limited

Best Saudi Arabia Money Market Fund Of 2012: Al Razeen Riyal Fund, Samba Capital

Best Saudi Arabia Trade Finance Islamic Fund Of 2012: Al Awwal SAR Murabaha Fund, Al Awwal Financial Services

Best Tunisia Balanced Fund Of 2012: SICAV Amen, Amen Invest

Best Tunisia Fixed Income Fund of 2012: Attijari Obligataire SICAV, Attijari Gestion

Best UAE Equity Fund Of 2012: Emirates Gateway Fund, SHUAA Capital

Best Worldwide Fund Of Funds Of 2012: SAIB Global Equity Fund, Alistithmar Capital

Best Worldwide Islamic Fund Of Funds Of 2012: Al Shamekh Shariah Compliant Fund, Riyad Capital

Zawya Fund Awards, as voted for by the industry, audited by Deloitte

Best Custodian Of The Year 2012: HSBC Bank

Best Administrator Of The Year 2012: Apex Fund Services

Best Law Firm Of The Year 2012: Al Tamimi & Company

Best MENA Asset Manager Of The Year 2012: EFG Hermes Asset Management

Best GCC Asset Manager Of The Year 2012: NCB Capital

Best Levant Asset Manager Of The Year: The Housing Bank for Trade & Finance

Best International Asset Manager Of The Year: Bank of London and The Middle East

Best Fund Manager Of The Year 2012: Tariq Qaqish

Most Compelling Personality Of The Year 2012: Farah Foustok

Best MENA Fixed Income Fund Of The Year 2012: Al Mal MENA Income Fund

Best Newcomer Fund Of The Year 2012: HSBC Amanah Saudi Freestyle Equity Fund

Monday, 22 April 2013

The Trouble With Humans,- Why rats and pigeons might make better investors than people do :- By Jason Zweig

Humans have a remarkable ability to detect patterns. That's helped our species survive, enabling us to plant crops at the right time of year and evade wild animals. But when it comes to investing, this incessant search for patterns causes more heartache than anything else.

We see that value funds have stunk for years, so we dump them and pile into fashionable growth stocks like Intel and Cisco--right before they hit the skids.We buy a stock because some guy at a barbecue recommended it, and everything he talks about seems to go up--but this one plunges. We put every dime in stocks after hearing that they've trounced bonds forever--only to see bonds zoom past stocks this year.

Our incorrigible search for patterns leads us to assume that order exists where it often doesn't. Many of us believe, for example, that it's possible to foresee where the market is heading or whether a particular stock will continue to rise. In reality, these things are far more random and unpredictable than we like to admit.

Remarkably, scientists are now finding that this tendency to look for patterns is hardwired into the human brain. Psychologists have long known that if rats or pigeons knew what the Nasdaq is, they might be better investors than most humans are. That's because, in some ways, animals are better than people at predicting random events. If, for instance, you set up two lights in a laboratory and flash them in a random sequence, humans will persistently try to predict which of the two lights will flash next. Stranger still, they'll keep trying even when you tell them that the flashing of the lights is purely random. Let's say you flash a green light 80% of the time and a red one 20% of the time but keep the exact sequences random. (A run of 20 flashes could look something like this: GGGGRGGGGGGGRRGGGGGR.) In guessing which light will flash next, the best strategy is simply to predict green every time, since you stand an 80% chance of being right. That's what rats or pigeons generally do in a similar experiment that rewards them with a crumb of food whenever they correctly guess the next outcome.

But humans are apparently convinced that they're smart enough to predict each upcoming result even in a process they've been told is random. On average, this misguided confidence leads people to get the right answer in this experiment on only 68% of their tries. In other words, it's precisely our higher intelligence that leads us to score lower on this kind of task than rats and pigeons do.

The man with two brains

A team of researchers at Dartmouth College, led by psychology professor George Wolford, has been studying why it is that we think we can predict the unpredictable. Wolford's team ran light-flashing experiments on "split-brain patients"--people in whom the nerve connections between the hemispheres of the brain have been surgically severed as a treatment for epilepsy. Here's the group's key discovery, which was recently published in the Journal of Neuroscience: When the epileptics viewed a series of flashes that they could process only with the right side of their brains, they gradually learned to guess the most frequent option all the time, just as rats and pigeons do. But when the signals were flashed to the left side of their brains, the epileptics kept trying to forecast the exact sequence of flashes--sharply lowering the overall accuracy of their predictions.

Wolford's conclusion: "There appears to be a module in the left hemisphere of the brain that drives humans to search for patterns and to see causal relationships, even when none exist." His research partner, Michael Gazzaniga, has christened this part of the brain "the interpreter." Wolford explains: "The interpreter drives us to believe that 'I can figure this out.' That may well be a good thing when there is a pattern to the data and the pattern isn't overly complicated." However, he adds, "a constant search for explanations and patterns in random or complex data is not a good thing."

The dance of happenstance

Trouble is, the financial markets are almost--though not quite--as random as those flashing lights. On CNBC and countless websites, investment strategists and other so-called experts scan the momentary twitches of the market and predict what will happen next. Far more often than they're right, they're wrong--and the Dartmouth discovery about the interpreter in our brains helps explain why. These pundits are examining a chaotic storm of data and refusing to concede that they can't understand it. Instead, their interpreters drive them to believe they've identified patterns upon which they can base predictions about the future.

Meanwhile, the interpreters in our own brains impel us to take these seers more seriously than their track records deserve. As Berkeley economist Matthew Rabin has pointed out, just a couple of accurate predictions on CNBC can make an analyst seem like an ace, because viewers have no way to sample the analyst's entire (and probably mediocre) forecasting record. In the absence of a full sample, our interpreters take over and lead us to see the analyst's latest calls as part of a pattern of success.

The interpreter also helps explain what's called the gambler's fallacy--the belief that if, say, a coin has come up heads several times, then it's "due" to come up tails. (In fact, the odds that a coin will turn up tails are always 50%, no matter how many times in a row it's come up heads.) The gambler's fallacy is as common on Wall Street as hairballs under a couch: Some pundits will say emerging markets are sure to rebound because they've been doing badly for years, while others say tech stocks will crash because they've risen so much. In reality, the market makes mincemeat out of most of our predictions; apparent trends often foretell little about the future.

In its constant search for patterns, the interpreter also tricks investors into believing that hot performance streaks are sure to persist. Based on a few months of scorching returns, investors piled into Internet stocks late last year--and are now sitting on returns as cold as liquid nitrogen. What's happening here is simple: As soon as a pattern seems to emerge in the market, the interpreter in our brains sees it as part of a predictable trend--rather than a random happenstance that may never be repeated.

Finally, I think the Dartmouth research helps solve another puzzle. Even when we have only a small sample of our own performance at risky tasks--a few yanks on a one-armed bandit or a handful of big scores on tech stocks--we tend to decide either that we know what we're doing or that we're on a lucky streak. We almost never conclude that our success is the result of chance alone. Dutch psychologists Willem Wagenaar and Gideon Keren have found that professional gamblers, when accounting for their wins and losses, greatly overestimate the role of skill, attributing just 18% of the outcome of each bet to random chance.

Similarly, when a day-trader makes a fat profit off a stock after doing no research and owning it for only seconds, he's likely to conclude that he's an analytical genius or has an uncanny feel for the market. In truth, that profit is probably an accident--but his mind won't allow him to see things that way.

Mind over matter

So how can you keep your brain from giving you a garbled view of the investment world? You could disable your interpreter once and for all by having a neurosurgeon separate your brain's two hemispheres, and then by scrutinizing investment information in the leftmost part of your field of vision. That way, only the right half of your brain would be able to process investment data, and the interpreter would be shut down. However, it won't be easy talking a surgeon into carving your cranium open for this, and watching CNBC out of the far corner of your eye might be a pain. So here are some less drastic options.

Don't obsess. In one of his most startling findings, George Wolford of Dartmouth says people in his experiments earned higher scores when they were distracted with a "secondary task" like trying to recall a series of numbers they'd recently seen. In other words, interruptions improved their performance by preventing the interpreter in their brains from seeking spurious patterns in the data. Likewise, continually monitoring your results will probably make them worse--as you fool yourself into seeing trends that aren't there and trade too much as a result. If you're spending more than a few hours a month on investing, you're not only taking valuable time away from the rest of your life, but you're almost certainly hurting your returns.

Remember what's at stake. John Staddon, a professor of psychology at Duke, says rats or pigeons will generally bet on the option that has had the highest probability of success over time. But, notes Staddon, "humans will consistently do that only when the stakes are large and the consequences really matter." So you'll make better financial decisions if you convince yourself that there's no such thing as a small or casual investment. Just think of the thousands of dollars you could squander--and the blissful retirement you could jeopardize--with a few careless stock picks.

Track your forecasts. Whenever you've got a strong opinion about where a stock, or the market, is headed, jot it down and note the date. This will keep you from conveniently forgetting your failed forecasts and may provide you with a humbling reminder of your limitations as a soothsayer. And whenever some analyst seems to know what he's talking about, remember that pigs will fly before he'll ever release a full list of his past forecasts, including the bloopers.

Defy the chaos. Not everything about investing is chaotic, however; a few things really are predictable. On average, over time, investors who keep costs low (either through index funds or buy-and-hold stock portfolios) are mathematically certain to outperform in- vestors who trade too frequently or buy funds with high expenses. So before you focus on your returns--which are entirely unpredictable--make sure that your investments are not overpriced.

Diversification is another principle that defies chaos. Consider the danger of investing almost exclusively in tech stocks. Many investors who bet heavily on the sector in 1982--the last time it was this hot--loaded up on market darlings such as Alpha Microsystems, Commodore, Tandy, Vector Graphic and Wang Laboratories, which later tanked. If you diversify--by owning a wide range of U.S. and foreign stocks and bonds--you virtually eliminate the chance that a few duds like these will ruin your financial future. Broad diversification is still the best insurance against the risk of making an investment mistake. And there's nothing random about that.

Saturday, 20 April 2013

Poll: What Is the Primary Factor Bringing Down the Price of Gold ?

In a poll conducted earlier this week in the CFA Institute Financial NewsBrief, readers were asked, what was the primary factor in the recent decline in gold prices.

What is the primary factor bringing the price of gold to its recent sell-off level of $1,400?

In this week’s poll, 30% of the 1,211 respondents chose the response “many large holders have announced their intent to sell,” in line with what was reported about the Central Bank of Cyprus, George Soros, and others, whereas nearly the same proportion believe that the list of factors in the poll does not include what they consider the primary factor for the sell-off.

Indeed, the cause of this sell-off, the largest in 30 years, appears to be quite complex, with most of the sell action in the COMEX, where 400 metric tons ($20 billion) were sold within a matter of hours, while reported physical gold demand remained robust, especially in Asia. Some linked to gold price crash to the sell-off in the Japanese bond market, while others attributed the drop to an orchestrated bear raid.

Friday, 19 April 2013

Live chart: Economic growth

In recent years poor countries have enjoyed impressive improvements in GDP per person. But in the rich world they have hardly grown at all.

Thursday, 18 April 2013

Joel Greenblatt's Market Secrets

The best-selling author shares choice advice for small investors with Steve Forbes.
Read the Transcript:

The Future for Investors- By Professor Jeremy Siegel

In his address to the 2012 Wharton MBA Reunion, Professor Jeremy Siegel, one of the world's top investing experts, comments on the past, present and future of the stock market, including the valuation of the current market, the most promising asset classes and how the global middle class hold the secret to future economic growth.

Dow Average to End 2013 Over 16,000, Siegel Says

Jeremy Siegel, professor of finance at the University of Pennsylvania's Wharton School, talks about the outlook for financial markets and gold prices. He speaks with Trish Regan on Bloomberg Television's "Street Smart.” John Ryding, chief economist at RDQ Economics, also speaks


Should you opt for MF pension plans?

This is the last week for you to invest in tax-saving instruments, so buckle up and get to it before the 31 March deadline. You could choose from the popular options, such as tax-saving fixed deposits, the Public Provident Fund, National Savings Certificate, insurance schemes and equity-linked savings schemes.However, there is another avenue that you could consider— pension plans of mutual funds. These are not widely used, but provide dual benefit of tax rebate (up to Rs 1 lakh under Section 80C ) as well as disciplined saving for your retirement years.

What do these plans offer?

Currently, there are only three dedicated pension schemes available in the mutual fund domain. Two of these, UTI Retirement Benefit Pension Fund and Templeton India Pension Plan, have existed since the 1990s and offer the advantage of tax savings under Section 80C.The third one, Tata Retirement Savings Fund, was launched a couple of years ago, but is not a tax-saving instrument as its features are different from the above two.

Funds allow you to invest systematically-

All three funds allow you to invest systematically until you retire. The funds from UTI and Templeton invest around 40% of their assets in equity, while the balance is in debt instruments. The investment in both the schemes is concentrated in large-cap stocks in the equity portion, whereas the fixed income has more of corporate bonds and government securities.The Tata scheme, however, is available in three options—a progressive plan, which offers a minimum equity investment of 85%, while its moderate and conservative plans offer equity exposure ranging from 0-65%. The scheme automatically switches from one plan to another depending on the investor's age.

Withdrawal comes at a cost-

After you turn 45 years old, investments under the progressive plan automatically switch to the moderate plan, while at the age of 60 years, investments in the moderate plan are shifted to the conservative plan.Since these are pension plans, any withdrawal from them comes at a cost. Under the UTI scheme, if you opt to invest without the benefit of tax rebate, you can redeem units at any time, subject to a hefty exit load (5% within one year, 3% between 1-3 years and 1% after three years).

All schemes offer a systematic withdrawal plan-

There is no exit load if you redeem after you are 58 years old. So, a redemption of Rs 10,000 within a year will fetch you only Rs 9,500. You also have to maintain a minimum balance of Rs 10,000 after withdrawal.If you opt for the tax rebate, you will have to abide by a 3-year lock-in period. The Templeton scheme also has a 3-year lock-in period, and there's a flat 3% exit load if you redeem units at any time before the age of 58. The Tata scheme charges a 3% exit load for redemption within three years and 1% thereafter, except if it's done after retirement age.All schemes offer a systematic withdrawal plan, where you can redeem at chosen intervals—monthly, quarterly, half-yearly or annually—for regular income during retirement.

Should you invest in such pension plans?

What does a mutual fund pension scheme offer that makes it better than other similar offerings? Most of the other options used for building a retirement kitty, such as the PPF, NSC and tax-saving FDs, are pure debt instruments. They offer a return of around 8% in the long term, which may not be sufficient for building a sizeable corpus, given that inflation erodes a chunk of this wealth. Hemant Rustagi, CEO, Wiseinvest Advisors, says, "Traditional retirement products yield a low return and offer no flexibility in asset allocation."

Mutual fund pension schemes, on the other hand, offer a dash of equity, which gives them the potential to offer much higher returns. While pension plans by insurance companies also offer flexible asset allocation, these charge hefty costs in the early stages for this privilege.

A healthy retirement corpus-

However, some experts believe that mutual fund pension schemes are nothing more than balanced funds, which provide an exposure to both debt and equity, and can be easily replicated by investors on their own. "These are not pension schemes in the real sense as there is no compulsory annuitisation of the investor's money," says Jayant Pai, CFP, Parag Parikh Financial Advisory Services. He adds that a combination of the PPF and ELSS investments can, instead, be used to create a healthy retirement corpus.Incidentally, these schemes have been performing well and the 5-year returns for the two existing schemes is healthy. However, the schemes from UTI and Templeton limit equity exposure to 40%, which makes them a tad under-exposed to the asset class for someone who is starting out early and should be taking higher risk (the National Pension System provides an equity exposure up to 50%). The scheme from the Tata stable, on the other hand, offers a more aggressive approach for building wealth over the long term. However, to get the maximum benefit from any of these plans, you should stay invested for the entire tenure of the scheme.

Wednesday, 17 April 2013

Why ETFs are better than physical gold for investment

Compulsive shoppers are queuing up outside jewellery shops in large numbers to make the most of the recent fall in gold prices. A shopper who managed to get inside a shop in Mumbai says the store resembled an overcrowded long-distance local train during peak hours. Another shopper complained that the jeweller had taken most of the interesting pieces off the shelves, claiming that everything is sold off to ward off the crowd. Probably, he wants to wait for the prices to rise again, she says ruefully.

There are also stories doing the rounds that jewellers are refusing to buy back gold at the current price, instead insisting on a discounted price. In short, gold is making headlines, but, sadly this time, not for glorious reasons.

Precious metal won’t glitter forever:-
Just as gold is set to breach the Rs 25,000-mark after a splendid run that lasted more than a decade, unlike the jubilant shoppers, investors in the yellow metal are a worried lot. For those who were sitting on profits, the tumbling was a rude awakening that the precious metal won't glitter forever. They also know that it is a "little too late" to sell and get out. As for those who were waiting in the wings for a price correction before investing in gold, they are a bit unnerved by the flood of obituaries for the yellow metal as a safe haven. Naturally, they want to be sure about the prospects of gold before investing in it. The only happy souls, it seems, at the moment are jewellery shoppers.

On a free fall:-
The writing was on the wall for some time. The sceptics had been predicting the end of the bull run in gold, which has been almost uninterrupted for the past few years. However, most conservative investors were dismissive. They had solid reasons: as long as there is chaos all around, gold will continue to glitter, they argued. Look around: the US is hardly out of the woods; Europe crisis shows no signs of abating; and Indian story is almost written off. While these arguments had merit, the metal has lost its sheen. From a record high of Rs 32,500 per 10 gm in November 2012, the yellow metal has tumbled to Rs 25,680 on Wednesday. However, after the recent fall there are many voices singing in chorus about the demise of gold. Gold prices unlikely to reverse downtrend:- "The confidence in gold has been severely dented given the magnitude and the forcefulness of the recent fall. Fears of a Cyprus gold sale, liquidations in ETFs and unwinding of long positions by institutions in the international markets have contributed to the downfall," says Kishore Narne, head, commodities, Motilal Oswal Securities. "The prospects of any meaningful recovery in gold remain weak and given the lack of any major triggers in the near term, gold prices are unlikely to reverse the downtrend anytime soon. Short-term pullbacks are entirely possible given the speed at which prices have declined, but we anticipate another 12-15% fall from here on domestic markets before the end of FY14," he adds.

Buy, hold or sell?:-

Are you about to hit the panic (or sell) button because of the collective pessimism all around you? Well, you should try to sooth the nerves and hold on to your investments for a while, say experts. "Selling gold at these levels is not advisable at all. Hold on to your current gold investments. Remember, gold is akin to currency. In the long-term, it will move up," says Devendra Nevgi, founder and partner, Delta Global Partners. Even if you don't share the optimism, you have no choice but to hold on to your investments — especially if you bought gold when the prices were hovering over Rs 30,000. "Retail investors wrongly thought that gold would help them get extraordinary returns. They should consider gold simply as part of the overall portfolio. They should not dump their investments in gold now," adds Suresh Sadagopan, certified financial planner, Ladder7 Financial Advisories. Invest in gold in a piecemeal manner now As for those waiting in the wings, many experts believe that they should consider investing in gold in a piecemeal manner now. "Retail investors should look at meeting 30-50% of their intended investment target for the year right away," says Nevgi. The remaining investment should be staggered over a period of a year, he adds. However, not everyone is recommending increased purchase of gold now. "Currently, we are not recommending additions to a client's portfolio despite weaker prices. At the moment we have a contrarian view and recommend trimming at price gains. As inflation concerns subside, gold as a 'hedge' is likely to subside," says Vishal Kapoor, general manager, wealth management, South Asia, Standard Chartered Bank. This apart, you should get in now only if you can stomach a lot of volatility in the short-term.

Invest through gold ETFs or demat gold-

"I think gold prices are very close to the bottom now. Investors should not try to time the market and instead invest systematically through gold ETFs or demat gold on the exchanges like NSEL. This will help them average out the cost of acquisition. They should also avoid leveraged buying. The volatility in gold prices is very high and even a movement of $40-50 could adversely affect your portfolio's value," says Priti Gupta, director, commodities and currencies, Anand Rathi Financial Services. You could consider monthly investments to even out fluctuations. Also, stick to your allocation. "They should keep their total exposure to gold in the 5-7% range and not try to time the market," says Sadagopan. Remember the basics: gold ETFs are always better than physical gold for investment purpose. Apart from better liquidity, it also eliminates the making charges and cost and risk of safe keeping. The pricing structure is also transparent. Other investment choices are gold coins and bars.

1929 Wall Street Stock Market Crash

Linkedin Is Top-Rated Net Amid Big Internet Earnings 

Monday, 15 April 2013

False Profits

False Profits-You now have all the tools you need to pick your own pocket.
By Jason Zweig

Back in the bad old days, Wall Street swarmed with knaves and shysters who hawked moneymaking magic: Buy our tax shelters! Invest in a low-return, high-cost mutual fund! Let me trade soybean futures for you!
These days, the get-rich-quick gang talks about "empowerment" and "taking charge of your own life." Too often, this ends up meaning that you can pick your own pocket, instead of paying someone else to do it for you. Although there are people who consider this progress, I am not one of them.
Everywhere you turn, someone is selling investment hogwash: seductive-sounding ideas that will supposedly enable you to beat the market and buy a tropical island with the proceeds. Using your own wits and the new weapons of online information, say these folks, you can make Wall Street's pros look like birdbrains--but you've got to hurry., for instance, tells you, "Every second counts." Business Week lionizes a retiree who used the Internet to trade in and out of his mutual funds 22 times in the first four months of 1999. The Motley Fool says it has a system enabling you to "crush" the market in just 15 minutes a year. Time magazine columnist Jim Cramer says "there's good reason" for you to become a day-trader. Robert Markman, a prominent financial planner, declares in Worth magazine that diversification is a stupid idea.

What it means to be right
In the past year or so, many investors' minds have been hijacked by these false beliefs; as Third Avenue Value Fund's manager Martin Whitman likes to say, "The inmates have taken over the asylum."
More than ever, people think the test of an investment's validity is whether it "worked." If they beat Standard & Poor's 500-stock index over any period, no matter how dumb or dangerous their tactics, people boast they were "right." But investing successfully over the course of a lifetime has nothing to do with being right in the short term. To reach your long-term financial goals, you must be sustainably and reliably right. While the techniques that are so trendy now--day trading, ignoring diversification, flipping funds, following "systems"--may seem right on a given day, they slash your odds of being right in the long run.
Imagine that two places are 130 miles apart. If I observe the 65-mph speed limit, I'll drive this distance in two hours. But if I go 130 mph, I can get there in just one hour. If I try this and survive, am I "right"? Should you be tempted to try it too because it "worked"? The flashy new ideas for beating the market are much the same: In short streaks, if you're lucky, they will work. Over time, they will get you killed financially.
To see whether someone is truly right and an investing idea really works, you have to test it as a scientist would. First you need a hypothesis, a commonsense explanation of why the technique should work. Then you need a large amount of accurate data testing the idea both before and after it was discovered. Finally you need to ask: Could this just be dumb luck?

The "Very Stupid" portfolio
Let's test a trendy "strategy" in detail--and see how to stay out of trouble by analyzing any investing idea skeptically.
The Motley Fool website and books have popularized the idea that you can beat the market with a basket of four high-yielding stocks in the Dow Jones industrial average. At first, the "Foolish Four" seems sensible: Stocks with big dividend yields are cheap, so they should do well in the future.
But the folks at the Motley Fool can't leave well enough alone. They claim you'd have "trashed the market averages over the last 25 years" by picking the five lowest-priced, highest-yielding Dow stocks. Then you'd discard the one with the lowest price and put 40% of your money in the second lowest-priced stock and 20% each in the third, fourth and fifth lowest. (This way you'd have beaten the S&P 500 by 10.1 points a year from 1973 to 1997.) Or you could pick the five Dow stocks with the highest ratio of yield to the square root of stock price, then drop the one with the highest ratio and buy the second through fifth highest. (This would have beaten the S&P by 11.5 points annually for 25 years.)
No, I'm not making this up--and yes, you're right to be confused. As financial planner Bill Bernstein has pointed out, there's no way these cockamamie contortions add up to a rational hypothesis. Why on earth should the square root of a stock's current price (divided into its yield or anything else) affect its future return? Why would anyone in his right mind drop the stock that scores highest for a desirable quality but keep those that score second through fifth? (The Motley Fool folks assert that the single lowest-priced stock can be "dangerous," since it's often financially troubled; but they don't explain why the stocks whose prices are right behind it should be any safer. And they say a stock's volatility is generally affected by its price, but they offer no reason why this should be true for the Dow.)
In short, the Foolish Four is investment hogwash in its purest form. Just as we can "predict" yesterday's weather with 100% accuracy, we already know exactly which stocks outperformed in the past. If we look long enough, we can find some attribute they share--but it's far more likely to be a complete coincidence than an actual cause of their high returns.
To show how easy it is to concoct something that works like the Foolish Four portfolio, I tried it myself. With the help of Kevin Johnson, a money manager at Aronson & Partners in Philadelphia, I studied up to 10,500 stocks a year back to 1980.
Here's what we found: Beating the market over the past two decades was a breeze. All you had to do was buy stocks whose names are spelled without repeating any letters. To heck with that Motley Fool complexity: Texaco, good (no repeated letters); Exxon, bad (two X's). I call this the "Very Stupid" portfolio--since that title, like our stocks' names, repeats no letters.
This year, Very Stupid is chock-full of stocks like Numex Corp. (up 316%), Grey Wolf (up 208%) and Ultrafem Inc. (up 100%); last year, Very Stupid would have held Jam Inc. (up 4,900%), IFX Corp. (up 409%) and Gap (up 138%). During our nearly 20-year period, a Very Stupid investor would have beaten the market by 1.3 percentage points a year.
But I didn't want just to beat the market; I wanted to pound it to a bloody pulp. So we tinkered some more and cooked up the "Extra Dumb" portfolio, which holds only the bottom 25% (by market value) of stocks without repeat letters in their names. That portfolio whupped the market by six points a year for two decades.
Am I kidding? Yes and no. Our data do prove what we say; a Very Stupid or Extra Dumb investor really would have beaten the market for nearly 20 years. But that doesn't mean that we're right, or that this portfolio will work in the future. If Kevin and I can't explain why it makes sense--and believe me, we can't--our "strategy" can only be dumb luck.

What really works
There's a lesson in all this nonsense: Unless someone has a sensible explanation and good data to document a strategy's returns--both before and after it was created--you're dealing with investment hogwash.
When 90% of professional investors, with their M.B.A.s and powerful computers and multimillion-dollar research budgets, can't beat the market, why should you believe anyone who says you can do it by day trading? (After all, the new information that comes to you over the Internet comes to the pros too.)
When a financial planner says that diversification doesn't work and you should put all your money in big U.S. growth stocks, ask why you would ever want to bet everything you've got on what's been hot in the recent past--instead of holding a wider, safer variety of assets that should go up in the future.
When someone trades his mutual funds 22 times in four months, ask whether there's a shred of evidence that he can earn more money that way than he could merely by sitting still.
If the inmates take over the asylum, here's a simple solution: Steer clear, stay sane and stick to what's always worked in the fullness of time--a diversified portfolio of U.S. and foreign stock and bond funds that you hold for years on end. In the long run, that's the best kind of empowerment for most investors.

Saturday, 13 April 2013

A Matter of Expectations Even forecasts that don't pan out have lessons for investors-By Jason Zweig-January 1, 2001

How much will stocks return in the future? Few questions are more important to investors--and few are harder to answer.
What proportion of your money you put into stocks and how prosperous a retirement you have hinge on how much you expect stocks to return over time and whether the future lives up to your expectations.

These days, as recent surveys of individual investors by Scudder Kemper and PaineWebber show, most people seem to expect the stock market to return about 12% to 15% a year over time. Based on history, that sounds plausible enough. Since 1926, according to the keepers of stock market research at Ibbotson Associates in Chicago, large U.S. stocks have gained 11.2% a year, on average. And according to data from Jeremy Siegel, a finance professor at the Wharton School who has tracked stock returns all the way back to the Jefferson Administration, U.S. stocks have averaged nearly a 9%-a-year return since 1802. How can we tell if expectations like these are reasonable?

Misusing the past
Unfortunately, 75 years--even two centuries--of data don't prove that stocks will average at least a 10% annual gain in the future. That's because the past is not merely that portion of the future that has already happened. Au contraire; if the present is drastically different from the past, warns Yale economics professor Robert Shiller, then "history cannot be a reliable guide to the future." In the past, the stocks in Standard & Poor's 500-stock index sold for an average price of 25 times their dividend income and 15 times their net profits--meaning that investors back then got to buy at bargain prices. But now, even after last year's sell-off, the S&P 500 sells at 86 times dividend income and 26 times earnings--about as expensive as U.S. stocks have ever been. Common sense says that you're not likely to get high future earnings out of anything if you pay too high a price for it.
Still, many pundits claim that stocks will always outperform bonds because equity investing gives you a piece of a growing business, while bonds simply allow you to lend money at a fixed rate of interest. But what if the rate of interest on bonds is at least as high as the expected growth of the businesses? Then bonds could beat stocks for surprisingly long periods, as they did for the 20 years that ended in 1948 and again for the 17 years that ended in 1982. Some of the smartest investment thinkers I know of, such as Yale's Shiller, Robert Arnott of pension fund manager First Quadrant in Pasadena and institutional investor Jeremy Grantham of Grantham Mayo Van Otterloo & Co. in Boston, believe we may be at the start of another period in which stocks will lag bonds--and may even lose money--for years.

Measuring the future
Before you panic, it's worth learning how the pros put their forecasts together. I spoke with Grantham; John Bogle, the founder of the Vanguard funds; and Laurence Siegel, director of investment policy research at the Ford Foundation. Their forecasts of average annual returns over the next decade or so range from Grantham's -2% to Bogle's (and Laurence Siegel's) 6% to 9%. They all agree that future returns depend on two factors. The first is the growth of corporate profits and dividends (including the repurchase of shares by the companies that issued them). Bogle calls these combined elements "the investment return." All these experts agree that the long-term investment return should reliably average between 5% and 6% annually before inflation.
The second factor, which Bogle calls "the speculative return," is the change in market valuation over time--a huge wild card. As investors become willing to pay more (or less) for stocks in the future than they are today, the market's price/earnings ratio will go up or down, raising or lowering future stock returns accordingly. Unfortunately, no one has a clue how to read the mood rings of tomorrow's investors. Jokes Laurence Siegel: "I decided not to put that in my forecast because I'm scared to." Bogle warns: "The speculative element is as unpredictable as the investment return is predictable."
But Grantham is willing to guess how investors' sentiment will change. He reckons that the S&P 500 will go from selling at 26 times earnings today to 17.5 a decade from now--"a friendly, optimistic assumption," he says, since it's above the long-term average P/E of less than 15. That single adjustment accounts for most of his forecast that stocks will lose nearly 2% a year after inflation for the next decade.
As the old saying goes, there are two kinds of forecasters: those who are wrong and those who know they are wrong. So you've got to take all these predictions about future stock returns with a grain of salt the size of Mount McKinley. However, while they may not be right, these forecasts aren't useless. Here's how they can help you think about your own future returns.

Hope for the best, but expect the worst. You won't suffer if stocks do better than you expected, but if they do worse, your dreams could be demolished. And the higher your expectations, the lower your chances of having them fulfilled. Do you think stocks will return, say, 25% a year in the future? Despite the 21% average returns of the past five years, a 25% long-run return is about as likely as a Pat Buchanan pep rally in Palm Beach. According to the researchers at Sanford C. Bernstein & Co., over the past half century only 10% of companies in the S&P 500 have increased their earnings at an average rate of at least 20% a year for five years running. Only 3% have raised earnings at least 20% annually for a decade. And none--zero, zippo, the big schneid--have sustained 20% earnings growth for 15 years or more. In the long run, it's just not possible for stocks to go up faster than the earnings of the companies they represent; the past few years' average returns of better than 20% cannot last. Be realistic, and scale back your expectations. As G.K. Chesterton said, "Blessed is he who expecteth nothing, for he shall enjoy everything."

What's average? The stock market is not a bank CD; when you hear that stocks have returned an "average" of 11% a year, that doesn't mean they gained 11% every year. In fact, in all the years since 1926, stocks have returned 11% only one solitary time (in 1968), and they've gained between 10% and 12% in only three of those 75 years. The rest of the time, returns were all over the place, from a 43.3% loss in 1931 and a 26.5% drop in 1974 to a 52.6% gain in 1954 and a 54% surge in 1933. As you can see from the graphs at left, the same average rate of return can be earned in astoundingly different ways. That's just how investment math works. It's not surprising for a short-term result to differ from what you expect for the long run; in fact, it's normal. So brace yourself for surprises. And remember that a bad year like 2000, or even several sorry years, can't tell you anything about what you'll earn in the long run.

Bad news, good news. What if the bears do turn out to be right? If you've complemented your U.S. stocks with bonds, foreign stocks and, perhaps, specialized investments like real estate investment trusts, you'll always have something that goes up. But the best thing about a protracted down market is that stocks will go on sale, and stay on sale, for years. Unless you're retired, that may turn out to be the best investment news of your lifetime. Wall Street hasn't put stocks on the remainder rack since 1973-74, when the market lost roughly 40% and P/E ratios fell to half their long-term averages. If it takes you by surprise, a sudden sale is a disaster. But if you're prepared, you can shop while stocks drop, and muster the years of patience it could take for them to recover. Personally, I say, "Bring it on."

Friday, 12 April 2013

Global economy muted again in 2013 - Reuters polls

This year now looks unlikely to deliver much improvement in the world economy's growth rate, with a weaker outlook for Europe and the United States tempering the cautious optimism that was evident in January.

Still, Reuters polls of roughly 400 economists worldwide, published on Thursday, suggested some of the threats to the health of the world economy are looking muted compared with a year ago.

The survey showed the world economy is expected to expand around 3.2 percent this year - the same rate the International Monetary Fund says it grew at in 2012.

Behind that headline number, just slightly down on January's poll forecast of 3.3 percent, there are some major differences between this year and last.

China is finally showing clear signs of economic vigour, which should help push global growth even as the US economy looks set to slow, with sickly European economies acting as the major drag.

The outlook for Japan, fresh from its announcement of a $1.4 trillion monetary barrage, was little changed compared with a month ago.

While that means global growth has little scope to pick up significantly this year, at least some of the things that threatened to derail the world economy last year look a little less threatening now.

"If we went back a year ago, the three big worries were Europe, a hard landing in China and the US fiscal cliff, and for those I think the worst-case scenario looks less likely now," said Craig Wright, chief economist at RBC in Toronto.

"The recovery is taking hold, but it's going to be an uneven, uncertain and underwhelming recovery."

Wright expects global growth of around 3.5 percent in 2013, and that things should improve next year too - when the overall polling forecast is for a 3.8 percent expansion.

Overall, the poll tallied with Wednesday's comments from IMF Managing Director Christine Lagarde, who said global growth was likely to remain tepid this year and central banks should keep their easy monetary policies in place.

After a strong start to the year, the US economy is set to slow as some of the effects of government spending cuts take hold, likely leaving the central bank's extraordinary stimulus in place into at least 2014.

Economists in a Reuters poll ratcheted up their forecasts for first quarter growth to an annualised 3 percent from the 2 percent forecast last month. But that pace is not expected to last, slowing to 1.6 percent in the second quarter.

"We are expecting growth to slow but I wouldn't throw this into the category of another 'spring slowdown'," said Michael Gapen, senior US economist at Barclays Capital.

Even the tepid growth expected for the United States would be a dream scenario for many European economies, after analysts cut their outlook for the euro zone.

Economists now see a 0.4 percent contraction for this year in the single currency bloc compared with a 0.1 percent decline predicted just three months ago.

Worse for the euro zone is that what growth it has is being helped by Germany, which is expected to pick up modestly. The other big economies - France and Italy - are in a slump.

"The lack of growth and record unemployment, combined with deeper spending cuts and a credit crunch as peripheral banks deleverage, present a real risk to the euro zone's future," said Lena Komileva, chief economist at G+ Economics in London.

Britain's economy will do scarcely better, although most expect it narrowly missed a third recession in five years in the first three months of this year.

Reuters will publish its economy poll for China, the world's second largest economy, next week. Thursday's survey showed a subdued recovery is in store for its biggest emerging Asian rival, India.

The Bank of Japan, led by new Governor Haruhiko Kuroda, last Thursday delivered a massive dose of shock therapy to break the deflationary phase by promising to inject about $1.4 trillion in less than two years.

Despite that, analysts still projected that the economy will grow by only 2.2 percent this fiscal year, which began this month, and 0.4 percent next year, unchanged from a poll taken last month.

"The BOJ will probably ease again if there is any event, such as a negative impact from overseas, that dampens Japan's economy and makes it even more difficult to achieve its inflation goal," Takeshi Minami, chief economist at Norinchukin Research Institute, said.

The 10 Fastest-Growing Industries for Small Business

Past performance is no guarantee of future results, as the old business truism says. But you also may have heard that you can’t know where you’re going without knowing where you have been.

To get a sense of which industries small businesses are growing in, the analysts at Raleigh,                        N.C.-headquartered private-company financial-information company Sageworks ran some numbers for Here’s a look at the industries where U.S. companies with $10 million or less in annual sales have shown the highest and lowest percentage change from Jan. 1 to Dec 31, 2012. As a benchmark, the average growth rate across all U.S. small businesses in the time period was 8 percent, says Libby Bierman, an analyst at Sageworks.

Fastest-Growth Industries for U.S. Small Businesses in 2012
  1. Residential building construction: 14.77 percent
  2. Building custom software and servers for businesses: 14.29 percent
  3. Machinery, equipment, and supplies merchant wholesalers: 13.75 percent
  4. Management, scientific, and technical consulting services: 12.31 percent
  5. Architectural, engineering, and related services: 11.40 percent
  6. Foundation, structure, and building exterior contractors: 11.37 percent
  7. Building finishing contractors who make additions, alterations, maintenance and repairs: 11.32 percent
  8. General freight trucking: 10.41 percent
  9. Services to buildings and dwellings, including pest exterminators, janitorial services, and landscaping: 10.11 percent
  10. Other specialty trade contractors, including site preparation activities and other specialized trades: 10.04 percent
Slowest-Growth Industries for U.S. Small Businesses in 2012
  1. Skilled nursing care facilities: -3.29 percent
  2. Printing and related support activities: 1.86 percent
  3. Automotive repair and maintenance: 2.81 percent
  4. Offices of physicians: 3.00 percent
  5. Highway, street, and bridge construction: 4.24 percent
  6. Insurance agencies, brokerages, and other insurance-related activities: 4.32 percent
  7. Lessors of real estate: 5.07 percent
  8. Other miscellaneous manufacturing including jewelry and silverware, sporting and athletic goods, dolls, toys, and games, office supplies other than paper, and signs: 5.55 percent
  9. Offices of health practitioners other than physicians and dentists, including chiropractors, optometrists, mental health practitioners, speech and occupational therapists: 5.98 percent
  10. Other amusement and recreation services including bowling centers, golf courses, and recreational centers: 6.03 percent
The good news for entrepreneurs is that much of the fastest growth is in service businesses, which can be started without a lot of money to buy equipment and inventory, says Bierman. Software development, management consulting and architecture firms have been frontrunners have been for a few years now, says Bierman.

Not all of the businesses on the fastest-growing list are service based. In particular, the residential housing market has just started to recover, and that is supporting businesses related to the construction industry, including foundation and exterior construction and specialty contractors. A lot of construction projects were abandoned during the recession and so part of the bounce in construction is businesses and individuals picking back up old half-finished projects.

Business services and construction are looking strong in the coming years. “They provide services that are, maybe not critical, but very much needed by other businesses and people who are trying to even grow their homes,” Bierman says. “I don’t see these industries going anywhere. Maybe their growth rate won’t be as high as it has been, but I don’t think it will be a decline anytime soon.”

A list of the fastest-growing industries for all businesses would include manufacturing, says Bierman, but most successful manufacturers have more than $10 million in annual revenue. “Manufacturing as a whole has been something that has pretty positive news lately,” she says. “If those manufacturers are having pull, the middlemen, or the wholesalers that are transacting those sales, will continue to see growth, too.”

During the depths of the recession, many industries were contracting. Now, almost all industries are growing, albeit some at more sluggish rates. The slower-growth companies are not seeing impressive growth rates because they are entrenched in technology that is becoming obsolete, such as printing. But some of those industries are seeing slower growth simply because they have relatively inelastic demand. For example, an economic recession does not change the fact that sick people need to go to the doctor. The growth rate for physician’s offices does not typically change drastically.

Overall, the home health-care industry has seen positive growth rates in revenue over the past year as consumers look for an alternative to moving into a nursing care facility, says Bierman. Skilled nursing care facilities come up on this list as a shrinking, but that’s partly because of the restrictions placed on the data. For this research, Sageworks included only those businesses with less than $10 million in annual revenue. The decline in skilled nursing care facilities may be an indication that smaller facilities are losing ground to their larger competitors or home health care alternatives, she says.

Infosys Q4 Result Disappoints Market

Infosys Q4 net up 3% YoY; shrs sink on poor sales, guidance

 Infosys '  fourth quarter net profit rose slightly higher-than-expected 3 percent year-on-year (1 percent quarter-on-quarter) to Rs 2,394 crore, helped by higher other income and lower income tax expenses. 

However, its revenue growth of Rs 10,454 crore, up 18 percent YoY (0.3 percent sequentially), was lower than what the street had forecast, sending its shares tumbling over 15 percent in opening trades.

Analysts on average had expected India's second largest software services exporter to report a net profit of Rs 2,297 crore, on revenue of Rs 10,730 crore, according to a CNBC-TV18 poll.

Infosys has guided for a full year revenue growth of 6-10 percent in FY14, which is also much lower than the 12-14 percent growth industry body NASSCOM has forecast. It has not provided earnings per share guidance for the full year.

Considering that Infosys' guidance includes contribution from Lodestone, the Zurich-based management consultancy firm it acquired in Sept 2012, this is a huge disappointment. If one excludes Lodestone, forecast will be even lower.

"Global economic uncertainties remain challenging for the IT industry," SD Shibulal, CEO and MD said in a statement.

But analysts are not enthused.

"...6-10 percent top-line growth guidance for FY14 seems pretty benign and pretty weak and on top of that we did not get the EPS guidance that we were hoping to get," Moshe Katri of Cowen & Co said.

Accenture reported strong numbers for their consulting business and so things seem to be actually going well for the sector, but Infosys on a relative basis is still struggling, he added. 

"The business is stabilizing but at this point it is more about how long it will take them until they generate industry like or peer like growth rate," Katri feels.

The company's fourth quarter net profit was boosted by other income, which rose 3 percent YoY (34 percent QoQ) to Rs 674 crore and tax expenses were down 25 percent (9 percent QoQ) to Rs 742 crore.

Infosys' operating profit, in fact, fell 7 percent (8 percent sequentially) to Rs 2,462 crore.

"The global currency market continues to be volatile, reflecting the uncertain economic environment," said Rajiv Bansal, CFO.

Infosys along with subsidiaries added 56 clients in the quarter. It hired 1,059 employees on a net basis in Jan-March and as of March 31 had 1,56,688 employees.

The company, in recent months, has become more flexible in pricing, to get more clients. That surely has reflected on the margin front. Its EBIT (earnings before interest taxes) margin declined to 23.55 percent from 25.68 percent.


Tuesday, 9 April 2013

Here's How To Use The News And Tune Out The Noise- By Jason Zweig

Here's How To Use The News And Tune Out
The Noise: By Jason Zweig

July 1, 1998

(MONEY Magazine) – I hate to seem as if I'm raining on my own parade, but recent events have me wondering: Is there such a thing as paying too much attention to the financial press? Are investors today better informed than they used to be--or have they become too well informed?

Last December, Warner-Lambert stock lost 18.5% of its value, or $7 billion, in a single day when a British company said it would stop selling a Warner-Lambert diabetes treatment. But over the next three months, Warner-Lambert sold $138 million worth of that drug--plus $1 billion worth of others--and the stock gained a third, outperforming the market by nearly three to one.

In May, the stock of Entremed, an obscure biotech company, shot from $12 to $85 in a day when the New York Times reported that two of the firm's drugs showed promise as cancer cures. Fidelity Select Biotechnology, a fund that specializes in similar stocks--but didn't hold Entremed--jumped 1% that day as its holdings rose in sympathy. Then the reality sank in that the drugs have workedonly on mice; the stock shrank back below $30, and the Fidelityfund lost value for the week. Only a few days after it broke the front-page news, the New York Times ran two articles scolding investors for not realizing that Entremed's prospects were not that bright after all.

In both cases, traders who acted on the first burst of news ended up kicking themselves. Why? Because these days, news reaches everyone so swiftly that it's almost impossible to beat the stampede. It wasn't always this way.

Back in 1790, as soon as Alexander Hamilton released his plan to reorganize U.S. debt, crafty bond speculators sailed south from New York in sleek ships that outraced the good news on land. Those speculators snapped up bonds from uninformed small investors at 20[cents] to 25[cents] on the dollar, and within days, they were able to double their money. Likewise, in 1815 financier N.M. Rothschild made a fortune buying English bonds after his elite private couriers slipped him the first word that the British had defeated Napoleon at Waterloo.

In Hamilton's and Rothschild's time, news took days to travel from Paris to London or New York to Philadelphia, giving clever investors a chance to get the word and act on it before anyone else. But today, over the Internet and CNBC, news flits from Jakarta to Chicago in nanoseconds--and professional and amateur investors alike can follow every twitch in a stock as closely and easily as intensive-care doctors monitor changes in a patient's pulse.

Mind you, it's still possible to get wind of big news before most people do. This May, the Internet chat rooms were rife with rumors that Tyco International was about to acquire U.S. Surgical. If you'd pounced on U.S. Surgical when the rumors first surfaced, you could--in theory--have earned more than 25% in just 12 trading days.

But in truth, investing is rarely that easy: First, the Tyco rumor was fueled by what appears to be inside information--not the kind of thing you often can get hold of legally. Second, for every online rumor that turns out to be true, there are scads of them that turn out to be false. Datek, the Internet brokerage firm, says in its ads: "Big news can mean big opportunity. Points can be made in a heartbeat." But at least as often, big news can be flat-out wrong--and points can be lost in a heartbeat.

The bottom line: It's the very urge to act on the financial news that gets many investors in trouble. A decade ago, Paul Andreassen, a psychologist then at Harvard University, designed a series of laboratory experiments to learn how investors respond to financial news. So far as I know, Andreassen's studies have never been described in a personal-finance publication--perhaps because they appeared in such arcane journals as Organizational Behavior and Human Decision Processes, or perhaps because they imply that we in the press do not always serve investors well.

It seems obvious that investors who are better informed will earn higher returns than those in the dark. But Andreassen found the opposite: Among buyers of more volatile stocks, those who ignored the news earned more than twice as much as the news junkies.

When you think about this, it makes perfect sense. In our race to bring you the latest scoop, we in the financial media tend to isolate recent changes, rather than put them in context. In fact, the flow of the news makes trends seem likely to persist just when they are most likely to reverse. Think, for example, of the glowing media coverage that Iomega, Oxford Health and Cendant got as their stocks were shooting almost straight up--and how, once the stocks stumbled, nobody in the press could find anything good to say about them anymore. Or consider fund managers Gary Pilgrim of PBHG and Garrett Van Wagoner of the Van Wagoner funds: After huge gains in 1995 and early 1996, they were written up as if they could walk on water wearing lead boots. Now the media often treat Pilgrim and Van Wagoner as if they're simply all wet.

That's because reporters, like most humans, fall into the trap of assuming that we can predict future results by analyzing recent patterns. Thus we tend to reinforce the notion that "when you're hot, you're hot--and when you're not, you're not." Unfortunately, a stock is no more certain to keep rising just because it has been going up lately, nor is a mutual fund more likely to beat the market this year because it did so the past few years. In fact, finance professors have amassed overwhelming evidence proving the opposite.

Also, the press usually focuses on the numerical amount of a price change, rather than on its value in percentage terms (which is what really matters). Thus a TV reporter may exclaim: "The market is dropping--the Dow is down 100 points!" even though, at the recent 9000 level of the Dow Jones industrial average, that's barely a 1% drop.

Now think how odd it would sound if the weatherman on the same TV station hollered, "It's getting colder--the temperature has fallen from 91[degrees] to 90[degrees]!" That too is roughly a 1% drop.

When we watch the market, much of what seems like news turns out to be nothing more than noise. A year ago the press was nearly unanimous in declaring Southeast Asia to be one of the world's best long-term investments; next, when the Asian Tiger markets collapsed last fall, you were advised to bail out; then, when those markets bounced up early this year, the coverage waxed bullish again; and now, with Asia in retreat, the news is back to bearish. Trying to follow all this is enough to give you whiplash--and to distract you from the key question: If Asia was a good long-term investment a year ago, isn't it an even better value today at half the price?

Listen to Charles Ellis of Greenwich Associates, the distinguished investment management consultant: "The typical stock price changes by at least 4% between its high and low each day. Since there are roughly 250 trading days per year, that implies a total price change of 1,000% per year. But the price of most stocks actually changes less than 15% per year on average, which means that more than 98% of all the movement is just flutter, or noise."

So how can you tune out the noise?

Stop checking your watch. Many people would panic if they did not know, day by day or even moment to moment, the exact prices of their investments. This impulse is understandable: It's your money. But the more you check your investments, the more they'll seem to bounce up and down.

By contrast, you probably don't check the value of your biggest investment, your house, on a daily or weekly basis. Does that prevent your house from rising in value over time? Does it make you a poorly informed real estate investor? Of course not. And you should think of your portfolio the same way. Personally, I check my mutual funds four times a year--no more, and no less.

How much trouble can you get into by obsessing over short-term price changes? Plenty. Recent research by a team of economists and psychologists compared allocations between one stock fund and one bond fund among two groups of investors: those who evaluate their portfolios monthly and those who look at their accounts once a year. The monthly group watched the stock fund heave up and down 12 times, while the yearly group saw it change only once, at year-end.

The monthly group, fixating on the interim volatility of the stock fund, moved money into the lower-earning bond fund; the yearly group stuck with the stock fund, ending up with twice as much money in equities. "The [investors] with the most data did the worst in terms of money earned," wrote researchers Richard Thaler, Amos Tversky, Daniel Kahneman and Alan Schwartz in the Quarterly Journal of Economics last year. The lesson: Stop checking your watch so often.

Investing is a marathon, not a sprint. Entremed, that little biotech company with the promising cancer cure, may well be the next Pfizer. But history shows that the company that comes up with a breakthrough is not always the one that profits. After all, the fax machine was pioneered by Western Union, commercial air travel by Pan Am, the VCR by Ampex and the personal computer by Commodore. All of these innovative firms lost out to the copycat companies that followed them. That's why you should never rush to buy a stock "on the news"; if the breakthrough is that great, the company has years of growth to come, and you can take your time evaluating it. And that's where the press can come in handy.

Finally, remember the difference between the weather and the climate. On any given day, it can be warm and sunny or dark and rainy. But in the long run, the climate is more predictable. Investing is like that too: Just as June tends to be warmer than January and August sunnier than April, over longer periods investment fluctuations smooth themselves into more foreseeable patterns. Although the market news can be alarming on any day--or, as in the 1970s, awful for several years--over time it will turn more comforting as the value of your investments grows.