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Before Buying a Property for Investment

Shitanshu Kapadia
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Before Buying a Property for Investment

When big boom was going on in the real estate market my friend purchased the property for a price that was 30% less than the prevailing market rate. His prime purpose in buying this property was to invest in the real estate market to get a good return. The only mistake he made while purchasing the property was that he overlooked the slum area present beside this property, as no buyer was available, he could get this property 30% lower than the market rate. After 5 years still, this property has not appreciated much.

Remember when you are buying property for investment you are making the most expensive decision of your life. So before buying property for investment, you need to consider various factors that affect the price appreciation of your property.

Buying a property or Home for investment

Location of property:-

The location of the property is the most important aspect in deciding the future price appreciation of the property. You should avoid mistakes like my friend has done. Property near a workplace hub or property surrounded by schools, colleges, market areas, or hospitals in its immediate vicinity appreciates much faster than others. Most people prefer to stay at a location where they can get all these facilities nearby.

Apart from the above placement of property also matters. Property facing a park, swimming pool, or property placed at the corner with a more open side may fetch more value than others.

A simple example is the property at Marine Drive, Mumbai “Queen’s Necklace”. As Queen’s necklace is a beautiful place to live hence price appreciation is seen at a much higher rate than in other places.

Infrastructure nearby property:-

Any infrastructure project like fly over, a bridge that is scheduled to come up in the area increases the value of the property, as this will become a unique selling proposition for property owners.

In some cases, it is found that property prices went up by 50% just be the announcement of new infrastructure projects.

A simple example is property price appreciation at Surat in the various areas due to the announcement of the Metro Rail project.

Connectivity:-

One should avoid locations which are far away or places where public transport is a problem. Place close to the railway station, airport of other good transport system is preferable. Price appreciation will be higher and faster at these places.

A simple example is the “Noida Extension” project for Metro Connectivity to Noida Extension is announced this place will see price appreciation once this connectivity is established.

Locality:-

Some area commands a premium in price just due to the locality of people. Locality where upper middle class people or upper class people are living may appreciate in value faster compared to other. These areas are called posh areas.

Like “Nariman Point” is one of the posh areas of Mumbai and the business hub of Mumbai. You will see the price of the property will appreciate faster here.

Extra Amenities & Quality of the Building: –

Many people prefer extra amenities in the project like a garden, swimming pool, gym, security system, intercom, recreational areas, parking place & auditorium these extra facilities may fetch higher returns.

Many people while buying property in resale look for quality of building structure. Occasional painting, renovation or revamping in the building can help you to bring a better price.

The size of property also matters you should not purchase too small or too big a house. Generally, 2 BHK flats are more in demand compared to others.  Apart from this many people consider factors such as Vastu while purchasing a home so if possible one should look from that perspective while investing.

Places to avoid while doing property Investment: – 

If your prime purpose in buying property is for investment you must avoid the following:-

Property near Slum Area: – This is very common sense that one should not make investment near a slum area. Still many people make mistakes like my friend has done and later stage they don’t have any option. Either they have to wait till the property price appreciates or make losses.

This area may have a high crime rate where people do not like to live. Apart from that these places may be unhygienic due to garbage dumps or sewage area. You should avoid places like this for investment.

Property nearby Religious places:- Buying property near a temple or mosque is not advisable. The reason is that regular prayers during odd hours on loudspeakers may disturb people. If it is a popular religious place then it may cause problems related to parking or traffic.

Apart from this, you should avoid areas where prices are already raised extensively. It may be possible that the price has reached to peak when you purchase and you have to wait for a longer period to witness price appreciation.

In short, you must take extreme care before buying property for investment.

RIGHT Time to Invest in Stock Market

Shitanshu Kapadia
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RIGHT Time to Invest in Stock Market

stock market right time

One question that we get often hear from everyone is – “Is this the right time to invest in stock market?”

Without giving you any theoretical answer we will show you some numbers that will suggest what is right time to invest in stock market.

Let us take you through the story of three friends and their different investing styles.

Each invested Rs 1,000 per month starting 1st August 2002 and till 31st July 2012. The only difference was in the way each one of them invested.

The first – let’s call him Mr. Lucky – was indeed very lucky, and he was able to invest his Rs 1,000 into the market at the lowest level of the Sensex every month.

Then, the second – Mr. Unlucky – was so unlucky that he invested his Rs 1,000 at the highest level of Sensex during that month.

The third friend – Mr. Wise – took a simple, consistent approach.

What he did was invest Rs 1,000 on the first day of each month.

Let us now look at how each of these fared over this 10-year period…

stock 10 year

The result is very clear Investing wisely paid off.

In other words, Mr. Wise – who was neither too lucky nor too unlucky – earned the second best returns of the lot.

The best part is that Mr. Wise earned just 4% lesser than Mr. Lucky (and you can never be that lucky!) and all due to his discipline of investing his money at the start of every month – without trying to time the market.

 You’re getting the point, right or not?

See, it doesn’t pay to look for the “right” time to invest unless you have this marvellous knowledge that you are going to be very lucky with your investments.

The best course of action for most of us as it comes out from the above results is to create an appropriate plan and take action on that plan as soon as possible.

Realistically, the best action you as a long-term investor can take is to invest in a systematic, disciplined way, regardless of the level of the stock market.

We come across certain people who do not invest in stock market, as they are fearful in investing in stock market, but believe me return on investment is one part but if you really want to be wealthy than you must invest in stock market.

Example of wealthiest person who has become wealthy by stock market is Greatest Stock market investor and Investment Guru Warren Buffet holding stock around 74 Billion $.

So, stock market investment is must & there is nothing like right time to invest in stock market you must invest systematically & disciplined manner to get rich return from stock market.

Critical insurance for critical illness with comparison

Shitanshu Kapadia
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Critical insurance for critical illness with comparison

Critical illness Cover

Most of us buy life insurance policy as assurance, that our family will get replacement of income in case of unfortunate death. But we hardly consider insurance policy for the replacement of our income when we are alive.

You must be thinking that what is need of replacing our income when we are alive?

You have ever thought about circumstances where critical illness and disability arises for you? Or the possibility of an accident where you might end up not being able to earn the money that you were earning till now?

You must be thinking that you have enough health insurance which will take care of this type of need.  Yes health insurance will surely take care of your hospitalization or medical need but due to this critical illness if you are unable to work this may be financial death to you. If you have purchased critical insurance plan then Insurance Company will pay sum assured in a few days after the diagnosis of any critical illness specified. This amount can act as replacement of income in this situation.

So Difference between Health insurance and Critical insurance plan is:-

Diffrence between health & critical insurance

Insurance company will pay sum assured in specified number of days after the diagnosis of any critical illness specified in the insurance contract, ranging from 30 to 90 days.

If a person dies in the 30-90 days waiting period, nothing will be paid by insurance company.

Before buying any critical illness plan you should look at the illness covered by the policy. Buy policy which is covering maximum number of illness. To help you we have made comparison of various critical illness policies available in market.

critical health
Click on image to enlarge

Critical illness insurance is critical insurance you must look for.

Some insurance companies provides policy with dual benefit of life insurance & critical illness rider. If you are planning to take life insurance policy or if you are under-insured, take a term policy with critical illness cover.

If you are young and healthy, do not wait. Get adequate life and critical illness cover ensuring that neither you nor your family suffers from any kind of income loss.

Tips for getting higher returns from share trading

Shitanshu Kapadia
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Tips for getting higher returns from share trading

Share Trading

How many times have you bought a stock on someone’s advice to make a quick buck and waited for months, may be years, to just recover your cost? Share trading, experts warn, is a risky game. However, it’s possible to play it smartly and make a quick buck as well, they say.

“The main attraction of trading is that people feel they can make quick money. But there are no free lunches. Trading requires a lot of discipline.”

While traders do make as well as lose money, whether this activity suits you depends on your financial position.

TYPES OF TRADES

You can trade in shares and commodities. However, in India, retail investors mainly trade in stock futures and options due to sheer volumes. Trading means buying and selling a stock the same day or holding it for just 2-3 days. The former is called intra-day trade. The latter is called swing trade. Positional trade generally involves taking a longer position and holding a stock for 2-3 weeks.

MAKING MONEY

Profits depend on risk appetite & risk management, how much money you invest and how many of your trades turn out to be profitable. You can make 3-4% in a day or even lose money

It also depends on how much capital is available with you, how many opportunities you can explore and your knowledge of technical analysis.

SKILL SETS

While any recipient of the so-called ‘hot tip’ can trade, making money consistently is possible only when you have sufficient knowledge of the markets and skills for technical analysis, which is the science of forecasting prices based on historical data.

The software for technical analysis is available on the internet for free, but with limited features. Professional software capable of highly detailed analysis comes at a price. One should either have knowledge of technical analysis and the market or should have good technical consultant to help him.

Stock exchanges, such as the Bombay Stock Exchange and the National Stock Exchange, offer courses in technical analysis. Another institution which offers such courses is Online Trading Academy. “People should trade only if they can take risk, control emotions, set targets and book profit/loss at the target point.

TRADING TIPS

While one can get many trading tips, their execution is important. It’s a battle of emotions. Trading is simple, but not easy. You have to be disciplined.

The importance of discipline in share trading cannot be obver stressed. That is because in most cases, when people are making money, greed makes them wait for more, and so they don’t book profits. When prices fall, fear makes them sell fast. These situations can be avoided if they know when to book profit/loss.

If losses are not a restraint and the market’s roller-coaster movements give you a high, here are a few habits and skills that can help you stay on the right track. These are useful for day traders as well as positional traders.

Skillset required for trading is as follows:-

Discipline:

The key to success is a stop-loss order. Stop loss helps a trader sell a stock when it slides to a certain price. Suppose you buy shares of company A at Rs 50 and set a stop loss at Rs 45. When the price falls to Rs 45, the shares will be sold automatically. This means you have limited your loss to Rs 5. While entering a trade, you should be clear about how much loss you are willing to accept.

Skill:

Trading is a skill, “You have to learn what not to do along with what you should do. You should also know how to spot amateurs and trap them and how to take positions. Also, you should be quick to get in and very quick to get out” .A lot of amateurs in the market buy at a wrong point. A skilled trader identifies such people and takes an opposite position to trap them.

Planning: One should identify a few stocks and focus on them.

Minimum capital:

Only those with a capital of at least Rs 1 lakh can trade for a meaningful gain. However, this capital should not be borrowed and should not be part of your core savings. People can also trade with less, but volumes are important. So, a certain minimum capital is a must.

Price movement:

What should you do with a share which has high volumes but not much price movement? You should prefer shares with a minimum price movement of Rs 10. This means the average difference between a stock’s intra-day high and intra-day low should be at least Rs 10.

Volatility:

Any stock with a positive beta of 1 or above is good. A beta of 1 means the stock will move in line with the market. If the market falls 2%, the stock will also fall 2%. “One can look at a maximum beta of 2 or 2.5, not more than that”. One can find a stock’s beta in the trading software.

Supply-Demand:

One has to know the supply and demand of individual stocks. If the number of shares up for sale is more, one should not buy the stock, and vice versa. To know if the sell quantity is more or the buy quantity is more, one cannot rely on the bid and ask numbers available on the screen. Only a technical analysis can help identify the supply and demand in individual stocks.

News Flow: Never trade on news which is out in the market. It takes a few minutes for a stock price to adjust to any news.

Average out:

When the price of a stock starts falling, people buy more to average out. In trading, it’s a strict ‘No’. “As a professional trader, I would never average out. It’s a losing trade. The trade is going bad. I would rather wait for the right time to enter again.”
Do you think you can immediately start trading with all these tips? The answer is “NO”. One needs to develop a few skills, including the ability to understand technical analysis. “Trading is a simple process, but not easy.,”

At last I would like to say that:-

“Markets are the places where two types of people meet up in the morning: those with experience and those with money. Towards the end of the day, they exchange their assets and go home.”

In future articles we will discuss in detail how one can trade using some charts and technical analysis.

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