17 March 2012

Indian Budget 2012-13 Commentary by Kotak Securites


Power of Compounding with examples

One of the most basic premises of investing is that your money multiplies manifold over time and this multiplication of money is normally referred to as the "Power of Compounding". The compounding effect of investing your money is perhaps one of the most important aspects to achieving long-term wealth. For it to work, you must be a long-term investor with lots of patience.

When you invest money, it earns interest (or returns). If you keep the interest invested, then it does not sit idle while only the original investment sweats it out. The interest earns interest too and then the interest on the interest earns interest again.

This is the beauty of compounding. That is what made great men like Warren Buffet extol the virtues of "compounding".

What does the power of compounding mean to an investor? Let us understand this with the help of an example. Mr. A, Mr. B and Mr. C are three friends with same background and age:

On his tenth birthday, Ms A's father gave him Rs100. He wisely invested the money that earned him an interest of 15% every year.

Mr. B won Rs200 as prize money when he was 16 years old. His friend, Mr. A, advised him to invest his prize similarly. When Mr. C earned his first salary at the age of 21, he salted away Rs400 in the same instrument as Mr. A's.

After reaching the age of 60, all three decided to withdraw their investments. Who do you think realized the most from his investment?

You will tend to think its Mr. C, right? After all, he invested four times the sum that Mr. A had invested. So what if he had invested the money ten years later? He did earn interest for 40 years after that. But think again. Mr. A made the most out of his investment, in fact, his Rs100 was worth Rs108,366. On the other hand, Mr. C Rs400 was worth only Rs93,169.

It simply means that the longer you stay invested the more money you will make.

Now you know why Mr. A made more money than Mr. B and Mr. C.

Let us try another one more example to understand the impact of interest rates.

Let us assume Mr. A, Mr. B and Mr. C invested Rs100 for ten years. However, all three of them earn interest at different rates. Mr. A earns 20% while Mr. B earns 15% and Mr. C manages a 10% interest rate.

What each one of them will have ten years hence?

Mr. A will have Rs619 while Mr. B will have Rs405. while Mr. C will have the least Rs259 in ten years. Have you noticed something though? While the interest rates differ by just 5%, in ten years the worth of the original capital, Rs100 would be vastly different.

That is another way of understanding the power of compounding or the power to grow exponentially.

There is one more interesting rule associated with compounding: The rule of 72.

The rule of 72 is an easy way to find out in how many years your money will double at a given interest rate. It is very simple, divide the number in the title by the interest percentage per period to get the approximate number of periods needed for doubling.

Suppose the interest rate is 15%, then your money will double in 72/15= 4.8 years. In case, the interest rate is 20%, then the money will double in 3.6 years.

Thus the moral of the story is the longer you stay invested the more money you will make.

The power of compounding when applied to the stock market can make you rich many times over and sooner than you can imagine. That is because historically, the stock market is known to give the highest return per annum over long term compared with the other investment instruments.

So, if you don't have an exposure to the stock market yet, start right now as according to the power of compounding, the longer you stay invested the more money you will make. (Source: Kotak Securities newsletter)

Catalyst of change - STEPS founder Sharifa Khanam

Catalyst of change

STEPS founder Sharifa Khanam on how to emancipate women

As a fatherless girl, Sharifa Khanam often likened herself to Cinderella, while she sat cooking by the fire. One of ten children born in a Muslim family, the dreamy-eyed maiden from Pudukkottai yearned for her own space and believed a fairy godmother would answer her prayers someday.

Fast forward three decades or so, and Sharifa Khanam finds herself at the helm of a silent social movement rewriting the destinies of thousands of Muslim women in Tamil Nadu seeking freedom from polygamy, domestic violence, dowry harassment and molestation. Like many modern Cinderellas, Sharifa discovered she could wait forever for her fairy godmother, or she could rescue herself. Though she dumped her illusions, it is clear she kept her dreams, for STEPS, the organization Sharifa founded, was essentially born of a feverish imagination.

“As a little girl, I believed I could conjure something out of the space between my fingers; I hoped I could create something out of nothing,” she says. Her biggest dream, ten years in the making, is to build the world's first women's mosque.

As we mount the narrow flight of stairs to a humble office bursting with petitions, it sinks in that STEPS is a stairway to emancipation for many women.

“Each petition is the story of an embattled woman,” says Sharifa, who established the organisation in 1991, inspired by testimonies at the all-India women's conference in Patna that she attended as a translator.

Though STEPS now works chiefly for the uplift of Muslim women, the organisation has in the past addressed landlessness of Dalits, protested eviction of cucumber vendors, provided asylum for women victims in the Premananda case and conducted gender sensitisation sessions for police. Sharifa believes that Muslim women face double discrimination. “Islam accords great respect to women but men who interpret the tenets use religion to make women subservient. For instance there is no practice of dowry in Islam, but dowry harassment is rampant in the community.”

The quest for a space of their own culminated in the formation of the Tamil Nadu Muslim Women's Jammat. A jammat is a committee attached to a mosque comprising elders who arbitrate on community disputes including divorce, dowry and domestic issues. Conventional jammats had no women representatives.

“How can a jammat be fair when the voices and rights of half the community are denied by excluding women? What do fathers and brothers speaking for a woman know of her opinions and feelings?” demands Sharifa. Police generally comply with the jammat's verdict, and politicians do not intervene for fear of losing the vote of Muslim men.

Though the women's jammat today has 25,000 members with 10,000 registered members in Southern and Central Tamil Nadu, Sharifa is keen on expanding the reach of STEPS. An award of Rs.10 lakh by Edel Give Social Innovation Honours instiuted by Edelweiss was invested in a minivan that would be used to respond to requests for help from women anywhere in the state. The women's jammat has set a precedent by issuing ‘talaq', albeit on substantial grounds, she adds.

“We always hear both sides, or how will we be different from other jammats?” retorts Sharifa, noting that women who attend jammat meetings are a less inhibited lot. She takes pride that the organisation she founded has grown ahead of her.

Citing an instance when members did not budge from Cuddalore until a favourable settlement was worked out for an aggrieved woman who was cheated out of her wealth by her in-laws, Sharifa says women no longer need her to spur them to take up the cudgels.

The first ever recipient of the Dr. Durgabhai Deshmukh national award instituted by the Central Social Welfare Board, New Delhi, Sharifa has always believed the road to empowerment is paved with economic independence. The jammat banks have produced around 1,000 women entrepreneurs by linking them with private financiers to set up tea shops, masala powder units or sari sales. “Poverty is the biggest concern and must be addressed before any gender-specific issue,” notes Sharifa.
White dream

Sharifa's wish list includes women's representation in the Waqf board, implementation of recommendations of Justice Sachar committee and constitution of a Muslim Women's Board for Empowerment without religious intervention.

Her personal goal is to launch a centre where women activists would be accommodated with all comforts when they are old or incapacitated. “The centre would be in recognition of their work, so that they feel they have not toiled in vain,” she says.

Sharifa's long-harboured dream is the completion of a separate women's mosque. She conceived the idea in 2003, as a jammat which is traditionally attached to a mosque. The idea then attracted publicity, but did not translate into resources. For want of funds, her white dream has nothing but a foundation.

“Today the project would require around 50 lakhs for completion. With all the pledges and promises, the mosque should have been completed. Resources have not increased, but my responsibilities have accrued."

Sharifa visualises the mosque as a community centre for women where women would pray, think, learn, bond and laugh.

"Give a woman her own space, and you'll witness a change,” she asserts. Our chat winds up in her own space, an airy red brick room on the roof built to filter moonbeams. “Somehow,” she vows, “I will complete the mosque in my lifetime.”

Indian Budget 2012-13 - What is your Income Tax?

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Thanks: The Hindu - Stay Ahead of the Times

Caterpillar as Zen Master

Inscape: Caterpillar as Zen Master

The hope was that by paying total awareness to one square foot of earth, you're experiencing in the natural world what you do contemplatively when you give total awareness to the inner world -the "inscape." One woman came back and told a story of how she had sat with her square foot of earth which was full of grass and it took twenty minutes for her to quiet down to the point where she noticed a small caterpillar that she had in fact been looking at for twenty minutes. She remembered the instructions that if a question was coming up from your heart, to simply allow it to come and in fact to direct it to the creature that you were sitting with.

Out of her heart rose the question for the caterpillar: "will you teach me about metamorphosis?". The caterpillar responded rather like a tough old Zen master: "Why should I teach you about metamorphosis?" She said,"because you will be going through complete metamorphosis and turn into a butterfly - who better to teach me about it?" He said, "you don't seem to understand - most of us don't make it to butterflies.

Either we don't find the right food plants and die or we're eaten by predators.
There's no guarantee at all that I'll become a butterfly. On the other hand, you, as a human being, experience metamorphosis all the time. If you want to know about metamorphosis, study yourself."

Looking at our own experience as humans on the Earth in the last, say, fifty years, we've gone from being a species with generally localized impact to a species that has very significant global impacts. We've become the dominant species, we control much of the biomass of the Earth, and are beginning to change the climate, the atmosphere, and so on in a significant way. But we haven't had a shift in consciousness consonant with our shift in status as a dominant species. My sense of how to bring about that shift is a simple and humble one - if enough people are willing to experiment and experience a shift in consciousness, then Earth itself, Gaia itself, ... can push on our consciousness, accelerate the process and a global shift in consciousness becomes imaginable..

This excerpt is from the interview of James Thornton, author and an eco-activist turned ecopsychologist. He devised a psychological technique of inscape– exploring the inner ecology.

Ecological Intelligence is important

Ecological intelligence allows us to comprehend systems in all their complexity, as well as the interplay between the natural and man-made worlds.

But that understanding demands a vast store of knowledge,one so huge that no single brain can store it all.

Each one of us needs the help of others to navigate the complexities of ecological intelligence.

We need to collaborate.

-Daniel Goleman

Without Tigers


Without Tigers Forests cannot exist.

Without Forests Tigers cannot exist. Tigers Protect the Forests.

 Forests Protect the Tigers. He who rules should always remember this mutual dependence and harmony.

-Mahatma Vidura in Vidura Neethi,Mahabharatha