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From the Rat Race to Financial Freedom... A common man's journey
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Happiness Unlimited...How to be happy..always !!
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Dream On...Every setback is a little nudge from HIM to Dream On
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The Autobiography Of A Stock
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Manoj Arora    About Me
Author Mission    My Mission
Credentials & Awards   Awards & Credentials

Corporate & Family Gifts   Corporate & Family Gifts [NEW]

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Saturday, September 28, 2013

What is Partition Deed

While a Gift Deed is an instrument to gift a movable or immovable property, a partition deed for a property is executed to divide the property among different people - usually among the family members. As with a gift deed, this is a natural phenomenon as generations change hands. It is better to equip ourselves with the knowledge needed for partition deed.

Monday, September 23, 2013

Gift Deed and Relinquishment Deed - Movable or Immovable Property

When it comes to transferring property from one owner to another, a sale deed may not always be the right instrument, especially if you want to pass the asset on to your relatives. This is also a natural phenomenon as the property changes hand from one generation to the next. In such cases, instruments like a gift deed or relinquishment deed can come to your rescue. However, blindly choosing either can lead to problems. It is better to understand these instruments and then take informed decisions.

Thursday, September 19, 2013

What are Gilt Funds

Gilts or Gilt funds, as they are conveniently called, are mutual fund schemes floated by asset management companies with exclusive investments in government securities. Gilts are securities issued by the central government and are said to carry sovereign or minimal risk. Lets understand more about them.

Sunday, September 15, 2013

Financial Wisdom for Youngsters

When it comes to teaching money management habits to our children, we either procrastinate the entire subject, or we feel it is not the right time to talk about money to our children. Unintentionally, we lose the most significant element that makes most people wealthy across the globe i.e. Time leverage.....read on..


80% of America's millionaires and 70% of all global millionaires are fist generation millionaires, ie they created wealth in their own life span and did not inherit anything or got it via lottery. When we analyse the data across all these millionaires, we realize that the biggest factors that they leverage to build wealth is the concept of "time leverage"

And what better age to teach children about time leverage than when they are in school. They have the time on their side. Rs. 500 per month saved from their pocket money, can make them millionaires in 30 years - that's the power of time leverage. But if that is so simple, then why is not almost everyone a millionaire. This goes back to the same old beliefs that we have seen for generations, and follow them with our sub conscious mind.


So, i thought of taking this initiative to our upcoming generation as one of the give backs to my society. Started with my own kid's school. 


In one such seminar conducted on 30th Aug at Queen's Valley School, Sector-8, Dwaraka, on the topic of "Financial Wisdom for Youngsters", we discussed and interacted on the importance of learning good money management habits from a young age (starting from their pocket money) and how these habits can continue to benefit them for the rest of their lives.

It opened up the student's minds and was extremely well received, by the students, teachers and the principal herself. The below acknowledgement letter from the school principal is self explanatory.

School curriculum miss out this fundamental life skill of how to manage money well. Do not be shy. You are getting your child educated in the best of the schools, asking them to compete in this world, giving them industry knowledge - all with just one aim - so that they are able to earn well and take care of his / her family. Along with this, if we teach them to handle money well from a young age, that can change their fortunes by the time they got to the age of doing a job. 
They will work for the love of their craft rather than for the need to earn money.



Go on, engage yourself with them on basic money management habits, some of which are listed below:

Save, no matter how small – Guide your teen to save money out of his/her pocket money or money received through gifts. The idea is to inculcate the habit of saving in them from a tender age. Whether it's a little or a lot,  open a low-fee savings account with a bank so that you can personally monitor their savings. Nowadays, banks are offering savings account for your children with features like net banking and ATM facility. They also have security features to prevent overspending and misuse of the account, so go ahead and get one for your child.
Make them spend within a Budget – Based on the average cost of clothing, entertainment and gifting, provide a specified amount per month to your teen. Ask them to manage the entire month on the limited budget they have, which will make them more responsible towards money.
The power of compounding - Your teen might have learnt the compounding theory in books but it's time to make them learn in reality. Use an online calculator to show your teen how compounding works so that they just don’t save but grow their money.
A strict ‘no’ to credit card – Make your teen understand the dark side of credit cards as it is no free money. They often lead you into a spending spree, and into debt. Credit cards are good if used wisely though, but they might turn out to be destructive weapons in your teen’s hands.
Let them achieve their own goals -  It’s a good idea to let your teens pursue and achieve their goals on their own like buying a gadget or enrolling into some kind of training. Instead of paying on their behalf, ask them to save and pay for their goals, if not fully then partially. This will bring them a lot closer to systematically work upon their goals in the future as well.
Let them experience poor budgeting- Allow your teen to suffer the consequences if they have made poor financial decisions. Instead of giving them excess money, ask them to cut on their own expenditures for the remaining days like no eat-outs with friends and movies just because they have spent their money in shopping.  It’s much better for them to learn this now than when they will have to deal with bigger responsibilities in future.
A financial plan will work at its best if the entire family is in sync with it and therefore making your teen understand the same is an important aspect. The above steps require time, effort, and patience from the parent, but they provide experiences that make the realities of personal finance far more manageable to your teenager.


If you need any help, do feel free to write back to me, and i would be more than happy to help.


Cheers



Manoj Arora
Lead a Financially Free Life !!

Friday, September 13, 2013

What are Blue Chip Companies and how are they selected

I used to hear the term "Blue Chip companies" since i was a child, but it is only during the journey of financial freedom that i had enough craving to dig deeper into why these are termed as blue chip companies, what these companies are, and how are they selected.

How did the word "Blue Chip" originate?
As befits the sometimes high-risk nature of stock picking, "blue chip" term derives from the game of poker. The simplest sets of poker betting discs include white, red, and blue chips, with tradition dictating that the blues are highest in value. If a white chip is worth $1, a red is usually worth $5, and a blue $25.

What are Blue Chip companies?
According to the New York Stock Exchange, a blue chip is stock in a corporation with a national reputation for quality, reliability, and the ability to operate profitably in good times and bad. They usually pay good dividends also, since dividends bring stability to returns in bad times. In India, Blue Chip companies are the companies which constitute the BSE Sensex(30 companies) and NSE Index (50 companies)

Guidelines to select Blue Chips in India
SENSEX consists of 30 top scrips from different sectors. BSE has some strict guidelines to select scrip into SENSEX.  Scrip Selection Criteria for Sensex are
  • Listed history – Listing history of at least 3 months at BSE, preferably more than one year
  • Trading frequency – Should trade each and every trading day
  • Final rank - The scrip should figure in the top 100 companies listed by final rank. The final rank is arrived at by assigning 75% weight age to the rank on the basis of three-month average full market capitalization and 25% weight age to the liquidity rank based on three-month average daily turnover & three-month average impact cost.
  • Market Capitalization - The weight age of each scrip in SENSEX based on three-month average free-float market capitalization should be at least 0.5% of the Index. These are typically Large Cap stocks.
  • Industry/Sector Representation: Scrip selection would generally take into account a balanced representation of the listed companies in the universe of BSE. The company should also be a leader in its own industry segment.
  • Track Record: In the opinion of the BSE Index Committee, the company should have an acceptable track record.
A similar parameter is held for NIFTY, which is an index of 50 shortlisted companies. 

Which are the Top 30 Blue Chip Companies in India
As on August 2013, these were the Top 30 Blue Chip companies that formed the Sensex. Depending on various factors as listed above, there are companies that can move into the list, and some which can move out of the list.
 

No. Company Industry
1 Bajaj Auto Ltd Automobile Two & Three Wheelers 
2 Bharat Heavy Electricals Ltd. Electric Equipment 
3 Bharti Airtel Ltd. Telecommunication - Service Provider 
4 Cipla Ltd. Pharmaceuticals & Drugs 
5 Coal India Ltd. Mining & Minerals 
6 Dr Reddys Laboratories Ltd. Pharmaceuticals & Drugs 
7 GAIL (India) Ltd. Gas Transmission/Marketing 
8 HDFC Bank Ltd. Bank - Private 
9 Hero MotoCorp Ltd. Automobile Two & Three Wheelers 
10 Hindalco Industries Ltd. Aluminium & Aluminium Products 
11 Hindustan Unilever Ltd. Household & Personal Products 
12 Housing Development Finance Corporation Ltd. Finance - Housing 
13 ICICI Bank Ltd. Bank - Private 
14 Infosys Ltd. IT - Software 
15 ITC Ltd. Cigarettes/Tobacco 
16 Jindal Steel & Power Ltd. Steel/Sponge Iron/Pig Iron 
17 Larsen & Toubro Ltd. Engineering - Construction 
18 Mahindra & Mahindra Ltd. Automobiles-Tractors 
19 Maruti Suzuki India Ltd. Automobiles - Passenger Cars 
20 NTPC Ltd. Power Generation/Distribution 
21 Oil & Natural Gas Corpn. Ltd. Oil Exploration 
22 Reliance Industries Ltd. Refineries 
23 Sesa Goa Ltd. Mining & Minerals 
24 State Bank Of India Bank - Public 
25 Sun Pharmaceutical Inds. Ltd. Pharmaceuticals & Drugs 
26 Tata Consultancy Services Ltd. IT - Software 
27 Tata Motors Ltd. Automobiles-Trucks/Lcv 
28 Tata Power Company Ltd. Power Generation/Distribution 
29 Tata Steel Ltd. Steel/Sponge Iron/Pig Iron 
30 Wipro Ltd. IT - Software 

So, if you are looking for companies that are stable, give you decent capital appreciation, pay good dividends, and you are ready to invest for long term, these are the first set of companies that you should look out for.

Cheers



Manoj Arora
Lead a Financially Free Life !!

Tuesday, September 10, 2013

When will you start living your life?

The book is now gaining momentum and is now giving the first symptoms that it can very well be a best seller this year. But irrespective of how much the book sells, here is the part i like the most about the growing word of mouth. 


This book and the increasing word of mouth gives me an opportunity to reach out and help so many more people attain financial freedom in their lives, and then enable them to do something which they always wanted to do.....to spend time with their families, to learn guitar, to join politics to cleanse our system, to plant trees, to travel the world and explore its enormous beauty, to help under privileged children, to not only see their children grow but also contribute in their growth....and on and on...essentially .. to follow what they love to do..... because MONEY is now out of the equation, and that's FREEDOM.

This is the freedom of thought, freedom to act, freedom to live the life of our dreams.

I wanted to share a comment that one of the book fans - Mr. Kanwalpreet - left on Flipkart today morning. I do not know this guy. But he has now sent me an email also to start getting coached on his journey towards financial freedom. 

"I am an avid reader of the Business and Financial Planning books from the past one year as I had started with my job just a year back. I always knew that one should take command of his finances as early as possible so as to really enjoy one's life and stop living up to his monthly paychecks. To really fulfill one's real essence of life one should be stress free to anymore worry about the Money and to achieve that one must know how the Money works for you.

I have read Rich Dad Poor Dad, Cash flow Quadrant by Robert Kiyosaki, The Snowball : Warren Buffet and many other books to get a deep insight in the Financial world. But after reading all these I was still on with my research on the Investment tools that were available in the India Markets so as to really implement the concepts taught by these great leaders. And on my way to research I found this book.

This book summarizes most of the Business and investment tools that are available in the Indian markets and how one can make a the best use of them in a best possible way. I loved the way the author has narrated himself in the book and it truly feels as if someone is just sitting next to you and teaching you.

I feel this is the book for anyone who is aiming a little higher in life than just the bread, butter, family and the materialistic things. Its about living your life the way you aspire it to be and stop getting stuck in something which your heart does not follow.

And the best part is that the author has promised to be in touch with you in case you have any difficulties in understanding something...

I would say this is a must read for anyone who is looking for a true freedom and aspiring for something more from life and giving back to humanity in a way you think is the best way you can."


(For more comments from other readers on Flipkart, click here)
(For more comments from others readers on the Freedom Portal, click here)

What else can i say. He has summed it up so well when he says:
I feel this is the book for anyone who is aiming a little higher in life than just the bread, butter, family and the materialistic things. Its about living your life the way you aspire it to be and stop getting stuck in something which your heart does not follow.

This is the crux of the book. 

Some of the people may continue to believe that this book is about money. Yes, it does talk about money, investments, savings, wealth principles, financial planning but that is not the soul of the book. The soul of the book is about living your life. As i keep telling my followers, Financial  Freedom is not about accumulating money, it is not the end goal. Financial Freedom is about the freedom to live your life.

So, get, set, go...Do not wait for an ideal time or ideal conditions to exist in your life, before you take charge. If you are serious to lead a value adding life, it must start today.

There are so many others who are reaching out and starting their journey. When will you reach out? When will you start living your life? Give it a try. Do not assume that you know what i am talking about. Do not repent at the end of life that at least you could have tried.

I am there to help..reach out !!
Cheers



Manoj Arora
Lead a Financially Free Life !!

Friday, September 06, 2013

What are Large, Mid and Small Cap Funds


We keep hearing terms like large-cap, small-cap and wonder what type of stocks we should own and what these terms really mean? How does someone calculate whether a company is a large-cap or mid-cap? With so many people having such questions in mind, i thought of sharing this post with you.


What is Market Capitalization?
If you wish to buy a company and all its shares were offered to you at the current market price, how much would the company cost you? The answer is its Market Capitalization. Yes, you will have to pay the “Market Capitalization” of the company which is the product of a company’s total number of shares outstanding and the market price of the share.

Example
Let’s understand it with the help of an example. Suppose, you decided to purchase ABC Industries, when its shares were trading at Rs.50 and the number of  shares outstanding were 1 Crore. You would have paid,
Rs.50     x    1,00,00,000    =    Rs. 50,00,00,000
i.e., Rs. 50 Cr. is the Market Capitalization of ABC Industries.

What does Market Capitalization reflect?
However, what you should remember is that the market price of a share is the public opinion about the worth of a company’s stock. Thus, Market Capitalization is the public opinion of what the whole company is worth. This opinion is based on the past performance, future prospects and market sentiments of the public about the company. The market capitalization changes with time as a result of factors like company performance, economic factors like inflation, interest rates, etc.

Categorization of Companies
In India, you can find companies with market capitalization ranging from a few lakh to as much as few lakh Crores ! As a result, companies are usually classified as large-cap, mid-cap and small-cap companies.

What are Large-cap, mid-cap and small-cap companies?
We have frequently heard about some companies being Large-cap (e.g. Reliance, Tatas, Infosys etc.), while many others being Mid cap or Small-cap companies.  "Cap" is short for capitalization, and generally used for market capitalisation. Wonder how they are classified? Let’s take a look at how the BSE classifies companies according to their market capitalization.

The 80-15-5 method
BSE uses a method called as the 80-15-5 method. Here’s how this method works:
  • Arrange all the companies in descending order of their Market Capitalization.
  • The group of companies from the top, which together contribute 80% of the total Market Capitalization are Large-cap Companies,
  • The next group of companies contributing 15% (80-95%) of Market capitalization are Mid-cap companies, and
  • The remaining companies which contribute 5% of Market Capitalization are Small-cap companies.

Thus, the Large-cap companies, Mid-cap companies and Small-cap companies contribute 80%, 15% and 5% of the total Market Capitalization of the market respectively. This is known as the 80-15-5 method. The number of small-cap companies is the highest followed by mid-cap and large-cap companies. Thus, a small proportion of the total number of companies (large-cap) contribute the major part (80%) of total market capitalization.

Thumb Rule
As a thumb rule, the market capitalization of small-cap companies is up to two thousand crore, mid-cap companies is between two thousand to ten thousand crore and large-cap companies is above ten thousand crores. However, this does not mean that if the market falls or rises considerably, large-cap companies will become mid-cap and mid-cap will become small-cap, or vice versa.

Rather, the above ranges will change with a change in Total Market Capitalization.

What is the significance of Market capitalization?
It is regarded as an indicator of a company’s size. Large-cap companies are more robust. A large-cap company can be compared to a heavy goods carrier, while a mid-cap company to a mini carrier. If there is a speed breaker/bump on the road, the chances of a mini carrier getting knocked down are much more as compared to the heavy goods carrier. At the same time, a mini carrier picks up speed quickly and travels faster as compared to the heavy goods carrier; which requires time to catch up speed but has better stability and momentum. 

Summary
So, when you build your equity portion of the portfolio,  make sure that you have a core foundation of large cap companies, and over and above that, you can buy a limited set of mid or small cap companies to balance your risk-reward ratio.


All the best !!

Cheers



Manoj Arora
Lead a Financially Free Life !!

Sunday, September 01, 2013

Mission of Life

The two most important days in your life are the day you are born, and the day you find out why.... said Mark Twain.
While all of us precisely know about one of these two important days, it is very rare for most of us to have established the second day of our lives.

Why do we exist on this planet? What is the value add of our life? Is it just our own survival, or just the survival of our family? Is that the only meaning of our lives? OR is there some purpose of our lives? Is there a mission that we live for, and are also ready to die for? This purpose is called as the mission of our life.

If you do not have a documented mission of your life, you do not know what you are missing in your life. You are mission the spark, the passion, the enthusiasm, the bliss, the happiness, and everything else that makes your life worth living. Life is not supposed to be a struggle, life is supposed to be lived and added value to. Finding your mission takes time, but make sure you are making an honest attempt to do so. 

My mission in life is "To Elevate My Society" and there are three distinct problems that i am targeting to address:
(1) People in our society who do not have time for themselves, or for those who are in need.
(2) People are fighting with each other, not only on bigger issues, but more on pity issues. We have forgotten to live in harmony.
(3) If we do not take care of our environment right now, it may just be too late.

Below is my plan to be a part of the solution to address these 3 vital problems of our lives. 

Again, it does not matter whether i can solve these problems or not, what matters is whether i am a part of the problem or a part of the solution. I am happy that i belong to the latter category.

Which category do you belong to? If you are watching things happen, you are definitely not a part of the solution. Make a mission of your life. Document it. Work on it. Not only will you lead a happier life, but you will change the way people around you think and act.

You can write to me at help@ratrace2freedom.com if you need any help in establishing a mission of your life. There are techniques to do that. I will be more than happy to help.

All the best !!

Cheers



Manoj Arora
Lead a Financially Free Life !!