Benefits of Investing Early

In the Power Of Compounding we discuss the importance of time in compounding. In this article we discuss how, because of the power of compounding specially over a long period of time, the difference between starting to invest early versus starting late can have a significant impact on your wealth.

I'll elaborate this with the help of an example. Let's compare two friends ? Sonia and Peter. Sonia starts saving Rs750 per year from the time she is 15. After 15 years, she stops investing money to her nest egg.

On the other hand, Peter starts investing Rs5,000 per year when he is 30 and continues investing this amount every year till he is 60.

If both earn 15% post-tax return per annum on their investments, who will have more wealth when they retire at age 60?

Sonia. Her Rs750 annual savings between age 15 and 30 will aggregate to Rs27.7 lakhs by age 60, whereas, Peter?s Rs5,000 annual savings between age 30 and 60 will aggregate Rs25 lakhs.

Both will have built up meaningful wealth (compared to their investments). BUT for Sonia to build her wealth, the difference in the annual investment amount and the fewer number of years required for making investments, highlight the importance of starting to invest early.

To summarise, the power of compounding is the single most important reason for you to start investing right now. Remember, every day that your money is invested, is a day that your money is working for you.

Power of Compounding

First Principle: There is no such thing as simple interest
Simply put, compounding refers to the re-investment of income at the same rate of return to constantly grow the principal amount, year after year. Cumulative fixed deposits are a prime example of compounding at work, wherein the total interest that you get paid for the period is in excess of the rate of interest multiplied by the period of the deposit.

You often see advertisements taken by borrowers of money (e.g., banks, finance companies, manufacturing companies, etc) who promise you rates of return that seem to be far in excess of prevailing interest rates. These advertisements are very often misleading because what the borrower is referring to is the simple interest that you will earn during the period of your investment. And not the `rate of interest' that is being compounded each year. Which brings us to the first principle of compounding. `There is no such thing as simple interest'.

And it would help your financial cause a great deal if you applied this principle when you invest or lend money. Because anyone who lends you money is sure to apply it!!


Second Principle: The smallest rate differential has a BIG impact over time
Would you care too much whether your rate of return is 12% or 14%? The fact is that if you did, it would make a big difference to your wealth as time progresses. The benefit from compounding arises primarily from the fact that income keeps growing the principal to generate higher absolute returns each year. Higher rates of return or longer investment time periods increase the principal amount in geometric proportions.

The table below shows you how a single investment of Rs100 will grow at various rates of return. 5% is what you might get by leaving your money in a savings bank account, 10% is typically the rate of return you could expect from a one-year bank fixed deposit, 15% is what you could expect by investing in relatively riskier company fixed deposits and 20% or more is what you might get if you prudently invest in equity shares.

The Impact of Power of Compounding
Use the table below, to see the impact of the power of compounding with different rates of return and different time periods.
At end of Year

5% 10% 15% 20%
1.yr rs.105 rs.110 rs.115 rs.120
5.yrs rs.128 rs.161 rs.201 rs.249
10.yrs rs.163 rs.259 rs.405 rs.619
15.yrs rs.208 rs.418 rs.814 rs.1541
25.yrs rs.339 rs.1083 rs.3292 rs.9540

By now, you've probably figured out the obvious conclusion from the above table.

It is literally 'a waste of time and money' to let your wealth lie in low-income investments for prolonged periods of time. You?ve obviously also realised that TIME is the magic wand for compounding!! For shorter periods of time, although different rates of return do result in different wealth levels, the impact is not earth shattering. However, the longer the period for which the investment is made (say over 10 years in our above example) the difference just cannot be ignored!

And yes, the next time you plan to borrow money, remember that compounding is busy working against you. Make sure you are conscious about the cost of your borrowing. Every time your credit card payment is running overdue, you are not paying just 2% per month in interest cost, you are actually paying 26.8% per annum!!!

(sorry bout the table guys wasn't able to set it right will will learn hw to set it right
the next time)!!!!!!!!!!!!!!!!

FIve superb SENSex stocks to gain FRom

Fundamentally sound stocks generally perform better in these troubled times. 5 good Sensex stocks are picked for those who prefer to invest in index large cap stocks. Long term investors should accumulate these stocks to get 60-80% returns in one year. Keep some cash to accumulate more on any unexpected fall.

5 best Sensex stocks for long term investment horizon:

1. Larsen and Toubro (L&T):This is the best stock in Sensex for long term investors. L&T surprised analysts with their better than expected results. But stock still underperformed to bad market sentiment. As L&T entered into niche areas, margins will improve in the coming quarters. Upcoming demergers will improve L&T valuations in the coming quarters. Huge order book is another plus point. Announcement of bonus is a near term trigger after current turmoil.CMP: 2,564. EPS: 74.3 P/E: 34.5Expected EPS for FY2009: 105-110.Ideal entry price: 2,350-2,400.1 Year target: 3,600-3,800.Best investment duration: 3 years to get wonderful returns from this giant.

2. ICICI Bank:Real strength of ICICI Bank lies in their subsidiaries. ICICI securities IPO is a near term trigger.CMP: 733. EPS: 37.3 P/E: 19.6Expected EPS for FY09: 48-52.Ideal entry price: 660-680.1 year target: 1150-1,250.

3. State Bank of India (SBI):Attractive valuations but unpredictable government interference.CMP: 1,249. EPS: 106 P/E: 11.7Expected EPS: 135-140.Ideal entry price: 1050-1100.1 year target: 2,000-2,200.Best investment duration: 18-24 months.

4. Reliance Communications:Another “Must buy” stock for long term investors if they don’t overly paid for acquisitions. Reliance Infratel IPO is a short term trigger.CMP: 491.6 EPS: 12.5 P/E: 39.2Expected EPS for FY09: 25-28.Ideal entry price: 470-480.1 year target: 750-800.

5. Reliance Industries:This stock holds enormous intrinsic value. Reliance will give good returns for patient shareholders who invested for long term. Kakinada gas will change fortunes of shareholders in short term. Invest in Reliance; believe in Ambani; forget about it.CMP: 2,100 EPS: 138 P/E: 16Ideal entry price: 1,800-1,900.1 year target: 3,000-3,200.Duration: Invest for 2-3 year to get complete benefits.

Infosys, Bharti Airtel and Grasim are good stocks to get safe moderate returns in these difficult times. Fortunes of DLF and M&M will depend on inflation. Recent salary hikes may hit the balance sheets of companies like BHEL.

Tata Steel is best underdog stock for FY09. We will get more clarity on these stocks in the next quarter results.


Equity investment should always be done cautiously. Though Financial markets (especially stocks trading) looks lucrative, if one fails to understand the finance, better you leave it to stock market experts (Mutual Funds, portfolio management etc.)
Invest Wisely,
Trade Cautiously !!
Happy investing !!

Xl- telecom and energy-multi bagger

This company has transformed itself from a low margin Telecom company by diversifying substantially into the high margin business of Solar Photo Voltaic Modules (SPV).

Buy XL Telecom & Energy at Current Market Price of Rs 60 for a 24 month target of Rs 1800. It has a order book of around 2.2 billion in Solar Photo Voltaic divisions and has secured orders for the supply of Fuel Ethanol from the oil companies.

For the period 2007-2008 barring unforseen circumstances the company should post a PAT of approximately Rs 45 crores on an equity of Rs 14.5 crores. For 2008-2009 barring unforseen circumstances the company should close with a turnover of Rs 1292 crores and PAT of Rs 155 crores. By then the equity would be Rs 26 crores. Thus the expected EPS would be Rs 60 approximately.

It is expected for 2009-2010 that turnover would be approximately Rs 1645 crores yielding a PAT of Rs 222 crores which will result an EPS of 85.This Share therefore has the potential to touch Rs 1800 within the next 24 months.

This stock recommendation is 3 months old. Business outlook at that time okay if not bad.A lot has changed since then. Stock market has lost much during this period and recession has spread it's wings across the world.

Let's have a look at DECEMBER 2008 quarter results of the company.

SALES turnover has come down from around 257 crores in September quarter to 102 croes in december quarter. Drop of more than 60%. Operating gross profit is down more than 50% for the same period. BUT NET profit has come down from 15 crores to mere 84 lacs. a Drop of 1400% EPS stands at 0.44 paise compared to 8 Rs. in earlier quarter.

With 0.44 EPS for this quarter, say annualized EPS st 2 with this kind of number for next 3 more quarters, current P/E stands at 17.

Look at the 52 week high of 334. EPS at that time was around 25 something. so the P/E ratio of 13.

For even the same P/E, at annualised EPS of Rs. 1.76, price of the stock has to be Rs. around 25.

So whenever stock price comes at mentioned price or near, it could be good opportunity to buy stock and keep for long term. Current market conditions would change in furture and if company could perform past performance again, it could be fetch good investment returns for investors.
.

This is the Ambasador Limo I was talking about....

As India is going through an automobile revolution, welcome to the new era of Parikh Coach Builders in developing the Limousine Industry. We are firmly committed to the total satisfaction of our customers by catering consistently a high quality of products and services. Parikh Coach Builder is managed by young Indian, Mr.Shreyans Parikh and NRI professionals with technical, financial, and marketing expertise with relevant experience in industry for more than a decade.

Product

Product of Parikh Coach Builders is 'AMBYLIMO', built to the highest standards. The base car used is Hindustan Motors Limited's Ambassador 1800 ISZ model. This car is cut from the center and stretched for 48" of additional length.Considering passengers safety and reliability of Ambassador 1800 ISZ on the Indian roads, 1817 CC ISUZU engine and 5 speed transmission, availability of parts, easy maintenance and cost of base car, 'AMBYLIMO' is the best car available at the most affordable price. The luxurious air-condition cabin is designed to enfold five passengers for a classy ride. The driver's cabin is design to enfold two passengers including driver. This vehicle can be used as a chauffeur driven personal family car, luxurious transportation for executives and business guests, film industry and travel industry, national leaders and foreign delegates.

Modification Process and Design
The complete process is designed by our engineers with the assistance of experts from the American coach building industry. These experts have experience of over twenty years in designing and developing various types of stretched cars.All the modification are done in accordance with the manufacturers standards and with the input from the R & D department of Hindustan Motors. A complete attention is given to superb structural and every mechanical detail. The Material used for extension body has superior rust and corrosion resistance, driveshafts matches companies standard for vibration free running.

Best Stocks To Buy For Long Term Investing in SIP Manner

Outlook had recently published best long term stocks to Buy for investing in SIP manner. Buying stocks from this list could fetch good stock investment returns with 3 years horizon. You are suggested to buy small quantities of these stocks at regular intervals to make most of your investment.Valuations have come down significantly, even for fundamentally sound companies. We are giving you eight such options—take your pick and invest for at least three years. Invest systematically to take advantage of any further price fall.

Methodology.
The companies that have been considered for selection are the ones with a market capitalisation of at least Rs 250 crore. Among them, companies with year-on-year (y-o-y) net sales and net profit growth of more than 10 per cent for the last three years and the last two quarters were retained. From this list, only companies that were able to maintain or increase their operating profit margin (OPM) and operating cash flow in the last three years were kept. The remaining stocks were examined individually based on qualitative and quantitative measures.

Bank of India (BOI)
BOI is perhaps the fastest growing public sector bank in India. Its operating profit and net profit in FY08 grew 53.81 per cent and 78.90 per cent y-o-y, respectively. For the last nine quarters, including the quarter ended September 2008 (Q2 FY09), its net profit grew at 50 per cent plus y-o-y, which indicates its sustained growth. Because of its strong presence in the industrialised states of Maharashtra and Gujarat, BOI has given advances to more productive sectors than its public sector peers. It has reduced its dependency on low-yielding treasury income and has focused on interest income and income from fees. Its gross non-performing assets have gone down from 3.72 per cent in FY06 to 1.68 per cent in FY08. Overseas operations contribute around 20 per cent of its business. The overseas branches help BOI raise deposits at rates lower than the domestic rates. It has some exposure to derivatives instruments overseas, but all of them have highly-rated Indian companies as underlying

Bharti Airtel
Bharti Airtel is riding high on the overall growth of the telecommunication sector in India. No doubt, It is one of the best stock to buy from Indian telecom sector. Mobile penetration in India is still around 26 per cent, which leaves an enormous opportunity for growth. In this growing and competitive market, Bharti has been on top, in terms of subscriber base since May 2006. It has maintained both y-o-y net sales and net profit growth at around 40 per cent in the last nine quarters. The margins have declined due to stiff competition, but the volume growth from the untapped rural market compensates that. It has outsourced its non-core operations to focus on brand building and increasing subscriber base. In January 2008, it hived off its infrastructure business into a new subsidiary, Bharti Infratel, which will share the capital expenditure burden with other telecom players

Emami
Emami has created a niche in the market by bringing products for its consumers that combine modern production techniques and ayurvedic principles. Its brands such as Boro Plus, Navratna Oil and Fast Relief are leaders in their respective categories. Its recently launched brand, Fair & Handsome, created an altogether new market. In the last eight years, its net sales and net profit registered 19 per cent and 23 per cent CAGR, respectively. Its OPM also improved over this period due to better pricing of products and cost management. The return on equity, which increased from 10.36 per cent in FY2000 to 35.78 per cent in FY08, also reflects its rising profitability. Emami is reaching deep inside rural India, which will lead to volume growth. Modern lifestyle has increased the risk of chronic ailments and consumers will demand natural products backed by research.

HDFC Bank
HDFC Bank has seen a y-o-y net profit growth of over 30 per cent for the last 34 quarters and has maintained a high OPM of around 60 per cent during the same period. Maintaining the same momentum, it has reported a net profit growth of 43.29 per cent and OPM of 62.61 per cent in Q2 FY09. The bank's merger with Centurion Bank of Punjab has not shown any significant impact till now, but it is expected to yield robust growth for the company in the future. Banks will start showing mark-to-market gain on their bond portfolio with interest rates expected to go down in the coming quarters.

Mphasis
MphasiS derives its revenues from application services, infrastructure technology outsourcing (ITO) and business process outsourcing that span industry verticals, such as banking and financial services, healthcare, transport and manufacturing. In Q2 FY09, Mphasis reported an impressive y-o-y sales growth of 54.59 per cent. It significantly improved the OPM by 273 basis points over the last quarter and, therefore, registered higher PAT growth of 128.74 per cent during the same period.All its three business segments are registering healthy growth with its ITO business growing at 113 per cent. MphasiS is trying to reduce its dependence on the US, which contributed 67 per cent to its revenue in FY08. The current crisis in the financial sector may impact its revenue, but it will also throw up new opportunities as ailing banks will go for greater outsourcing in order to cut costs.

A Definitive Multi bagger by 2012-2015

A group of individuals bought a listed company in 2004 and turned it around. The software company they bought, has now expanded into telecom and even into the emerging bio-fuels business. Can buying stocks of IKF help us in creating wealth for us. IKF Technologies is today a Rs 180-crore company and growing. In 2004-05, when the company was taken over by Pradeep Dutta and Sunil Kumar Goel, it had a share capital base of Rs 10 crore. Over the last two years, the company has invested in putting together infrastructure and technology, which has paid off. It grew its web development, software and BPO businesses internationally, to Australia and the UK.
In 2006, it set up a 31-seat BPO for Tata Teleservices. “The initial couple of years went into restructuring and settling down in the core business,” says Pankaj Garg, director at IKF Technologies, which counts domestic telcos and banks among its clients. Though the promoters realise that they are late entrants in BPO outsourcing, they are looking at new markets.

IKF has now set up offices in Germany, Brazil, Dubai and Russia, and is hoping to see growth from these markets over the next two years. The idea of getting into telecom was there since 2006 but “since it was difficult to get a licence at that point in time, it never materialised”, says Garg. But it finally got a Category ‘A’ licence for Internet Service Provider (ISP) by the Department of Telecommunications (DoT) in January. Since then, it has been busy setting up its network. “We have already spent Rs 4-5 crore, and another Rs 8-9 crore will be spent in the future on developing the network,” informs Garg. As an initial foray in telecom, the company decided to get into VoIP services, a segment, which is not too crowded. That’s how IKF Tel came into being. The company is almost on the verge of launching its VoIP services for the retail market, having already launched the same for enterprise customers.

IKF has earmarked $2-3 million for its telecom business, of which, says Garg, $1 million has already been spent over the last one year. IKF expects revenues of Rs 100 crore from its telecom business in the next three years, growing both organically and inorganically. Taking its quest for emerging technologies forward, IKF is into bio-fuels too.

The chairman of the company, Dr RP Singh, who is a former scientist at the Indian Agriculture Research Institute, led us into this field,” says Vishal Rawat, president bio-diesel at IKF Green Fuel. IKF Green Fuel is also planning to get into ethanol, solar and wind energy in the near future. For bio-diesel, though, it has signed an MoU with the government of Madhya Pradesh through which it is seeking 200 hectares of wasteland for jatropha cultivation and will also be setting up an oil extraction plant with an investment of Rs 30 crore.

It also engages in contract farming on private wasteland. “We have one refinery already at Udaipur, which can produce 3,000 litres a day but at the moment, it is being used for trial runs. We expect commercial production to start by 2010-11,” says Rawat. Commercial bio-diesel production would need a steady flow of jatropha seeds. To this effect, IKF has 10,000 hectares of jatropha under cultivation, both on leased and owned land. “By 2008-end, we hope to reach the 30,000-40,000 hectares mark,” says Rawat. Meanwhile, research is on for better seeds with agricultural universities and other institutions.

The company has been granted permission by the government of India for a GDR issue to raise Rs 500 crore. About Rs 200 crore are already been allocated for IKF Green Fuel, indicating the company’s commitment to the growing sector. It is also exploring JVs in Brazil and South Africa for plantation and extraction there. “We want to be the leader in the bio-fuels market by 2015,” says Rawat.

IKF Tech plans to grow jatropha in Africa-------IKF Technologies, the country's first corporate jatropha refiner, has formally approached African Governments — Swaziland, Mozambique and South Africa — for permission to cultivate the plant. Armed with detailed project reports, the company has also applied for an area of 50,000 acres of wasteland in each of these countries for organised jatropha farming. Mr Mukesh Kumar Goel, a director of the company, told Business Line that official responses, however, were awaited. According to the company's estimates, the cost of acquiring the land (total 1.5 lakh acres), nursing the plants till the first fruition after 18 months, and setting up crushing facilities would be Rs 3,000 crore. In a phased manner If permissions were obtained, the purchases or acquisition of land through lease and taking up the plantation projects would be done in a phased manner over a long period of time. IKF has sought to own the land in Africa, and prefers not go in for contract farming, Mr Goel explained.

In India, it has opted for the contract-farming model in Rajasthan, where its existing refinery is located, in an area of 5,000 hectares. In Meghalaya, however, IKF cultivates on its own land.Its refinery was commissioned in March this year. Currently, it is procuring jatropha seeds from the open market since it began farming the plants in Meghalaya roughly 12 months ago.Though the first flush of seeds takes 18 months, jatropha harvests are available twice a year in the period after maturing. One hectare can accommodate roughly 2,500 plants.The yield per tree in one harvest, according to thumb rule, is around 3.5 kg and from one kg of seeds, a little over 300 ml of bio-diesel can be had.The company has a one-year renewable technology agreement with Indian Oil Technologies Ltd, a subsidiary of Indian Oil Corporation, for perfecting mixing grade bio-diesel.

Refinery in Gujarat :It has proposed to set up another refinery in Gujarat with a capacity of 1 lakh tonnes per annum at a cost of Rs 50 crore.It has also sought permission for contract farming of jatropha in Gujarat and Chhattisgarh.In Rajasthan, it has a refinery running with a capacity to produce 3,000 litres a day.As a Market Analyst, I am strictly recommending this stock.CMP: INR 3. It's future prospect is bright. Stock price will definately touch arround INR 200+ in 2012

Superb Business Idea

HEY PEOPLE THIS IS MY VERY FIRST BLOG POST.
SO HERE GO....


THIS IS A BUSINESS IDEA THATS ALREADY IN USE IN PUNJAB
BUT ITS NOT YET FOUND ITS PLACE HERE IN MUMBAI.

ITS LIKE THIS IS THE WEDDING SEASON AND THERE IS A HUGE DEMAND
FOR LUXURY CARS FOR THE GROOM.HENCE ALL KINDS OF LUXURY CARS ARE IN DEMAND.BUT THERE IS A LUXURY CAR WHICH IS A HUGE HIT IN THE WEST BUT
HAS NOT YET MADE ITS MARK IN INDIA THATS A "LIMOUSINE"

A LIMOUSINE(LIMO) IS A LUXURY LIKE OTHERS BUT ITS HAS A VERY LONG BODY U MUST HAVE MOSTLY SEEN SUCH A CAR IN MOVIES.
OF COURSE WE ARE NOT TALKING ABOUT AN ACTUAL LIMO HERE BUT
A MODIFIED VERSION OF IT THAT'S MADE OUT OF OUR VERY RELIABLE
AMBASSADOR.THE CONVERSIONS COST INCLUDING THE CAR COST COMES TO AROUND
8-10 LACS SO THAT'S IT BOUT THE BASIC INVESTMENT.

THEN IT REQUIRES A DRIVER WITH A PAY OF SAY 10 K ON THE HIGHER SIDE.
SO THE EXPENSE ON THE DRIVER IS 1.2 LACS ANNUALLY.OTHER THEN THAT WE JUST NEED A MOBILE FOR COMMUNICATION PURPOSE AND FOR OFFICE WE CAN OPERATE
FROM HOME INITIALLY.

NOW BASICALLY THESE KINDDA CARS CAN BE RENTED IN THE RANGE OF 6-10 K PRICE RANGE DEPENDING ON THE CUSTOMER.

USUALLY THE WEDDING SEASON IN INDIA IS BOUT SIX MONTHS.SO ITS SAFE TO
ASSUME OUR CAR IS ON RENT FOR AT LEAST 100 DAYS (OUTTA 180 DAYS).
SO WE MAKE AROUND 4.5 LACS ON THE LOWER END INCLUDING THE EXPENSE
ABOUT 8 LACS ON THE HIGHER END.

ANYWAYS THESE CARS CAN WE RENTED BY THE CORPORATES AND OTHER INDIVIDUALS ALSO FOR MANY OTHER PURPOSES.

ALL IN ALL THIS IDEA AS ITS NOT YET MADE IT BIG IN MUMBAI MAKES PERFECT BUSINESS SENSE.

HOPE ALL U GUYS LIKE THIS IDEA.WAITING FOR UR COMMENTS OTHER SIMILAR IDEAS ALIKE.

LOG IN REGULARLY FOR NEW IDEAS EVERY FORTNIGHT.
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