The Seasons Of An Investor's Life

An investor's life is not a static thing. Assuming that you get income from sources other than your investments - like employment or your own business - this income will change as you age. Generally speaking, your income increases as you get older. This means that, as an investor, you will have the most income when you have the least amount of time to invest. Here we look at what characterizes the various "seasons" of your life as an investor and what actions you should take at each stage.

It is important to note that, although the seasons of your investing life are more or less set like the seasons in a year, you must start as early as possible. If you start investing late in life, you will have a very compressed spring, summer and fall, followed by a very long winter. If you start early, you can enjoy each season to its fullest.

Spring

When you are young and just starting to invest, you probably don't have enough disposable income to devote INR 10,000 a month to investments. You may have only INR100 to INR1000 rupee to spare. The important thing is to invest this small amount regularly. Due to the costs associated with investment and the smaller income you have available in the spring of your investing life, the choices available to you will likely be limited. Look for plans or investments at your local bank that allow you to invest a small monthly amount with little or no commission, such as some mutual fund plans. You probably shouldn't bother with something like a $20 savings bond - while the return will be better than nothing, it will still be discouraging.

Spring is a time of discovery and learning. This is a time to check out companies and learn how to decipher a balance sheet. It is also a good time to start reading about higher level investing, so that you'll be ready before you enter that phase. Generally speaking, this is when you do some small-time investing as training for the future. You should avoid any investments with high commission costs because your goal is not only to gain experience, but also to get a return on your investment as you learn.

Summer

You are starting to move up in the world, and while your disposable income won't put you on the Forbes list, you do have up to INR5000 a month to devote to investments if your cell phone bill comes in cheap. This is the time to look at index funds, income-producing investments and retirement plans. Summer can't last forever, but if you start planning for retirement now, the winter will be much milder.

If you're like most people, summer is a time when you can be very aggressive with your investments, because your disposable income is fairly high compared to your expenses. Furthermore, you may not have a mortgage and a family to worry about at this point, and this means that you can put a larger portion of your investment capital into high-risk, high-return vehicles. If you are keen, you can even look into things like options and shorting.

Fall

This is when you're in your earning prime. However, this season may also be the most expensive time in your life if you are providing financial support to children. In the transition between summer and fall, you may have gained some major debt in the form of a mortgage, but you will be paying it down diligently with your increased earning power rather than spending that money frivolously. Right? After all, winter is on its way.

In the fall, you will also be making a series of shifts as far as your investing strategy goes. Hopefully, some of the high-risk investing you did in the summer will pay off now, and you will be able to put that money into more stable investments. Your tolerance for risk isn't what it used to be, but the experience you've gained and the capital you control allow you to profit from lower risk investments. You will be buying bonds as well as continuing your investments into stocks and index funds. If you have prepared well in spring and summer, fall will be the most profitable season as far as investments and income - think of it as bringing in the harvest. This is when you will feel tempted to overspend because of your relative financial security, but try to be cautious, because income branches such as earned wages will soon be bare.

Winter

Your earning days are over and, from your perspective, this winter seems far better than that busy summer long ago. Your bonds and other investments are coming due at important intervals and covering your expenses. When you have extra money, you look at income-producing investments to help you purchase that time-share in Hawaii. If your investments have been especially good to you, you are also looking for a good estate lawyer to help you transfer your unneeded investments to your children and grandchildren, thus sparing your family the burden of estate taxes.

As you sit back in your armchair, basking in the warmth of financial security, you think back to those first steps you took way back in the spring and realize that planning for the seasons of your investing life wasn't so hard to do. In fact, it was almost natural.

Source: http://www.investopedia.com/articles/basics/06/investingseasons.asp

Robeco's Indian fund unit sales director quits

Sanjay Santhanam, Robeco's (RBEN.AS: Quote, Profile, Research) director for sales and marketing in its Indian fund unit, has quit the firm after nearly 15 months of service.
"Friday was my last day," Santhanam told Reuters, adding he was yet to take a decision on his next job.
Robeco, part of privately-held Rabobank Group [RABN.UL], with India's Canara Bank (CNBK.BO: Quote, Profile, Research) runs Canara Robeco Asset Management which held average assets worth 41 billion rupees in January, data from the Association of Mutual Funds in India showed.

Source: http://in.reuters.com/article/domesticNews/idINBOM47813220090302

Commodity funds back in vogue

Commodity funds or mutual funds (MFs) that either invest directly in commodities or in those companies that have a commodity-centric business model have been around for a while now. It is worthwhile to see how such funds have performed and whether these can hold promise for investors, who are keen to tap the commodity market.

ET Intelligence Group conducted an analysis of the performance of MFs including commodity MFs and specia funds (ETFs) to understand as to which funds really stood the tough times and which can actually withstand the times to come.
There are more than 10 commodityfocused funds that invest in Indian and global commodity-focused companies (equities).
With the exception of SBI Magnum Comma Fund – Growth, which has three-year returns record, most funds are either one-year or less than one-year old. Take the case of Reliance Natural Resources Fund, which is just completed one year.
On an average, for the last one-year and six-month period, though commodity funds have seen a decline in their net asset values (NAVs), the drop was lower than that in the benchmark Nifty.
These funds, for the last one-year and six-month period have fallen to an extent of 35.81% and 20.35%, respectively, while the benchmark Nifty has fallen to an extent of 38.03% and 46.82%, respectively, by similar comparison. So, would these funds continue to fare well than the benchmark Nifty?
An answer to this question lies in the nature, price movements and overall global situation of the market. One needs to understand that most commodities barring gold, which rose to a new peak, have fallen sharply by over 50% in most cases. Further, such a steep fall would be unsustainable in future.
For instance, the crude oil prices have fallen by more than two-third in a very short time. A further dip from $30-level would be unanticipated. Though it does not provide any information about the upward potential of prices, it does tell us that downward risk is limited.
Commodity funds provide investors the flexibility since these funds invest across the commodity based businesses. This also spreads the investment risk when compared to the situation where investors have exposure to individual scrips like ONGC, BPCL, or Hindalco.
Another thing is that though investors can take positions on the commodity bourses, it requires expertise of gauging demand and supply factors for underlying produce and intricacies of derivatives contract. The positions are also marked-tomarket on a daily basis, which can expose one to unlimited losses.
It should be noted that investing in commodity funds should be for a long-term as commodity-focused companies would take at least two more quarters to demonstrate the positive impact of the fall in prices of commodities.
Apart from commodity funds, investors can consider exposure to gold ETFs. But before that, it is important to understand the recent spurt in gold prices. Investors in Europe and North America bought gold coins and bars in the last quarter of the previous year as the collapse of financial giants triggered purchase of gold as a safe haven.
This pushed global retail investment up almost 400% to 304.2 tonnes, according to the World Gold Council. Gold now trades at Rs 15,000-level per 10 grams. A further rise from this level sounds difficult but not impossible.
Given this factor and high volatility in gold spot prices, it makes more sense to go for gold ETFs than for the physical yellow metal. One can buy gold ETF units in small quantities, when the price seems affordable.
More so, gold ETF units held for more than one year qualify for long-term capital gains at 20%, whereas the holding period in physical form has to be three years to qualify for long-term capital gains. For less than three years, the gains are taxed at 30%. Also, gold held in paper form is not liable for wealth tax. Hence, investment in gold ETF would be sensible option.

Source: http://economictimes.indiatimes.com/articleshow/4210396.cms