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Builders & Real Estate Bulls Theory Proved Wrong

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Builders & Real Estate Bulls Theory Proved Wrong

Last updated: November 1 2016
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  • Re : Builders & Real Estate Bulls Theory Proved Wrong

    Originally posted by mmulye View Post
    To lock in at current rates for 5 year period the avenues are

    1 FD;s - corporate (DHFL,LICHFL,Mahindra etc) give better rates
    2 FMPS/Debt funds - no guaranteed returns..also involves taxation calcn, returns sometimes are less than bank interest
    3 NCD's fresh or resale...hardly any good pvt companies except shriram (muthoot/mannapuran etc are in dire straits may default also), returns are not so high but duration can be long..ideal for retirees
    4 Most neglected and never suggested..though safest and ok returns..NSC(5 yr.10yr), KVP

    Liquidity is notional...the proper term is "Liquidity without loss" else
    FDs - premature charge 1-2%
    Shares - are illiquid if current price is less than bought price
    Real Estate - is liquid if you are ready to lower price (though may take 1 month minm)

    Also the recommendations of financial experts is directly proportional to the commission they receive if you buy what they recommend, No expert recommends Fd or govt instruments..though they are safest since there is hardly any commission

    Rest it all depends on the individuals "psychology , fear and need quotient " and also tax bracket
    If the expected housing bust comes true.. Where do you think the housing finance companies will be ? Avoid housing finance companies if you are a MAJOR bear. Globeson wants to diversify from banks. Normally we consider nationalised banks as the safest. In such a case , deposits with housing companies should be avoided. Lichl with lic parentage may be a safer bet but the deposit needs to be guaranteed by lic.

    Fmp returns are normally fixed since the MF picks up papers with the same maturity. No trading is allowed. Due to mark to market, the notional return during the life time of the fmp may vary but the final return is within 15-20 basis points of the expected returns. I have been a major investor in fmp for my organization for the last 7-8 years and not found a variation in the return. Even if the pre tax return is lower than FD, the post tax return due to indexation is always substantially higher.

    In fact until the long term indexation period was increased from 1 year to three years, some of the largest corporates in India were investing in fmp and their total exposure was 15-20,000 crores. The sort of scrutiny that the portfolios undergo from these corporates helps secure your investment [emoji1]
    Life is what happens when you are making other plans. Enjoy it

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Check your data

      @que Sera

      RE has gone bust... is it ? Just because premium flats in mumbai dont get sold ..does not mean RE is doomed..

      All housing finance companies have shown phenomenal growth in turnover /profits last few Qs....
      DHFL ...is going to give "bonus 1:1" .. and its AAA rating (if it means anything)

      On the other side look at this

      Capital Mind - JP Morgan AMC Takes A Big Hit on Two Short Term Debt Funds – The Sword of Potential Default in Amtek Auto?

      This is what happens when you handover your money to FMPs and short debt funds...and it can go bust even if one company defaults...its like giving the keys of the car to the driver and going to sleep....you either wake up when you reach the destination(which may be wrong.one .) or when the car has an accident.
      Last edited by mmulye; September 1 2015, 11:49 AM.

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      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        comments please...

        Debt funds look more attractive in the short term, say experts - The Economic Times

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          ET is a mercenary

          check this

          FDs of NBFCs like HDFC, Mahindra Finance in demand as clamour for rate cut gets louder - The Economic Times

          This was in Dec 2014 when rate cut began.......

          ET like other media is mercenary...whoever pays money...a favourable article is posted ...

          so take your own decision and read the articles just as reference...

          All financial wizards...can sell/desell an "financial instrument" based on the same set of figures/numbers....it is on basis of this skill that they are recruited and promoted...

          LIC agents never sold "term" insurance till the pvt players came in......

          ULIP sellers...with their false propoganda...were finallly curtailed by IRDA & SEBI...

          Investment in FD's and Govt securities is not "glamorous" and it does not fit in to the "we are better than the older ppl" concept of young investors...but they are the safest with ok returns...

          Its a learning curve...."burn your fingers couple of times"....thats fine...

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Debt funds have high volatility, specially the short/long/gilt funds. You may consider only if you can stomach the volatility.

            The expected high return is based on the interest rate cuts. But I have seen expectations dashed before leading to low returns/negative returns. A lot of returns in such funds are based on entry timing.
            Life is what happens when you are making other plans. Enjoy it

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Originally posted by mmulye View Post
              @que Sera

              RE has gone bust... is it ? Just because premium flats in mumbai dont get sold ..does not mean RE is doomed..

              All housing finance companies have shown phenomenal growth in turnover /profits last few Qs....
              DHFL ...is going to give "bonus 1:1" .. and its AAA rating (if it means anything)

              On the other side look at this

              Capital Mind - JP Morgan AMC Takes A Big Hit on Two Short Term Debt Funds – The Sword of Potential Default in Amtek Auto?

              This is what happens when you handover your money to FMPs and short debt funds...and it can go bust even if one company defaults...its like giving the keys of the car to the driver and going to sleep....you either wake up when you reach the destination(which may be wrong.one .) or when the car has an accident.
              Mr mule

              Learn to read and under stand.

              I have mentioned expected bust. It is up for the investor to have their view and take a call accordingly.

              Does the phrase past performance is not indicator of future returns mean anything ? Bonus shares are no big deal. It merely sub divides existing wealth in to two.

              Do you have any ideas of the "good" companies that have gone bust in 5 years and taken deposits with them ? At least none of the banks have done this.. And the query about the alternate investments is raised by a person who wants to diversify from nationalised banks. So respect their risk level tolerance.

              At least in a fmp, the risk is broken up into multiple companies.. De risking at its best.

              And you have messed up analogies. Even in a corporate FD, you are trusting that the driver will earn enough on their trips to part you promised interest.

              Finally despite the partial write off for the JP Morgan treasury fund, as of today, the six month return is 5.32 vs a average for the category of 9% and one year is at 7.28% (category average 9.2). Try getting such returns when your favorite corporate is in a funk and unable to return deposit.

              And your favourite dhfl has deposits at 9.75% .. End return post tax is 6.8%/7.8% for a 30%/20% tax bracket person.

              With indexation, you will not pay any tax if MF return is 7.2 but have a long term capital loss. With a return of 9% your post tax return is likely to be around 8.5%
              Life is what happens when you are making other plans. Enjoy it

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Originally posted by Que Sera View Post
                Mr mule

                Learn to read and under stand.

                I have mentioned expected bust. It is up for the investor to have their view and take a call accordingly.

                Does the phrase past performance is not indicator of future returns mean anything ?

                "this is what all financial companies do to when they market ...put a disclaimer(in fine print) and wash their hands off any repurcutions in the future"

                Bonus shares are no big deal. It merely sub divides existing wealth in to two.

                - You need to earn good wealth to distribute it...how many companies give bonus? Giving bonus shows their healthy financial position...they have also recently bought an AMC

                Do you have any ideas of the "good" companies that have gone bust in 5 years and taken deposits with them ?
                - If you considered them good....its your mistake or the marketing skills of the salesman..
                ...tell me of one "AAA" rating company which has gone bust in 5 years...??

                At least none of the banks have done this.. And the query about the alternate investments is raised by a person who wants to diversify from nationalised banks. So respect their risk level tolerance.

                So thats what NBFC and NSC/KVP is what i suggested...i

                At least in a fmp, the risk is broken up into multiple companies.. De risking at its best.

                This is your "worst assumption"....look at what happens to many pharma companies..etc The new companies act forced all such companies to "discontinue" their FD's..why ?


                And you have messed up analogies. Even in a corporate FD, you are trusting that the driver will earn enough on their trips to part you promised interest.

                Tell me one NBFC with "AAA" rating which has defaulted...also all home finance companies are monitored by National housing bank

                Finally despite the partial write off for the JP Morgan treasury fund, as of today, the six month return is 5.32 vs a average for the category of 9% and one year is at 7.28% (category average 9.2). Try getting such returns when your favorite corporate is in a funk and unable to return deposit.

                As of today...at end of the period it will be ??


                And your favourite dhfl has deposits at 9.75% .. End return post tax is 6.8%/7.8% for a 30%/20% tax bracket person.
                With indexation, you will not pay any tax if MF return is 7.2 but have a long term capital loss. With a return of 9% your post tax return is likely to be around 8.5%
                Check my comments above"
                Please learn to read...my last sentence i have mentioned "risk profile...and tax bracket..."

                All financial marketers use terms "if return is" ..."you will gain this mich" and when it does not..."market conditions not good".....

                I have met many "so called" financial experts....and put an offer

                "I give you X lakhs for period of 3 years ..you give me returns of 18%CAGR ...anything above is your gains...(ofcourse yearly fees will be paid) but he has to give a collateral for X lakhs and sign a registered agreement that he will repay principal +18% returns from his collateral if he fails"

                No one was ready....finally its easy to use/sugest other people's money but if it comes to their own they backtrack....lack of confidence/knowledge....only "jumlas" If they were so good why do they keep working for years on..and dont make their own money in the market?
                Last edited by mmulye; September 1 2015, 04:33 PM.

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                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  check this link

                  FMPs V/s FDs: Which is the safest investing option? - Moneycontrol.com

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Mr Mule

                    You are priceless. Et is bad.. But money control is good..

                    Let me quote from your article in money control

                    For investors willing to lock in their capital for a period of over 3 years, FMPs are still an attractive option,

                    Read more at: http://www.moneycontrol.com/news/fix...ce=ref_article

                    As per their calculations, a similar yielding fmp and fd with pretax yields of 10.25% yields post tax 10.05/6.9% for 30% tax bracket.

                    So which is better ?[emoji1] thank you for proving my case.

                    There are major flaws in the article.. About indicative yields provided by the fund house not being met.

                    Unlike an FD which offers an assured rate of return, the FMP can give only an indicative rate - hence might be riskier in the very short term. 

                    And then at the end of the article the genius author says

                    FMPs are mutual funds that invest in highly rated debt instruments, but do not announce any fixed rate of returns,

                    Can you see the contradiction ?

                    Funds houses are not allowed to provide indicative yield by sebi since 2011. Most financial advisers do not sell fmp since the commission is approx 0.10-20% (10 paise per rs 100 invested) so your rant about financial advisors is not applicable here. They rather you invest in short term/balanced funds for higher commissions.

                    Secondly FMPs can be good options in a rising interest rate cycle as they can lock in higher rates as per the article

                    I hope even you can see the fallacy. In a FALLING interest rate they allow you to lock into higher rates. In a rising interest rate, they allow you to actually lock into a low interest rate.


                    The investments into these funds are safe since they invest only in highly rated government paper,. as per the article

                    Wrong again. Fmp invests majorly in non govt paper. The returns vary based on the credit risks assumed. A fmp investing in aaa paper will yield lesser than a fmp investing in aa paper.

                    The frustration in your posts i guess comes from following such advisors [emoji1]
                    Life is what happens when you are making other plans. Enjoy it

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Que Sera;

                      You put your money in FMP ("still attractive,, no guarenteed returns, no exit, higher risks...

                      Cool down....lol.....thats what i said..newbie are easy targets to sell FMP's ,,,until they burn their fingers and get back to FDs & govt securities NSC/KVP (they are safe right ?)

                      Also check/read "ET like other media" phrase ,,,and also the cautio "just as reference"
                      Last edited by mmulye; September 2 2015, 11:48 AM. Reason: Mentioned User

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