How To Beat Fund Managers?

It is often seen that mutual funds fails to beat benchmark indices. This happens despite the fact that mutual fund managers are paid professionals who actively manage the fund. So what’s the use of investing in mutual funds? This question often arises in the minds of investors. If the investor has enough time at his disposal then he/she can do without mutual fund, directly invest in the market and easily beat the indices. He will have to invest his time for doing this and always keep the following points in mind:

Have the Right Time Horizon on Mind

One should have the right time frame in mind before investing in any stock. If you are thinking about trading in a particular stock than you should exit the stock as soon as your target price is achieved. In case, the target is not achieved within the time period pre-decided by you then you should take the loss. Most people aren’t so sure about their investment horizon. If there is a loss or marginal profit, they keep on increasing their time frame in anticipation of achieving their price target and eventually end up with a huge loss. Therefore, it is very important to be sure about your investment horizon and stick to it. Similarly if you are investing for a long-term, you should given enough time to your stock to get handsome appreciation. Usually, the period of less than a year is considered as short-term and the period of at-least a year is called Long-term in investment parlance.

Understand the Business of the Company

Remember the golden rule of investing “Never invest in a business you don’t understand”. This is very important. You must have the decent knowledge of the business of the company you are investing in. Before picking a stock you have to familiarize with the business of the company. Gather necessary information by reading, through internet etc. This would give you a rough idea about the future prospects of the company, the sector in which it is operating and the general business conditions. If you are thinking about picking a stock from a particular sector then pick the best performing company in that particular sector.

Always go for Good Management

This is very crucial since good management not only runs the company successfully but it also takes into consideration the investors’ interest. It is being often seen that companies with good management are also very investor friendly. Companies with good management can survive even the worst market conditions. Therefore it is always prudent to prefer well-known management over relatively inexperienced or unknown management. This factor should be considered thoroughly before selecting the stock.

Keep Track on the Numbers

While picking a stock it is very important to keep track on the quarterly numbers of the company. This would give an idea how the company is doing. Pay attention to comments on the results coming out of various quarters such as TV, Business Newspaper etc. This will make you aware if any company has the habit of fudging with the numbers.

Review Your Stocks Regularly

Buying stocks & forgetting about them is not a prudent strategy. You should constantly watch out for news on the company and read every bit of information available so as to make sure that you don’t end up with a junk stock. If you think that the fundamentals of the company is getting worse then dump the stock. The habit of regularly reviewing your stocks would allow you to let go the under-performer and pick the out-performers.

Companies giving high interest rates on FDs

There are many companies that accept deposits from public. But most of them offer interest rates that are quite less than what banks offer on their FDs. Still there are a few good companies that offer much higher interest rates than bank FDs. Following are details of such companies’ Fixed Deposits:

COMPANIES	PERIOD (YEAR)
	1	2	3
1) Jaiprakash Associates Ltd.	11%	11.5%	12%
2) Jindal Stainless Ltd.	10%	10.5%	11%
3) Television-18	10%	10.5%	11%
4) Sriram Transport Finance Corp.	10%	10.5%	11%
5) Sriram City Union Finance Corp.	10%	10.5%	11%
6) Ind-Swift Ltd.	11%	11.5%	12%
7) ABT Industries	9%	9.5%	10%

• Minimum Amount of Deposit for all the companies are Rs. 10,000/- while for Jindal Stainless Ltd. it is Rs. 21,000/-
• Rate of Interest mentioned above is for Non-Cumulative schemes. On Cumulative schemes rate of Yield could be higher.
• Ind-Swift Ltd. accepts deposits for 6 month period for which the rate is 10% p.a.
• Most of the companies give additional 0.5 % interest to Senior citizen.
• More details & application forms may be available from your broker or financial advisor.

Brokerage Houses Stock Picks

1. IndiaBulls has given a ‘buy’ rating on Axis Bank with Price Target of Rs.1,111, CMP: Rs. 901.65.

2. Prabhudas Lilladher gave ‘out-performer’ rating on Volt-amp Transformers with a Price Target of Rs. 1,611, CMP: Rs. 1,100.50.

3. Pinc Research has initiated a ‘buy’ rating on Redington (India) with a Price Target of Rs. 445, CMP: Rs. 369.75.

4. Sharekhan has given a ‘buy’ rating on Opto Circuits India with a Price Target of Rs. 460, CMP: Rs. 337.80.

Ways To Beat Inflation?

Inflation diminishes the purchasing power of the currency. It affects everybody badly since we have to shell out more amount money for purchasing the same amount of product/services. Salaried class is not much affected by the inflation since their salaries are sensitive to inflationary trends. Similarly people running business or profession are also least affected as they can always raise rates, fees, prices along with the costs of operating their business or profession. But the fixed income earners, whose only source of income is their investment, bear the brunt of high inflation. In the recent times of high inflation which is well over 7% p.a. it becomes all the more important for such people to earn more than the rate of inflation so as to earn positive real income. For that one has take smart investment decisions.

Here are some smart investment strategies to tackle inflation:

1. Park your money in Real Estate at the earliest.

If you don’t have your own house then you should buy that at the earliest. It should be kept in mind that everything appreciates except the value of rupee. I you buy the house you need in time, you are automatically hedged against inflation. The value of house/real estate appreciates more than your fixed deposits. So the value of the house you purchased today would be much more than the value of your fixed deposits say a ten years from now. If you delay your decision to buy your house, you will have shell out far more amount of money afterwards.

As an investment also real estate is better than most other investments. You can easily earn handsome amount of rents which are also subject to inflationary pressures. You can raise your rental earnings when the cost of living goes up everywhere.

2. Invest in Higher Interest Instruments.

During the periods of high inflation it is best to keep your money in fixed deposits having short maturity period. Since higher inflation rates are often followed by higher interest rates, it is better to keep all your options open at this time. You can invest in company deposits which gives higher interest rates than bank deposits. But remember this instrument is quite risky so invest only with those companies that have clear track record of repayment. Alternatively you can invest in Fixed Maturity Plans (FMP) offered by mutual funds from time to time. They usually generate better returns than bank FD.

3. Invest in Equities and Mutual Funds.

It has been established by various studies that equities generate superior real returns over the long-term vis-à-vis any other asset class. So equities should be a part of everyone’s portfolio. If you have time at your disposal, you can invest directly in the stock market after doing proper research on your own. If you don’t have time to track the performance of your stocks regularly, you can go for a diversified equity mutual fund with proven track record. You can also go for a balanced mutual fund if your risk appetite is low.

4. Invest in Gold

Gold has always proved to be a good hedge against inflation since time immemorial. You can invest in gold in the form of bullion, bars, coins or jewellery. Now you can also invest in gold through exchange traded funds investing in gold.