September 26, 2006


Investing, Speculating and Gambling

SMS received from ICICIDirect -
Sep25 - Pepper OCT.
Buy 13915
Target 14175-14325-14545
Stop Loss - 13775
For more trade calls, refer Commodity Compass.
Please refer risk disclosure document as ICICIDirect.
ICICIDirect has recently launched Commodity trading. They are sending newsletters, recos by SMS (I have received it for Crude Oil, Chilli, Gaurseed,..), conducting the training sessions, etc.

When you buy a stock after knowing the company's business, financials, future prospects, it is investment. When you buy a stock based on a hot tip, it is speculation. Because, for the stock there is a still an underlying company. Just that you have not done your homework. When you are getting into commodities and derivatives, most of the time, it crosses the boundary of speculation and can be termed gambling.

Retail investors have lost money in commodities. Just last week Amaranth, a hedge fund from US, lost US$ 6 Billion( That's right. SIX Billion Dollars) in one week due to loss on speculative positions in natural gas. It is extremely easy to lose capital in commodity trading with little or no knowledge of how it works. And in some cases, such as Amaranth, even the knowledge doesn't help. Retail investors should definitely stay away from this. Instead of letting people know the risks associated with commodities, ICICIDirect is turning them into a bunch of speculators.

To use Peter Lynch's words, if you are into commodity trading, there a better idea to part with your money - at India's only casino in Goa. At least, you will have fun losing your money.

PS: Firefox crashed while this post was almost complete. I was upset with myself for not saving the text. Magically, the Session Saver extension retrived the content of the page! I love it when things just work.

Update: I received the following SMS today (9th October).
You are receiving our daily trading calls that helps you to take investment decisions on commodity markets. If you wish to unsubscribe, SMS as COMM NO to 676766
Hmm.... Do ICICI folks follow my blog?

Technorati Tags: India ICICIDirect Commodity Trading


Term Insurance in India

Standard Disclaimer: Insurance is the subject matter of solicitation. Consult your advisor. I don't own any responsibility ... yada yada...

This post is results of some gyaan acquired in last couple of years and some research done recently with regards to life insurance.

Q: Do I need life insurance?
A: Yes, if the financial equation of your family gets affected in your absence.

Q: How much insurance does one need?
A: Varies from person to person depending on assets and liabilities. Thumb rule is one needs cover of 5 to 8 times annual income. Most of the insurance companies have farily comprehensive insurance calculators on their websites. (This will give an idea how under-insured you are.)

Q: What is the most economical plan to get the required cover?
A: Term Insurance. This the plan in which you don't get your premium back at the end of the term.

Q: What about the traditional plans?
A: In recent years, the returns with those plans have come just to match inflation. So, in effect, you are getting exactly the money you invested without any returns. I feel bad when smart people employ wonderful tricks to save tax (eg paying rent to your nearest family member) and then go on invest that money in insurance plans which offer 5% pa return.

Q: Then, why not the "new age" Unit Linked Insurance Plans(ULIP)?
A: Multiple reasons. One, don't mix insurance and investment. Two, the exhorbitant cost structure. In the initial years, ULIPs charge as high as 30% of premium as some kind of fees. (In fact, major chunk of this cost is the comission given to the insurance agent. Don't be surprised if your advisor pushes for ULIP.) As all the costs are front-loaded, you stick with the same plan so that the cost is amortized over a long period of time. Basically, they have strong exit barriers.

Q: But, ULIPs offer tax breaks.
A: Never buy insurance for investment and tax breaks. There are tax-saving mutual funds(also known as ELSS funds) which also offer tax breaks. And these funds have performed well in recent times.

Q: ULIP Vs Term Insurance+ELSS. Which one is better?
A: Term Insurance + ELSS. One, low cost of ELSS mutual funds. Two, flexibility of investing whenever you wish instead of in one go for ULIP. Three, lock in period of ELSS is 3 yrs and that of ULIP is 5 yrs. And if you exit after 5 years, the cost incurred can be as high as 10% of annual premium. Third, in ULIP you are more concerned about total premium paid instead of ensuring if you are getting enough cover.

Q: My insurance advisor has shown that the ULIP from the company ABC has given 46% returns in last 3 years.
A: It is preposterous to extrapolate last 3 years' data to next 25 years. These years have given abnormally high returns to the investors. If you get 20% return over 15-20 years, safely assume that your fund manager is the next Warren Buffet or Peter Lynch.

Q: But, I don't have time to learn about mutual funds and term insurance.
A: How much time you spent choosing your last pair of jeans and t-shirt? How much time you spent in buying you vehicle or TV? Now, how much time you should spend before you commit Rs 30-40 Thousand PER YEAR for next 20 years?

Q: Where to find the returns of ELSS mutual fund?
A: ("Compare across Sub-Category"->Equity-ELSS) and Category->Equity-Tax planning)

Q: Which company offers the cheapest insurance
A: Here is premium comparison of various companies, in no particular order, for the 25-year term cover of Rs 10 Lac for a 26-year old, non-smoker male (As you have guessed correctly, that's me. On the wrong side of 26.). The premium is to be paid annually. Term insurance attracts service tax (current rate 12%). The column ST indicates whether the premium indicated includes service tax.
In general, premium goes up when the term is increases (Unlike other insurance plans where it is exactly opposite). Premium goes up if you smoke. If you start early, premium is the lower.

Company Annual Premium (Rs) ST Included? Maximum Term Other Features
ICICI Prudential 3055 Yes 30 Yrs
SBI Life 2280 No 25 Yrs Option of increasing cover at regular intervals.
Reliance Life 2460 Not mentioned 30 Yrs
LIC 3010 Not mentioned 25 Yrs Other plan offers term upto 35 yrs with minimum cover of Rs 25 Lacs
MetLife 2900 Not mentioned Not mentioned
HDFC Standard 2810 No. 30 Yrs
Max New York Life 2530 Not mentioned Upto age of 60 Yrs
Tata AIG 4080 No. Upto age of 60 Yrs

Update: This post was published twice due to a glitch. And I'm still not able to get the table formatting right.

Technorati Tags: India Cheapest Term Insurance Personal Finance

September 19, 2006



Generally, I don't argue with people who ask what's so good about Satya. I have come to accept that one either likes Ram Gopal Verma style or hates it. One cannot be convinced to like that kind of movies, with possible exception of Rangeela. But, I am sure, there will be no two opinions about his latest movie Shiva. It is downright bad and that view is unanimous. Bad news travels faster than light and, somehow, I was one of very few who happened to miss the news. The movie hall of 300 had just 20-odd people, who also had missed that news. So, what's wrong with the new Shiva? Well, a quick answer - pretty much everything.

This is a story of an honest cop (Mohit Ahlawat) who has taken the job of cleaning up the "system" which consists of gangsters, politicians, gangster-turned-politician and police. In the first 15-20 minutes, I could sense Ardha Satya set in 2006. Alas.. a girl (Nisha Kothari) enters in the life of this newbie cop and his quest for "doing the job" loses fizz. He is spending more time impressing her with bravado (totally hero-ishtyle) of "vardi", bashing the goondas, etc.

When RGV's movie starts with disclaimer "All characters are fictional...", you are treated with a meticulously crafted real-life character(s) in the movie (Think Company, Sarkar). Sure, there is one here. But, RGV spends so much time in details of that character that he loses the big picture - the story. The spineless story, if I we accept there exits one, is full of cliches. Dialogues are not as catchy as they were in earlier gangsta flicks. In the name of action, you see our hero beating 20 goons with one hand (The girl is clung to the other hand. All the time.) and a nail (or was it a chisel?) drilled in the head. Music score by "Maestro" Ilayaraaja tends to be loud as if it is trying to make up lack of some emotions in the movie. The songs are as pleasant as large potholes on a tattered road. On acting front, only Ahlawat, Upendra Limaye(the cop from Page 3) as Bappu and Dilip Prabhavalkar, in a tiny role, are impressive. Nisha Kothari may well be on her way out of Bollywood.

This movie is the glaring evidence that RGV is running out of ideas. Sarkar was inspired by Godfather. And his forthcoming movies Nishabd, Sarkar 2 and Sholay are clearly rip-offs of existing work. What's wrong with you, RGV?

RGV once said in an interview that he has posters of his flop movies plastered in the office (Daud, anyone?). Shiva deserves the largest space on that wall.

Technorati Tags : Shiva RGV

September 15, 2006


Yahoo mail beta

I have switched to Gmail as my primary account long time back, but it is good to see Yahoo catching up. The new ajax-ified interface is rich and comes closest to the desktop e-mail clients. Try it at (Update: Fixed URL)

(Hat tip: A comment on a blog post)

Technorati Tags: Yahoo Mail Beta


Missing opportunity Mumbai Mirror style

In the past, Indian bloggers had complained about the website of Mumbai Mirror, a tabloid from Mumbai, where links vanish mysteriously. Looks like they move articles to the 'archive' and give a new URL. Today, a story on Slashdot referred to the links from Mumbai Mirror. And the first post on that thread is
"It just says article not found. The picture works though."

This page is powered by Blogger. Isn't yours?