Mr.Rohit Gautam, 28 is working with
an advertising agency in Delhi for the last 5 years. He is a bachelor, and stays with his
parents. He has just bought a new Matiz car by taking a loan of Rs.3 lakhs. He was
attracted towards the equity market and started investing in equities in 1999. His major
picks in equities include Zee Tele, Reliance Petro, HDFC, Global Tele, Infosys, Digital
Equipment. Last year he invested in two IPOs of Hughes Tele and Mukta Arts. His entire
portfolio has been eroded in the last 6 months and the value of his portfolio in the
present market conditions is at 50 percent of its initial value. His other two investments
include Mutual Funds and bonds.
His holdings in Mutual Funds are restricted to ELSS schemes, which offer tax benefits and
so is the case with bonds, in which he has invested mainly for tax purposes. Some part of
his savings is held in high-return yielding Company FDs. Rohit believes that the present
downturn in stock market, economy and investment climate in general will not sustain for
long. The recent scams in stock market like rigging in K-10 stocks and de-listing of
stocks like DSQ Software have not shaken his confidence in the stock market.
His present portfolio: Equities: 75%, MFs:15%, Bonds: 5%, FDs: 5% |
Mr. Ramandeep Singh Sareen, aged 30 years
and recently married, is a colleague of Mr.Rohit. He has recently shifted to his new flat
in Noida, which was purchased by taking a housing loan of Rs.10 lakhs for a period of 15
years. He keeps away from the stock market and most of his savings are in the form of Bank
FDs and Insurance policies. He started saving 5 years back and 20% of his total savings
was used for funding his new flat. He has two insurance policies – one in his name
and one in his wife’s name. Both the policies are money back policies with a term of
25 years.
His remaining savings are in the form of Gold, Mutual funds and bonds. He considers debt
mutual funds as the safest option in mutual funds and hence his entire investment in
mutual funds is concentrated only in debt funds. According to Raman, gold is a safe and
traditional investment and forms a substantial portion of his portfolio. Raman has been
closely following the recent developments in the financial market and hence considers his
portfolio as the safest bet in the present scenario.
His present portfolio: MFs: 5%, Bonds: 5%, Real Est: 20%, Insurance:5%, Gold:15%, Bank
Savings: 50%
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It is 6 o’clock in the evening at
South-Ex. Rohit and Raman are excited today as they received their Dassera bonus. They are
seated at a bar and waiting for another colleague Kiran to join them. Rohit is smoking and
Raman is looking through the window at the big hoarding of Tata AIG insurance. HTA has
bagged this account and their company just missed this opportunity. Raman asks
Rohit..’ Do you have any insurance, Rohit?’ ’No’, replied Rohit and
slowly turned his face towards the hoarding...’See Raman, I’d like to be that
man in the hoarding, ready to take the risk and win the game’. The hoarding showed a
sportsman going for a high jump over a high-jump bar. Raman continued..’ I’m
going to purchase at least 10 Infosys tomorrow…uski bhao to abhi mast chal raha
hai….’ Just then, Kiran come and
waived at both of them..’ Aare year, sorry for being late….cabinet shuffle ke
chakkar mein pura Delhi me traffic rukh geya.…’. Now, Raman asks
Kiran….’So, how do you plan spend your bonus amount?’ Kiran pulled his
chair and said loudly ’ I need to do some shopping’. ‘Tera keya plan
hai?’..Kiran threw back the same question to Raman. Raman thought for a while and
tapped at the table..’Yet to be decided, lekin Rohit plans to go for Infosys this
time’. Kiran said..’okay, this is a turn for Infosys but why don’t you
clear part of your car loans at a single stroke, Rohit?’. Rohit smiled back and
replied ’ There is nothing like investment in stocks, you get money and you get to
become rich with no effort." Kiran was carefully observing Rohit and pulled the
window curtain. Now the hoarding was really looking bright with a running neon light
around. Kiran said..’Dekh Rohit, that stick in the hoarding is the real challenge for
all high-jump players. If the balance of the stick is disturbed, It falls down immediately
and the player gets disqualified. Similarly you need to maintain the right balance in your
investment portfolio, if you have to earn good returns".
"Yes" agreed Raman, "Safety of money should be the highest priority. That
is why I put most of my money in bank deposits." Kiran responded " Money lying
in low-return savings account of banks, though safe will not serve the purpose of wealth
accumulation as inflation will reduce the value of your savings. The inflation figure in
India has jumped 130 per cent during the period 1991-2001. Hence you can barely manage to
stay above the inflation rate by locking your money in bank accounts." " What
about gold? You definitely cannot beat gold in terms of safety, security and appreciation
in value." Raman argued. " You are really mistaken Raman," Kiran replied,
My uncle invested Rs.1 lakh in gold in 1991, it was worth a mere Rs.1.21 lakh in March
2001. This works out to a compounded annual growth rate of just 2.14% over a period of 10
years." "This is really, really low!" interfered Rohit. "Take my word,
after stocks, Equity mutual funds are the best and will give you good returns once the
market picks up." Kiran again disagreed. " Whatever be the investments, I feel
that they have to be balanced in order to safeguard his money and see it grow too."
He again looked out at the delicately placed balance-bar in the advertisement.
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