Why you should think Long-term when investing in Equities?

When it comes to investing for your future, there are a lot of stocks and investment to choose from. Although there is no specified formula or handbook that investors are expected to follow, there is one general rule: "Invest for the long-term and buy in dips". Don't bother about the Market position whether it is all time high or all time low.

If you need funds for the short term, investing in stocks is not encouraged as by the markets leaders because of the nature of volatility of market and can swing in either direction based on a lot of factors. That is why, in India, gold and real estate are preferred investment options. However, if you're looking to your returns 5 or more years into the future, an investment in equities or an equity fund can be ideal.

Here are reasons why long term planning is essential when investing in equities:
1. Power of compounding
Your age and financial responsibility play an important part in your investment decisions. Since youngsters have fewer financial responsibilities such as retired parents, a spouse, children, or car or home loans to pay off, they are encouraged to start their investments early. A young individual also has a high risk-bearing capacity, being able to withstand the swings of the market. Moreover, buying stocks or investing in equity for the long term allows you to take advantage of compounding.

Compounding requires two factors for it to work: the reinvestment of earnings, and time. The more time you give your investments, the more you can accelerate the income potential of your original income.

For example, an investment of 10,000 at 10% will result in 11,000 in one year. If you decide to reinvest the gain of 1,000 and receive the same rate of return, your capital will grow to 12,100 by the end of the second year. By contrast, not reinvesting the gains would have resulted in capital of just 12,000. This difference seems small over short time periods, but if one were to sustain the same 10% annual rate of return over a decade, the difference would show 25,937 for the reinvested corpus, versus just 20,000 total for the portfolio with gains pulled out of the market.

Year	Starting Value	Multiplier	Interest Earned	End Value
1	10,000	10%	1,000	11,000
2	11,000	10%	1,100	12,100
3	12,100	10%	1,210	13,310
4	13,310	10%	1,331	14,641
5	14,641	10%	1,464	16,105
6	16,105	10%	1,610	17,715
7	17,715	10%	1,771	19,487
8	19,487	10%	1,948	21,435
9	21,435	10%	2,143	23,579
10	23,579	10%	2,357	25,937

The above table is for illustrative purposes only.

2. The data doesn't lie
Although there have been ups and down, history shows that if you align your portfolio for the long term, you're more likely to make money, especially if you focus on high-quality businesses.

After the 2008 crisis, many investors terminated their SIPs. This was a really bad choice because the whole point of an SIP is to keep investing, irrespective of market conditions. Investments made when the markets are down big tend to make the greatest profits - as Warren Buffett says, "Be greedy when others are fearful."

3. You can correct investment mistakes in the long term
Anyone can start a long-term investment; you don't have to be an investment guru to invest in well-run businesses for the long term. An important thing to remember is that you will make mistakes; even the best investors have been wrong. But a regular review of investments every six months can help to correct at least some of these mistakes. It is important to hold on to companies that have historically demonstrated strong growth and add to companies whose business models are still intact but have fallen on hard times.

A game of patience

Hope is a dangerous thing, as investors found out yesterday. If the Finance Minister was guilty of presenting an insipid budget that was low on the detail that the market wanted, investors too were perhaps guilty of expecting too much, too soon. That doesn't absolve the Finance Minister of a budget that is low on ambition, boldness and vision but at least it teaches investors to not hope for the moon going into a policy event.

The real damage was done when the FM spelt out the 6.8% deficit number implying a large market borrowing programme with little detail on how he "would get back on the FRBM path". Global rating agencies will pass their judgement in the next few days but the bond market didn't wait that long. The benchmark bond yield shot past 7% raising fears of interest rate spikes and triggering off a collapse in stock prices. At a macro level, that perhaps was the undoing of the market. At a more micro level, a lot of sectors had run up expecting substantial boosts from the budget. Education, real estate, textile and fertiliser stocks which had meaningful rallies leading up to the event collapsed completely . The surprise was Infrastructure, where stocks sold off as well, as apart from an increased outlay for the NHAI the budget was a bit low on bold moves.

Then there was disinvestment, which the market had pinned some hopes on. The pitiful Rs 1100 crore figure which the FM unveiled dashed those hopes. That number is truly inexplicable.

Not that this budget had nothing postive for the stock market and corporate India. The scrapping of FBT, extension of 10A/10B for IT companies, removal of CTT and no rollback of excise cuts were all positives, partly offset by the hike in MAT. The scrapping of the surcharge on personal income taxes may even be a limited consumption trigger. Tobacco companies were spared the axe this time and ITC was one of the few stocks that ended in the green, contrary to investor fears.

Yet what the market wanted was a green signal, that finally the drought on reforms is over. That a government, shorn of the Left, will press ahead with bold policy moves. The charitable view is to accord the FM the benefit of doubt : he didn't have enough time to unveil a big bang budget and the best is yet to come, over the next few months and in the next February budget. The cynical view is that the market is running ahead of itself; despite the electoral surprise, things will improve only incrementally and over a much longer duration than investors want. The truth, as often, perhaps lies somewhere in the middle. While investing in India, the virtue of patience cannot be overstated.

Source : Silicon India

India is the second largest investor in U.K.

India is the second largest investor in the U.K. in 2008 according to an annual survey conducted by Ernst & Young. Indian companies accounted for 49 projects and trailed the U.S. which accounted to 263 projects. Indian companies were able to beat France and Germany to get the second spot. The study sees Bangalore and Mumbai as the next top centers of Global investment.

"The primacy of long-established centers in the developed world, including Europe's capitals, is being challenged by emerging Asian cities such as Shanghai and Bangalore and by regional cities acquiring international expertise," said Marc Lhermitte, Partner at Ernst & Young and author of the report. The study also revealed that business leaders believed Shanghai and Mumbai are seen as more credible alternatives than New York and Silicon Valley or London.

The survey also revealed that London is Europe's preferred destination for foreign investment. Even though London accounted for 262 of the 686 new projects in the U.K., foreign investment in London fell by 13 percent over the last year. Europe is seen as safe place to invest in. "The BRIC regions (Brazil, Russia, India, China) are not providing the absolutely safe ground that international investors are looking for. Europe is seen as predictable and safe," added Lhermitte.

The U.K. retained its ranking as the most attractive European location for foreign direct investment. The U.K. attracted 686 investment projects in 2008, four percent less than in 2007. The 686 investments in the U.K. created 20,000 jobs, ranking the county as the number one location for FDI job creation in Europe.

Sources: Silicon India

Tatas, SBI, Infy among world's top 50 reputed firms

The Tata Group, State Bank of India (SBI) and Infosys Technologies are among 17 Indian firms that figure among the top 50 in a list of the world's 200 most reputable companies.

With a pulse score of 80.89 on a scale of 0-100, the US-based Reputation Institute ranked the Tata Group 11th above global giants like Google, Microsoft, General electric, Toyota, Coca-Cola, Intel and Unilever.

Italy-based chocolate producer Ferrero was ranked as the most reputable company on the planet right now. With its pulse score moving from 83.52 last year up to 85.17, Ferrero came up from fourth place last year to first, more than a full point ahead of second ranked IKEA.

"However it is the people of India who love their companies the best," noted US business magazine Forbes. "Of India's 27 corporations ranked by the institute, 24 (89 percent) placed above the average. Seventeen of them landed in the top third of the list."

The Reputation Institute's global pulse of 600 companies is a measure of corporate reputation calculated by averaging perceptions of four indicators - trust, esteem, admiration and good feeling - obtained from a representative sample of at least 100 respondents in the companies' home countries.

SBI, India's largest bank, is ranked 29th with a score of 78.11. India's second largest software exporter Infosys is at 39th, with a pulse score of 77.45.

Larsen & Toubro comes next at 47th position with a pulse score of 76.58, while India's largest carmaker Maruti Suzki has been ranked 49th with a pulse score of of 76.26.

Other Indian firms in the top 200 are: Hindustan Unilever (69 - 74.99); ITC Ltd (95 - 73.50); Canara Bank (102- 73.34); Hindustan Petroleum (111 - 73.08); Indian Oil (112 - 73.01); Wipro (116 - 72.77); Mahindra & Mahindra (137 - 71.61); Bharti Airtel (163 - 70.32); Bank of Baroda(174 -- 69.81); Bharat Petroleum(175 - 69.79) and Punjab National Bank (177- 69.67.)

Johnson & Johnson, which placed first in the US for reputation, lands third globally. Kraft Foods places eighth, making the US one of only two countries with two businesses in the global top 10. Brazil is the other. Its Petrobras and Sadia landed fourth and fifth respectively.

Brazil had the second highest percentage of its participating companies ranked above the global average at 76 percent, while 62 percent of American companies received pulse scores above the average.

FDI flow to India will remain robust: Goldman Sachs

The global economic slowdown will not affect the foreign direct investment (FDI) flow to India as the domestic demand remains "resilient", investment banker Goldman sachs said.

"FDI is showing positive signals," Tushar Poddar, an economist with Goldman Sachs said, adding: "We expect FDI inflows to remain significant in 2009-10, given India's relatively resilient domestic demand momentum."

According to the bank, the FDI flow to India during September-January - the months when the credit crisis was at its peak - amounted to $9.2 billion, higher than $7.9 billion in the corresponding period last year.

Pranjul Bhandari, another economist at Goldman, said: "India's balance of payments (BOP) may have had its worst quarter in October-December 2009, when it showed a deficit of $18 billion."

However, "in 2009-10, we expect the current account deficit to narrow to 1.3 per cent of GDP from 3.5 per cent last fiscal with the trade deficit narrowing considerably,"she added.

Notwithstanding the weakness in trade credit and foreign portfolio inflows, the basic balance of payments (BBOP) are expected to move to positive this fiscal, the economists said.

According to them, the major risks India faces are "political uncertainty and the high fiscal deficit".

"Portfolio investment and trade credit on the other hand, have fallen sharply and we expect them to remain weak this fiscal," Poddar said.

"NRI deposits showed an up tick last fiscal, but we expect it to remain flat in 2009-10. We expect NRI deposits coming due in the next year ($32 billion) to get rolled over to a large extent, but do not expect large fresh inflows," he added.

External commercial borrowings (ECBs) are expected to moderate in in the current fiscal. Although ECBs have slowed to $9.1 billion during September-February from $11.8 billion in the previous six months.

"In 2009-10, we expect ECBs to remain positive due to higher growth and yields in India, notwithstanding the $7 billion of outstanding commercial loans coming due," Bhandari said.

Private remittances from Indians working abroad slowed to $4.3 billion in the October-December quarter from $7.9 billion in the July-September quarter.

"We expect this to remain weak, but do not expect much further weakness from current levels," she said.

Bhandari added that the merchandise trade deficit had fallen to $5 billion in February from a peak of $14 billion in August.

"This is likely to turn the BBOP into positive from a current negative, and is also expected to make the overall BOP stronger," she said.

Taken From : Economic Times