Investing It! : stocks, planning

The ‘Panchasutra’ for your money!

Yogi — Tue, 03 Mar 2009 09:48:00 GMT

Irrespective of good times or bad times, if you follow these basic rules with your money you are sure to reap rewards and a secure future!

1. Invest early!

The early bird gets the worm and the nectar in the flower too! There is no bigger mantra than starting to invest early. The difference in an investment of Rs.2000 a month made 7 years back and that of 5 years back, assuming a 10% rate of return is a whopping Rs.87,000 i.e almost 50% more in 2 years.

To give an example – Assume you are planning for your retirement which is 10 years away. If you put aside Rs.20,000 every month for at 10% return per annum, you can make more than double of what you accumulate in 10 years if you had only started this 5 years ago instead of now!

2. Know your risk profile!

Knowing your risk profile will help to determine which investments are best for you. Investing in equity no doubt carries risk but it is also true that equity is one of the better performing asset classes over the long term as long as the fundamentals of the economy are good. A look at the investment growth and returns in Indian markets over the past 3 decades is proof enough that a long term investment assures higher returns than a short term one.The key word is investor and not speculator. So, equity is definitely not a bad word and despite these times, SIPs/STPs should be continued and increased if possible.

3. Insurance

Insure your expenses and your goals. The unforeseen is called precisely that because you can’t see the future. We would all like to lead smooth lives but what is actually around the corner is anybody’s guess. What we can do is prepare best to face unforeseen calamities so that those left behind don’t have to go through financial loss as well besides the emotional loss. Insurance is mainly an instrument used by consumers for hedging the future contingent risks related with life, health and non-life general issues. Keep aside funds for the right type of insurance that you need. And dont forget to invest in a Term Insurance policy as well.

4. Plan it !

He, who fails to plan, plans to fail. You plan a simple weekend holiday, you plan an evening out, you plan a movie with friends, you plan Diwali gifts for your friends and family. Then why don’t you plan you finances. Why doesn’t one set the goals in life and plan for them? Remember it is never too early to start planning for retirement and/or long term goals.

5. Diversify, diversify, diversify!

These times are the best example of how diversification of one’s portfolio with proper allocation of assets to different types of investments can reduce the risk to the portfolio. Look for asset classes with low or negative correlation to each other, such as gold and equities or art and real estate and depending on your goals allocate accordingly to these. All eggs in one basket never benefited anyone – so, diversify!

For InvestmentYogi by Lovaii Navlakhi, Chairman, International Money Matters

Investment in Pharma

Yogi — Wed, 06 Aug 2008 04:49:39 GMT

Why pharma is the cure??

Investing was never as difficult as it seems today. In times like these, it's best to go for safe sectors. Pharmaceuticals might just be a good example, difficult though it is for investors to decipher. But why pharma?

Here are some reasons:

1. Chemical synthesis skills
Indian pharma companies are among the most cost-competitive and technically capable businesses in the world. Thanks to the lax patent laws prevailing prior to 2005, they reverseengineered several blockbuster drugs. This has been the chief reason for the growth of several companies such as Ranbaxy, Dr. Reddy's, Sun Pharma, Cipla and Glenmark.

2. Generics
After a drug is no longer patented and becomes generic, its price falls significantly. The US and European manufacturers can no longer supply it profitably. This offers a ready opportunity for Indian manufacturers to supply bulk drugs to these markets. India is the top applicant for bulk drug registrations approvals and formulations approvals from the USFDA.

3. Outsourcing capabilities
If software companies can outsource code-writing and BPOs can migrate entire business processes to India, pharma companies can (and do) undertake contract manufacturing in India on a massive scale. Contract manufacturing is especially lucrative when foreign entities are acquired by Indian companies (or vice versa) and their manufacturing shifts to India. Divis Labs, Jubilant and Dishman are among the top players in this segment.

4. Research capabilities
Several Indian pharma companies have world-class R&D capabilities. So, global innovator companies can safely outsource many (if not all) of their costly research to an extremely capable and low-cost location. This also allows the R&D efforts of Indian companies to be monetised. In a world where new drug development costs are spiralling, Indian companies offer a considerably cheaper (and arguably more capable) research pipeline to foreign companies. The current star in this space is Glenmark. The company earned over Rs 240 crore 12% of its total revenues in 2007-8 from such outlicensing.

5. Domestic growth
With over a billion people, India is one of the largest pharma markets of the future. As healthcare evolves and per capita spending on drugs picks up, these are surely structural bull opportunities that are qualitatively different from the cyclical investing plays in sectors like metals, capital goods and energy. MNC drug companies might turn out to be the dark horses. Sales could zoom when they introduce products from their global stable in India. Pfizer has already introduced Viagra, while Glaxo, Aventis and Wyeth are also bringing in products.

If your investments have been decapitated by capital goods, or deconstructed by construction companies, or are going up in flames courtesy the energy sector, take some anti-depressants, balms and painkillers. Switch to pharma!

Dipen Sheth is Head of Research, Wealth Management Advisory Services.

Article sourced from Money Today.