Small, mid-cap stocks are the new wealth creators

MUMBAI:
Ever heard of Energy Development Carbon Dioxide (EDC)? Not if you are not in measure with the
investments of Bollywood ace star Amitabh Bachchan and his brother Amar Singh. The couple clasp 10 hundred thousand and 2.5 hundred thousand shares of this small-cap company (by BSE
classification), according to the shareholding form filed as on September 30,
2007. This relatively unknown
company have been inch the thick of action, soaring nearly 200% in the past one
month. That do the investings of these personalities worth Rs 26.7 crore and
Rs 6.7 crore, respectively, on the footing of the current market
price. EDC is only one of the
several small- and medium-cap banals which have got provided mind-boggling returns
in a short period. A figure of SME pillory witnessed a smart mass meeting on Wednesday
when the BSE’s Smallcap index closed for the first clip above the 10k
level, ending with additions of 238 points, or 2.4%, astatine 10,039. The Midcap index jumped 172
points, or 2.1%, to 8,286. The two indices, in fact, have got outperformed the
broader indices, gaining 14% and 14.5%, respectively, against the Sensex’s
rise of 13.5% since October 19, 2007. Unlike in the past, the
interest in little pillory have been wider, which is also reflected in healthy
advance/decline ratio in B1, B2, S, Deoxythymidine Monophosphate and deoxythymidine monophosphates groupings which generally house small-
and medium-cap stocks. Out of 2,454 scrips traded in these groupings on Wednesday,
as many as 1,739 recorded additions while 663 lost ground, resulting in an
advance/decline ratio of 2.6
times. The sudden rush in
second-rung pillory may have got got brought some alleviation to little investors, but brokers
have a word of caution. In the absence of any major fund-based buying, they
suspect that the mass meeting in many pillory may have got been triggered by manipulation. Brokers state there be good
investment chances in small- and mid-cap space, which investors should
find out with the aid of proper research and penetration into the background of
concerned companies. “Most pillory have got rallied because of herd mentality. Investors, no doubt, are chasing good stories, but they are also falling quarry to
rumours and bad negotiation in the market,” said Karvy Stock Broking
vice-president Ambareesh Baliga. Of late, a batch of involvement is
observed in pillory of working capital commodity and public sector companies from other
sectors. The bovine spongiform encephalitis Capital Commodity and PSU indices jumped 574 points (2.8%) and 396
points (3.9%), respectively, on Wednesday. Capital commodity pillory have got emerged as
the greatest outperformers in the current market. Analysts impute their gains
to break industry prospects in the aftermath of the government’s greater
emphasis on accelerating infrastructure
growth. “Order book of
most working capital commodity companies is full, reflecting high-growth potentiality in the
next few years. PSU pillory have got been rising because the marketplace have begun to
factor in evaluation of excess assets possessed by them,” said Religare
Securities’ Kiran Vaidya caput (investment banking).

With Profits Pension Funds - Beware

If you have got a "with profits" pension, or are being advised to put in one - read on urgently.

A study by Money Management, an constituted personal finance magazine, have once again highlighted the sinking payouts to many investors from well known investing brands.

Lets take Standard Life as an example.

Here are the figs based on the Money Management survey. For a rescuer who have invested £200 per calendar month over 20 years, the monetary fund value from Standard Life would now be £94,752. This is compared to the same rescuer receiving £243,375 in 2002.

This is a 61% drop!

In the same survey, many other major insurance companies showed similar waterfall in payouts. For example:

Company, Now, 2002, Fall %

Axa, £103,663, £249,532, 58

Clerical Medical, £118,978, £195,031, 39

L&G, £105,145, £183,921, 43

Norwich Union, £107,097, £188,777, 43

Prudential, £124,305, £179,878, 31

Scottish Equitable, £108,105, £191,510, 44

Scottish Widows, £97,779, £164,342, 41

One of the grounds why this have happened, taking Standard Life as an illustration again, is that they misjudged the marketplace in 2000. This meant they had to cut down the amount that the monetary monetary fund invested in equities, which in bend led to take down growing on the with net income fund.

On an in progress basis, the image is improbable to better for those investors who have got many more than old age before taking their benefits. This is because the Standard Life with net income monetary fund have only 21% of its investings in shares, which in the longer term is one of the chief drivers of growth.

Another issue here is that £144 billion of investors money is invested in "closed funds". These are finances that are closed to new business, and the study shows that quite often investors are getting a natural trade with returns.

An illustration here would be Greater London Life, who turned £200 per calendar month over 20 old age into £75,593!

If you add to the premix that there have got been a autumn in recent old age in rente rates (the amount of pension you have in relation to the size of your fund), many investors are very worried.

The study additional showed that investors in these types of finances were totally confused as to what to do or what their options are if they happen themselves in one of these with net income funds.

The Financial Tips Bottom Line:

If you have a with net income pension (or endowment), then make not detain - happen out how your monetary monetary fund is performing and then you will be in a place to make an informed decision. You will either make up one's mind to go forth the money where it is Oregon transportation it to an option supplier (the latter option necessitates careful analysis arsenic there may be punishments to shift the fund).

ACTION POINT

If you would wish feedback on this important issue, for a limited time period we will offering to measure your place and concerns individually for no complaint (up to 1 hours work).

If you desire to take advantage of this offer, delight obtain full inside information of your policy/policies as soon as possible and contact us, Graeme or Ray, at docden@rwplc.uk or 0191 217 3340.

Investors And Their Investments - Be Careful What You Say

Question: As an investor, are there certain things I should look for (and look out for) when investing or going to a broker? As an arbitrator and mediator for the National Association of Securities Dealers (NASD) I have found that investors must begin to protect themselves before they purchase any investments. This begins when you open an account and fill out the client account form. This is your personal and business information. The one thing I can guarantee is that in case of a dispute this information will either strengthen or weaken your position in the dispute.

Usually a problem can arise months or sometimes years later when you realize that you were sold an investment that you were unsuited for, or an investment about which you did not understand the risks involved.

If this happens to you, and you and the brokerage firm cannot come to an amicable solution, then arbitration could be your legal remedy. The arbitration may take place years after the original conversation between you and your financial advisor regarding the investment you purchased. I can almost guarantee you that the financial advisor will remember the conversation differently than you do, thereby making the verbal discussions unreliable and meaningless. That is why the client account form, usually the only written document the financial advisor has that describes you, becomes so vital in your defense.

The client account form might look like a basic questionnaire with simple questions, but it is the document that shows if you are suited for certain types of investments. Do not answer these questions lightly or inaccurately. It could cost you dearly in the future

Before you begin to fill out the account form I want to emphasize the best advice I can give you. DON'T EXAGGERATE YOUR INVESTMENT EXPERIENCE OR INCOME. Remember, just because you are knowledgeable and successful in your professional field it does not mean you have the same knowledge in investments.
When the question is about your investment experience in stocks, bonds, mutual finds, private placements, commodities, etc., only put the actual number of years you have been an investor. If you are trying to impress the financial advisor, don't.

Here are three typical questions on the account form that you should be aware of and how they may be interpreted by the advisor:

1-Residence - rent or own. This shows the brokerage firm that if you own a home, you are not ignorant of all types of investments. Also, if you own a real estate limited partnership, REIT, or a pool of sub prime mortgages you would have some idea of the liquidity and economic risks involved. Thus, if these investments have decreased in value, you could not claim that you were unaware of the risks in real estate.

2-Client state annual income. Client state net worth exclusive of family residence, and estimated liquid net worth - DO NOT EXAGGERATE. This shows the brokerage firm what portion of your assets is in a specific investment. Having a diversified portfolio of no more than 2-5% of total assets in one investment may not be worth as much in an arbitration decision as 50% in one investment.

3-Is the client an officer, director or 10% stockholder in any corporation

This tells the brokerage firm that you probably have knowledge about business and investments and also that you have additional assets.

It is important to have a good professional relationship with the financial professional who will help you attain your retirement goals. Just remember if your investments fail, everything you either said or wrote in the past will either help you or hurt you in the future.

Investing - Exchanging Real Estate Tax Free

No one likes writing Uncle Sam large checks. Yet many people needlessly send Uncle 15% of their profit when they sell a rental house or land. There is a simple way to avoid it. It's called a 1031 exchange and it can keep you from losing tens or hundreds of thousands of dollars in unnecessary taxes and loss of growth.

The 1031 exchange is named after section 1031 of the IRS tax code. Basically, it allows you to exchange an existing investment property for a different investment property without having to pay capital gains taxes on the transaction. This applies to any investment property including rental houses, raw land, business property, commercial real estate, condos, apartments, etc.

You can roll the profit from the sale of an existing property into the purchase of the next. Not only does this save you from having to pay capital gains taxes in the short-term, it can also preserve the ability of appreciated property to receive a step-up in basis at death which can eliminate those taxes altogether.

For instance, I recently talked with a retiree who lives in Ohio and owns a rental house in Florida. The recent hurricanes have increased the management headaches. He's looking to simplify his life and wants to sell, but a sale would result in a large capital gains tax bill. With a 1031 exchange, he can sell the Florida rental house and reinvest the proceeds by purchasing a portion of a professionally-managed property. That way he can still earn the income without all the management headaches–and avoid paying capital gains taxes in the process.

As with all IRS tax code, there are a number of provisions and details that must be met exactly for the exchange to be valid. First of all, the exchange has to be a 'like-kind' exchange. For instance, you can't sell a rental house and reinvest the money into a U.S. Treasury bond. Investment real estate to investment real estate is considered a like-kind exchange even if it is a rental house for a potion of a shopping center.

Second, there are several important time periods that must be followed. From the time ownership of the first property is transferred, you have 45 days to identify the replacement property and 180 days to complete the replacement property's purchase. Since real estate closings are notorious for hiccups, I recommend you have two or three properties identified prior to the transfer of the property you are selling. Also, try to close on the purchased property well before the 180 days. If you miss these deadlines, you lose the 1031 exchange ability.

Another important provision is that you cannot take possession of the proceeds of the sale. A qualified intermediary is used to hold the funds, handle the paperwork and make sure the law's provisions are carefully followed. One of my clients worked with a local attorney and used escrow services at the local bank to fulfill these provisions.

Since all the proceeds of a sale are rolled into the new property, a 1031 exchange allows you to continue to get income and growth off the money otherwise sent to the IRS. The client above saved over $125,000 in immediate capital gains taxes. If they are getting a 10% return, that results in earning an additional $12,500 each year. Those extra earnings add up quickly and can help provide additional retirement income.

Lastly, you can add money to the purchase of the replacement property or even reinvest just a portion of the sales proceeds. The IRS rules regarding such situations are complex, but essentially, if you end up getting any proceeds of the sale they are subject to at least some capital gains tax.

A 1031 exchange is not for everyone but can make a tremendous difference in the right situation. If you own investment property and are considering selling it, I recommend exploring your options of doing a 1031 exchange. Talk with an advisor, CPA or attorney who is familiar with 1031 exchanges. Not all of them are, so make sure you are working with one who has handled this type of transaction.