Inquisitive Investor

It has been a week since the budget , t he hue and cry of long-term capital gains on equity was the epicenter of most discussions among serious equity investors. Was it correct to have a tax on gains arising equity? What really is grandfathered? Is that even a word? Why is it used in the context of taxation? Talking about grandparents, one can relate to unconditional gifts, so was there a gift in the budget for the investors? Long-term capital gain tax is now a reality how does that impact the life of an equity investor? Amongst all problems are there any solutions?  What really happened? 1.       Gains arising out of Equity are now taxable at the rate of 10% flat without indexation, only gain up to 1 lac is exempted. 2.       Dividends from Equity Mutual funds were tax-free, now there is a dividend distribution tax of 10%. Was it unexpected? In India, there are only four asset classes namely, Real estate, Debt a...

It is digital money It is an amalgamation of two words, they are “Bit” that represent digital like zero or one and “coin” as in money, therefore it means digital money . But is it the first type of digital money? No! I am sure every reader of this post must have experienced at least 10 different examples of digital money. Examples of digital money include Jet miles, star bucks points, Café coffee day beans, etc. But 1 Bitcoin is valued at 7000 USD. There must be something special, what is it? It is decentralized digital money Therefore the secret ingredient in Bitcoin versus all other earlier forms of digital money is just one word: Decentralized. What does it mean? Decentralization means removing the need of a central authority from a system. Before attempting to understand the new decentralized system, Let us reiterate the existing centralized system. Centralized payment system Imagine Mr. Vinod, residing in Delhi, sending some money to John, in New York...

The purpose of term insurance (Death benefit) is to safeguard against monetary loss due to death of an earning member of the family. With the same logic, the regulator prohibits solicitation of life cover by a woman in a domestic role or a housewife. However, the same regulator allows child plans in which even a newborn can be insured. There are two questions here, Why regulator defies its fundamental definition of life insurance in child plans, and second and even stranger question, Why would a parent want life cover for her little child?   The answer to this lies in history Juvenile insurance or Life cover (death benefit) for individuals below the age of 18 years became prominent in the western world in the 19 th  century. It was driven by the high infant mortality rate coupled with high funeral and burial cost. It was intended for the poorer class. It covered the monetary loss of parents for the sum of money spent on the child, the insurance money could be u...

When one invests in Mutual Funds and tends to choose diversification across multiple schemes. The common view is, this reduces the risk your money is exposed to. However, what really needs to be asked is, “ Is there really is an ideal number of funds that should be in one’s portfolio? ” Before answering this question, it is important to first set the agenda or objective of investing in actively managed Mutual Funds, Which to my mind is  to beat the market (or perhaps an Index Fund or ETF) , but why? Simply because an index fund or index ETF gives market returns at cost which looks negligible as compared with 1.8% to 2.4% of annual expense of actively managed funds. Therefore to sum up – the purpose of investing in actively managed funds is to beat the market returns (index returns). The below mentioned illustrations will get us closer to the answer. Here’s a look at two – arguably extreme - scenarios , both with their pros and cons listed and explained: Scenario 1 :...