Blog Posts by Deepak Shenoy

Suresh Natarajan decided he was out of his depth. Either this stock market business was too complicated, or he was doing something horribly wrong. He did the obligatory social media status update ("The stock market is a gambling den!") and got 60 friends saying they agreed, and one - Atul Balaram Kasbekar, or Abacus - saying, "Call me, SN."

Why not, he thought. He dialed the number.

"Abacus, it's me, SN. How are you? Tell me what stocks to buy - the last five tips I got were utterly useless."

Abacus replied, "Great, SN. But before I start, why don't you tell me what you've done?"

"I started thinking last year that I have some surplus cash lying around, and I should invest it in the stock market. My insurance advisor suggested a person who had excellent inside knowledge of the market, for just five hundred rupees a month, and gave me a list of calls that had done very well. So I bought in.

"The first month it seemed very good - I got 30 tips and about 5 of them did really well. I broke

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While returning on Sunday from a break in the Himachal mountains, the taxi driver told me he was afraid of the all-India "bandh" on Monday, railing against the fuel price hike and 'mehengai' (rising prices). He was afraid of getting attacked by mobs, but at the same time was sympathetic to the cause - prices going out of control, he said.

The small corner of Gurgaon where I live wasn't affected by the bandh but the residents are quite horrified by rising prices. But that's the downside of requesting an opinion. You never find people articulating their joy over falling prices, as has been silently happening with computers, mobile phones and telephone bills.

The frustration seems to be over what we are seeing in the agricultural markets - prices of agri-products have risen tremendously over the last year or two and that seems to be affecting the "aam aadmi" - the common man.

Most of those that will read this article will have a very small part of their monthly expense attributed to

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My last column, 'The ULIP War', has yielded a number of responses from anxious readers asking me if I would recommend exiting from ULIPs (Unit Linked Insurance Plans) they already own. I wish there was an easy way out like saying 'yes', but there are no blanket answers. The only correct answer is 'it depends'.

People seem to want to exit ULIPs for, largely, two reasons - either they trusted people who made them buy such policies in ignorance, or they were looking to only invest for a few years and exit anyhow.

So a ULIP holder can:

* Stop paying any further premiums, and consider withdrawal immediately or within a few years.

* Continue the policy, paying further premiums till a point where exit or continuance can be considered afresh.

Stopping further premiums is a knee-jerk reaction. Most ULIPs are designed so that if you stop prematurely there is a significant hit to your 'fund value'; each product has its own idiosyncrasies. Since such surrender charges tend to diminish over time,

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The turf war between the Insurance Regulator (IRDA) and the Securities Regulator (SEBI) is finally over. The government, on June 19th, passed an ordinance that granted full regulatory control of the Unit Linked Insurance Product (ULIP) market to IRDA, foxing many financial commentators. To an outsider, the brouhaha seems strange, but there's a history to it. (Isn't there always?)

Insurance has meant that you pay a certain amount of money so that if there is damage or a demise, there is a cash payout to compensate. If nothing happens, you lose the 'premium' paid.

In India, life insurance, in particular, has seen a different twist. People are sold products that return money even if they survive. So you pay Rs. 100,000 per year for 20 years, and you can get Rs. 50 lakhs back if you survive, and should you die, you have 'insurance' of 5 lakhs during this period. A part of your premium goes to cover the 'risk' of the 5 lakhs of insurance. Another part goes to cover fees and charges. What is

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Some people are afraid of the stock market - it's a gambling den, they say. Stocks move for no reason, and sometimes, they do not move even when there are good reasons for them to. In certain cases, news seems "manufactured" to make the stock look attractive, just before it crashes. Certain companies only advertise on channels such as CNBC-TV18, just so they will be noticed by traders who might buy their stock and make it go up.

While it is true that some stocks are manipulated, the amount of manipulation you perceive is directly proportional to the amount of money you have lost in the market. It is illogical to presume that broad markets are rigged against you if it has given you a compounded return of 12 per cent in the last 18 years; if anything, it has been rigged in your favour.

We've never let some of our largest entities go down, even if they were scam-tainted. Apart from small co-operative banks, none of our large banks have in any way hurt depositors or debtors even when they

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Nothing is certain but death and taxes, an old saying goes. The man who said those words went on to die, and no longer needs to worry about taxes. But you and I do -- and I sometimes feel that taxes are a more painful choice. Anyway, from an investor's point of view, taxes impact our returns and complicate our investment choices.

Consider for instance, the average bank Fixed Deposit (FD) at 7% a year. If you invest Rs 10 lakhs you will receive an income of Rs 70,000 a year. If your net income, including this interest, is greater than 5 lakhs, you'll end up paying 30.9% as taxes, reducing your income to Rs 48,370 - a post-tax return of just 4.84%.

You might invest the same amount in a Fixed Maturity Plan (FMP) or a "Growth" plan from a mutual fund, which delivers the same 7% in a year. As a "long-term capital gain", you pay a lower 22.66% tax after "indexation" - a method that lets you account for inflation. If the announced inflation figure was 5%, you pay tax only on the "excess" 2%

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Every day I read financial news that is depressing or euphoric, reinforced by data that seems to nail the argument.

Consider this statement:

"The Indian stock markets have grown 20% in the last year, with earnings growing over 18% on the back of an economy that grew 7%, among the largest growth rates in the world."

And then, in a piece from a newspaper where the sole editor was in a coma for two years:

"In the last two years, the stock markets have gone nowhere, at nearly the same levels of May 2008. Earnings have stagnated - the earning-per-share (EPS) of the Nifty has moved only 2% in the same period, despite the economy clocking growth rates of 6% or more. A fixed deposit in a bank would have done better."

Finally, a recent headline:

"9 of top 10 cos lose nearly Rs 1,35,000 cr in m-cap in a month."

Different headlines, different conclusions. The pieces make you focus on different times - a year, two years and one month respectively - and demand completely different actions,

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We're back to Abacus and Sharma, who chatted about the EMI conundrum last week.

"I need some more help," said Sharma. "I'm getting hounded by calls for buying life insurance."

"Before we go there," said Abacus, "do you understand how car and home insurance works? You pay some premium every year, and if something goes wrong you get paid, but either ways the premium's gone. And you're fine with that. You insure your car or house against damage, so that you can replace their services without losing a lot of money."

"Yeah, so what is he getting at?" wondered Sharma

Reading his thoughts, Abacus continued: "You want to buy life insurance for yourself for the same reason. If you die, your family will be very sad, but since they're dependent on your income, how do they survive the rest of their life? It's not a difficult calculation. You said your home loan was covered under a separate insurance package, so let's leave that alone.

"Say you're 33 and you spend 50,000 rupees per month; add to it

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