Personal Finance Ideas

What you may not know about your Bank

MSN Money has an interesting article on some things that you need to know about how banks make money off you.

10 things your bank won't tell you

The Underwear Index

There are a number of unofficial so-called indexes that some experts use to check consumer confidence and spending behavior. One of the most common is the Lipstick Index, which measure the sale of Lipsticks.

MSN Money has a article on a new index I have never heard about the Underwear Index.

The article goes on to discuss some other non-common economic indicators.

Interesting Read…

Spend Prudently

I found this very interesting article at yahoo..

Want Peace of Mind? Spend Prudently

“That will be my goal for the next 40 years: to spend prudently. If you are smart, it will be yours, too.”

Can your hobby make you wealthy

Many of us have hobbies that involve collecting things. The most common is Stamps or Coins. But it is not restricted to these alone. Any item that has a collectable value can be a valid investment idea.

Stamps and coins are the most common collectible investments that are pursued by millions of people all over the world. Do note there is rarely a definitive way value or trade in these items. For now most people use ebay /similar online auction sites or dealers for trading in these items. So valuations are very difficult to arrive at. There are a number of catalog that can give you what people usually refer to as catalog value, but the real market value may be drastically different. Common items may trade well below their catalog value, while very rare issues may trade a lot higher.

Scinde Dawk, the first stamp issued in India/Asia

Most people collect stamps or coins as a hobby. Very few actually recognize that this is an investment. Thus, most stamps/coins are rarely well taken care of and thus result in loosing their value. Generally most stamps or coins just about keep pace with inflation. Even if you start collecting recently, your stamps values increase over the years (but rarely will give you wealth). Obviously, you may not make a killing on your collection unless you have a rare issue. The value of a stamp or coin increase due to multiple reasons. The most common is due to high demand. For example, the Gandhi stamps set of India is very highly valued as a lot of collectors want that set and the supply is not very high. There may be also certain events that may increase the value of certain stamps. E.g. There was a increase in value of Princess Diana stamps around the time just after her death.

The important thing is that you need to have deep expertise in specific areas to make Stamps or coins a wealth creator. This is perhaps the most risky area and it is very difficult to find those high value stamps/coins that will make you money. Also now that a lot of investors recognize stamps can build wealth, rare stamps now costs a lot to buy.

Personally, I collect stamps. I have fun collecting them and also in recent years started to focus on the value of these stamps. You already collect these and so the added advantage of them being a wealth creation tool is a great thing. The main thing is to take the effort to make sure that you take care of your collection so that its value is not diminished by bad handling. (A lot of part time collectors just put stamps into boxes and forget about them. Damages always decrease the value of your stamps)

So look at collecting first as a hobby enjoy it and maybe it will also add to your portfolio.

Happy Collecting

Micro or P2P Lending – Investment or Charity

If you look at the current online opportunities available for either Micro or P2P lending, you see this positioned either are Charity (or do good thing) or as an investment. For example, if you see MicroPlace or RangDe, they position themselves to attract your good/giving side, rather than your risk and growth conscious investment side. If you see LendingClub or Prosper, then they kind of offer a high return investment option, which also allows you to help other people in need.

So the obvious question is whether you look at this Asset Class as part of your Charity piece or as a valid investment option?

This is a very difficult question to answer.

Though both of these investment options are highly risky, P2P lending is usually riskier as the Micro Lending companies at least have better credit checks and local companies backing at least part of the funds. Actually RangDe seems to offer some kind of protection is that the SHG groups that are part of its lending network actually kind of insures you against loss of your investment (Social Collateral).

Even given this, this is a high risk investment. So the reason you are even looking at this as an investor, is because it has high returns.

• In P2P, this is usually in terms of higher interest rates, up to 16-20% (the general interest rates in the US being around 1.5%-3% for saving accounts and CDs gives you a perspective on how good this return is).
• On the Micro Lending side, the return is not in terms of money, but more in terms of feeling good, impact on society, satisfying your charitable instincts etc.

But overall I think even micro lending can be viable and actually grow only if it also satisfies part of your investing brain. This is basically because, the amount of money people will put up for charity is extraordinarily small compared to what they would put into an investment. So for Micro Finance to actually grow, it needs to start also tapping into the investment instincts. Microplace is starting to do that. They now have investments that earn interests around 5-6% (which is quite good in the US context, compared to the much safe CDs , which is market what Microplace is serving). So if people think they are getting adequate returns and it is also good for the society, this can really open the taps for Micro finance as a whole.

Personally, I divide the amount I keep aside for investments in M & P2P lending roughly at 30-70, towards charity vs. investments. So 70% of the funds go into either the 5+% return notes in Microplace or P2P lending (with 8+% returns), while 30% towards MicroPlace investments that I believe in (notes servicing groups in India or Green initiatives) and other charity lending like RangDe.

If you are serious about this asset type, I would recommend that you to do something like this so that you both do your bit for society at the same time you make sure your wealth is growing adequately.

Happy Investing

 

Technorati Tags: Microfinance,P2P Lending,Charity,Micro Lending,Investment Strategy

Job Losses and Indian Reaction

The Recession has had a major impact on the Indian IT industry. Since most of their revenues are from external sources, when the world sneezes, the Indian IT industry catches a cold.

This sudden change in economic activity has given a bad blow to an industry that was trying to recover from a strong rupee, created by a booming economy in 2007.

Over the last couple of days I have been seeing reports of companies like Infy and TCS laying off workers. This is something I would have expected in any recession and with the kind of job losses US is witnessing, the numbers seem miniscule (Infy sent out 2200 workers, around 3.5% of the company).

<rant>

Obviously India being what it is, any retrenchment is seem as a major rich man-poor man issue. See what happened when Jet Airways wanted to trim their staff. It even became a political issue. So most IT companies say that they sent out under performing people. Yes, most IT companies do send out underperformer regularly and this is almost never reported. But this being a bad year, everything is news.

Seeing the responses/comments on articles relating to artilces on the Infy layoffs, I can see people bad mouthing Infy and its management. This show a lack of understanding of how businesses work. It is ok to be critical of any company. After all in a democracy, you have the right to your opinion. But most of these people did join Infy when offered a job that too at maybe 100 times the salary a normal Indian makes. What really makes me mad, is that these same people now talk about Infy being a bad company??

I see discussions around creating an IT union to fight this issue etc. I can see this become a political platform and easily cripple the growth of the IT industry as a whole.

Think about a situation where a company cannot every reduce its employees. It just increases pressure on the company to hire less so as to be safe.

</rant>

What can help the IT industry (or any other industry for that matter) grow?? Both the company/government as well as each employee has to work on things to make it easier to do business.

A few of my ideas:

1. Government or Industry - Allow companies to hire and fire easily and truthfully. Not cover things as firing underperformers etc.

2. Government or Industry - Create an unemployment pay system (something that will cover your salary for a fixed no of months, say 6 months). I guess the best way is to create an insurance product in this space. So when you work, you pay the premium every month out of your salary and after a minimum no. of years (say 5 year), if you loose your job the insurance covers your salary for some time. Instead of this being run by the government, as in the US, this can be better managed if run by the Insurance companies (LIC, HDFC, ICICI etc).

3. If you work in any private company, plan on being fired and save a fixed amount every month for an emergency fund. It is usually recommended that you save at least 5-8 months of your expenses in this emergency fund.

4. Always improve your skills. This helps you get a new job when you loose one.

5. Network with your peers. Either use events or user groups etc to meet and get to know other people in other companies or use the web, linkedin or other networking sites.

6. Don't ever talk foul of your ex-employer. It does affect your ability to get a new job.

(Cross Posted both in .NET From India and Personal Finance Ideas)