Rajiv Gandhi Equity Savings Scheme (RGESS)

Benifits

Rajiv Gandhi Equity Savings Scheme, 2013 (RGESS) is a new equity tax advantage savings scheme for equity investors in India, with the stated objective of "encouraging the savings of the small investors in the domestic capital markets.” Vide notification dated December 18, 2013 the scheme has been notified by the Department of Revenue, Ministry of Finance (MOF)... It is exclusively for the first time retail investors in securities market.

The objective of the scheme is to encourage flow of savings in the financial instruments and improve the depth of the domestic capital market

• A new section 80CCG under the Income Tax Act, 1961 on ‘Deduction in respect of investment under an equity savings scheme’ has been introduced to give tax benefits to ‘New Retail Investors’ who invest up to Rs. 50,000 in ‘Eligible Securities’ and have gross total annual income less than or equal to Rs.12 Lakhs. The investor would get a 50% deduction of the amount invested from the taxable income for that year.
• The new retail investor may invest in one or more financial years in a block of three consecutive financial years beginning with the initial year.
• Gains, arising of investments in RGESS, can be realized after a year. This is in contrast to all other tax saving instruments.
• Investments are allowed to be made in instalments in the year in which the tax claims are filed.
• Dividend payments are tax free.
• This scheme has a long run benefit of educating the retail investment segment and thereby moving towards financial inclusivity in the country.
• Success of this scheme can lead to transfer of assets from traditional savings instruments such as bank deposits and FDs to the capital markets, leading to diversification in retail investor portfolio and also leading to more productive "capital formation" assets.

Eligibility

The deduction under the Scheme will be available to a ‘new retail investor’ who complies with the conditions of the Scheme and whose gross total income for the financial year in which the investment is made under the Scheme is less than or equal to twelve lakh rupees.

The deduction under the Scheme shall be available to a new retail investor who:-

• Is a resident individual (the benefit cannot be availed by HUF, corporate entities / trusts etc).
• Has not opened a Demat account and has also not done any trading in the derivative segment till RGESS account opening date or the first day of the “initial year” in which he brings in the RGESS eligible investment into the account, whichever is later.
• Has opened a Demat account and has not made any transactions in equity and /or in the derivative segment till designating such account as RGESS or the first day of the “initial year” in which he brings in the RGESS eligible investment into the account, whichever is later.
• In case the demat account is opened as a first holder, but there are no transactions in the equity or derivative segment, then the first account holder is eligible to be a new retail investor.
• For taking the benefits under RGESS, the new retail investor will have to submit a declaration, as in Form ‘A’, to the Depository Participant (DP) at the time of account opening or designating his existing demat account.
• In case of joint accounts, only the first account holder will not be considered as a new retail investor. All those existing account holders other than the first demat account holder (eg. second / third account holders or other joint holders) or nominees of the existing account holders will be considered as new retail investors for the purpose of opening of a fresh RGESS account, if otherwise eligible.
• Has gross total income for the financial year less than or equal to Rs. 12 Lakh.

Process

A new retail investor can make investments under the Scheme in the following manner:

• Open a demat account with a Depository Participant by providing an undertaking Revised link (Form A) that he wishes to designate his existing account or open a new account as RGESS account.
• An investor can invest in eligible securities in one or more transactions during the year in which the deduction has to be claimed.
• An investor can make any amount of investment in the demat account but the amount eligible for deduction, under the Scheme will not exceed fifty thousand rupees.
• The eligible securities brought into the demat account, as declared or designated by the new retail investor, will automatically be subject to lock-in during that year, unless the new retail investor specifies otherwise and for such specification, the new retail investor will submit a declaration in Revised link Form B / Application indicating that such securities are not to be included within the above limit of investment.
• An investor will be eligible for a deduction under subsection (1) of section 80CCG of the Act in respect of the actual amount invested in eligible securities, in the first financial year in respect of which a declaration in Revised link Form B / Application has not been made, subject to the maximum investment limit of fifty thousand rupees.
• The investor would get under Section 80CCG of the Income Tax Act, a 50% deduction of the amount invested during the year, upto a maximum investment of Rs. 50,000 per financial year, from his/her taxable income for that year, for three consecutive assessment years.
• An investor will be permitted a grace period of seven trading days from the end of the financial year so that the eligible securities purchased on the last trading day of the financial year also get credited in the demat account and such securities will be deemed to have been purchased in the financial year itself.
• An investor may also keep securities other than the eligible securities in the demat account through which benefits under the Scheme are availed.
• An investor can make investments in securities other than the eligible securities covered under the Scheme and such investments will not be subject to the conditions of the Scheme nor will they be counted for availing the benefit under the Scheme.
• The investment under the Scheme will consist of an investment in any of the eligible securities covered under the Scheme.
• Deductions claimed will be withdrawn if the lock-in period requirements of the investment are not complied with or any other condition of the Scheme is violated.

Have You Disclosed Other Source of Incomes?

The due date for filing personal income-tax returns for the financial year 2012-13 is 31^st July 2013.

There are a few more sources of income which one MUST disclose. The disclosure can be done either to our employer (so that they are taken care of in Form 16) or while filing our returns.

Some of the very important disclosures are:

1	Interest earned from Savings Bank Account	Interest earned from savings account is tax free up to Rs 10,000/-. Any interest earned above that is taxable and should be declared.
2	Interest earned from Fixed Deposits	Interest received from fixed deposits is taxable as per ones income tax slab. Most of the times banks deduct 10% TDS when the interest accrued is more than Rs 10,000/- (unless one submits a Form 15 G/H). However, the actual tax liability will be more or less, depending upon the tax bracket one falls under after all incomes and deductions are claimed.
3	Interest earned from Recurring Deposits	Interest received from recurring deposits is taxable as per one’s income tax slab. Banks do not cut any TDS on interest earned on recurring deposits and hence it becomes even more important to declare this source of income.
4	Interest earned on Postal deposits and National Savings Certificates (NSCs)	Interest earned on Postal deposits and National Savings Certificates (NSCs) is taxable and needs to be declared.
5	Cash Gifts	Cash gifts received for more than Rs 50,000/- should be declared as they are taxable (unless for specific occasions like marriage, will etc)
6	Capital Gains/Losses	Any Capital gains/losses made from trading equities, selling mutual funds, gold etc should be declared even though they may be non-taxable (e.g. for equities long term capital tax is NIL). Similarly, any losses should be declared as these help in offsetting gains for subsequent years
7	Exempt Income	Exempt Income (e.g. Interest earned on PPF/EPF accounts) should be declared for auditing purposes only. This is a tax free income
8	Dividend Income	Dividend income is tax free in the hands of the investor. However this should be declared while filing income tax returns

10 tips to become a SMART stock market INVESTOR

Morningstar.in

We've boiled down some of our most salient observations into 10 suggestions we think will make you a better stock investor.

At Morningstar globally, our analyst staff has about a thousand years of collective investment experience. Here, we've boiled down some of our most salient observations into 10 suggestions we think will make you a better stock investor.

1. Keep it simple

Keeping it simple in investing is not stupid. Seventeenth-century philosopher Blaise Pascal once said, 'All man's miseries derive from not being able to sit quietly in a room alone'. This aptly describes the investing process.

Those who trade too often, focus on irrelevant data points, or try to predict the unpredictable, and are likely to encounter some unpleasant surprises when investing.

By keeping it simple -- focusing on companies with economic moats, requiring a margin of safety when buying, and investing with a long-term horizon -- you can greatly enhance your odds of success.

2. Have the proper expectations
Are you getting into stocks with the expectation that quick riches soon await? Hate to be a wet blanket, but unless you are extremely lucky, you will not double your money in the next year investing in stocks.
Such returns generally cannot be achieved unless you take on a great deal of risk by, for instance, buying extensively on margin or taking a flier on a chancy security. At this point, you have crossed the line from investing into speculating.
Though stocks have historically been the highest-return asset class, this still means returns in the 10 per cent to 12 per cent range. These returns have also come with a great deal of volatility.
If you don't have proper expectations for the returns and volatility you will experience when investing in stocks, irrational behavior -- taking on exorbitant risk in get-rich-quick strategies, trading too much, swearing off stocks forever because of a short-term loss -- may ensue.

3. Be prepared to hold for a long time
In the short term, stocks tend to be volatile, bouncing around every which way on the back of Mr. Market's knee-jerk reactions to news as it hits. Trying to predict the market's short-term movements is not only impossible, it's maddening.
It is helpful to remember what Benjamin Graham said: In the short run, the market is like a voting machine -- tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine -- assessing the substance of a company.
Yet all too many investors are still focused on the popularity contests that happen every day, and then grow frustrated as the stocks of their companies -- which may have sound and growing businesses -- do not move. Be patient, and keep your focus on a company's fundamental performance. In time, the market will recognize and properly value the cash flows that your businesses produce.

4. Tune out the noise
There are many media outlets competing for investors' attention, and most of them center on presenting and justifying daily price movements of various markets. This means lots of prices -- stock prices, oil prices, money prices, frozen orange juice concentrate prices -- accompanied by lots of guesses about why prices changed.
Unfortunately, the price changes rarely represent any real change in value. Rather, they merely represent volatility, which is inherent to any open market. Tuning out this noise will not only give you more time, it will help you focus on what's important to your investing success -- the performance of the companies you own.
Likewise, just as you won't become a better football player by just staring at statistical sheets, your investing skills will not improve by only looking at stock prices or charts. Athletes improve by practicing and hitting the gym; investors improve by getting to know more about their companies and the world around them.

5. Behave like an owner
We'll say it again -- stocks are not merely things to be traded, they represent ownership interests in companies. If you are buying businesses, it makes sense to act like a business owner.
This means reading and analyzing financial statements on a regular basis, weighing the competitive strengths of businesses, making predictions about future trends, as well as having conviction and not acting impulsively.

6. Buy low, sell high
If you let stock prices alone guide your buy and sell decisions, you are letting the tail wag the dog. It's frightening how many people will buy stocks just because they've recently risen, and those same people will sell when stocks have recently performed poorly.
Wake-up call: When stocks have fallen, they are low, and that is generally the time to buy! Similarly, when they have skyrocketed, they are high, and that is generally the time to sell! Don't let fear (when stocks have fallen) or greed (when stocks have risen) take over your decision-making.

7. Watch where you anchor
If you read our article on behavioral finance, you are familiar with the concept of anchoring, or mentally clinging to a specific reference point. Unfortunately, many people anchor on the price they paid for a stock, and gauge their own performance (and that of their companies) relative to this number.
Remember, stocks are priced and eventually weighed on the estimated value of future cash flows businesses will produce. Focus on this.
If you focus on what you paid for a stock, you are focused on an irrelevant data point from the past. Be careful where you place your anchors.

8. Remember that economics usually trumps management competence
You can be a great rally driver, but if your car only has half the horsepower as the rest of the field, you are not going to win. Likewise, the best skipper in the world will not be able to effectively guide a yacht across the ocean if the hull has a hole and the rudder is broken.
Also keep in mind that management can (for better or for worse) change quickly, while the economics of a business are usually much more static. Given the choice between a wide-moat, cash-cow business with mediocre management and a no-moat, terrible-return businesses with bright management, take the former.

9. Be careful of snakes
Though the economics of a business is key, the stewards of a company's capital are still important. Even wide-moat businesses can be poor investments if snakes are in control. If you find a company that has management practices or compensation that makes your stomach turn, watch out.
When weighing management, it is helpful to remember the parable of the snake.
Late one winter evening, a man came across a snake on the path. The snake asked, 'Will you please help me, sir? I am cold, hungry and will surely die if left alone.'
The man replied, 'But you are a snake, and you will surely bite me!'
The snake replied, 'Please, I am desperate, and I promise not to bite you.'
So the man thought about it, and decided to take the snake home. The man warmed the snake up by the fire and prepared some food for the snake. After they enjoyed a meal together, the snake suddenly bit the man.
The man asked, 'Why did you bite me? I saved your life and showed you much generosity!'
The snake simply replied, 'You knew I was a snake when you picked me up.'

10. Bear in mind that past trends often continue
One of the most often heard disclaimers in the financial world is, 'Past performance is no guarantee of future results.' While this is indeed true, past performance is still a pretty good indicator of how people will perform again in the future. This applies not just to investment managers, but company managers as well.
Great managers often find new business opportunities in unexpected places. If a company has a strong record of entering and profitably expanding new lines of business, make sure to consider this when valuing the firm. Don't be afraid to stick with winning managers.

Courtesy 

The Top 17 Investing Quotes of All Time

When it comes to the world of investing, three words come to mind: overwhelming, intimidating, and scary. For us "regular Joes," the questions seem never-ending. On that note, let's revisit what experts have said over the years on the topic of investing. The quotes date back to Ben Franklin, and some are from modern pundits like Dave Ramsey and Warren Buffett. Though markets may change, good investing advice is timeless. (For more information, see This Is Your Brain On Stocks)

1. "An investment in knowledge pays the best interest." - Benjamin Franklin
When it comes to investing, nothing will pay off more than educating yourself. Do the necessary research, study and analysis before making any investment decisions.

2. "Bottoms in the investment world don't end with four-year lows; they end with 10- or 15-year lows." - Jim Rogers
While 10-15 year lows are not common, they do happen. During these down times, don't be shy about going against the trend and investing; you could make a fortune by making a bold move - or lose your shirt. Remember quote #1 and invest in an industry you've researched thoroughly. Then, be prepared to see your investment sink lower before it turns around and starts to pay off.

3. "I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." - Warren Buffett
Be prepared to invest in a down market and to "get out" in a soaring market. (For more, read Think Like Warren Buffett.)

4. "The stock market is filled with individuals who know the price of everything, but the value of nothing." - Phillip Fisher
Another testament to the fact that investing without an education and research will ultimately lead to regrettable investment decisions. Research is much more than just listening to popular opinion.

5. "In investing, what is comfortable is rarely profitable." - Robert Arnott
At times, you will have to step out of your comfort zone to realize significant gains. Know the boundaries of your comfort zone and practice stepping out of it in small doses. As much as you need to know the market, you need to know yourself too. Can you handle staying in when everyone else is jumping ship? Or getting out during the biggest rally of the century? There's no room for pride in this kind of self-analysis. The best investment strategy can turn into the worst if you don't have the stomach to see it through.

6. "How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case." - Robert G. Allen
Though investing in a savings account is a sure bet, your gains will be minimal given the extremely low interest rates. But don't forgo one completely. A savings account is a reliable place for an emergency fund, whereas a market investment is not. (To learn more, see Savings Accounts Not Always The Best Place For Cash Assets.)

7. "Invest in yourself. Your career is the engine of your wealth." - Paul Clitheroe
We all want wealth, but how do we achieve it? It starts with a successful career which relies on your skills and talents. Invest in yourself through school, books, or a quality job where you can acquire a quality skill set. Identify your talents and find a way to turn them into an income-generating vehicle. In doing so, you can truly leverage your career into an "engine of your wealth."

8. "Every once in a while, the market does something so stupid it takes your breath away." - Jim Cramer
There are no sure bets in the world of investing; there is risk in everything. Be prepared for the ups and downs. (To read more on how Cramer makes his pick, see Cramer's 'Mad Money' Recap: Tools of the Trade.) 

9. "The individual investor should act consistently as an investor and not as a speculator." - Ben Graham
You are an investor, not someone who can predict the future. Base your decisions on real facts and analysis rather than risky, speculative forecasts.

10. "It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for." - Robert Kiyosaki
If you're a millionaire by the time you're 30, but blow it all by age 40, you've gained nothing. Grow and protect your investment portfolio by carefully diversifying it, and you may find yourself funding many generations to come.

11. "Know what you own, and know why you own it." - Peter Lynch
Do your homework before making a decision. And once you've made a decision, make sure to re-evaluate your portfolio on a timely basis. A wise holding today may not be a wise holding in the future.

12. "Financial peace isn't the acquisition of stuff. It's learning to live on less than you make, so you can give money back and have money to invest. You can't win until you do this." - Dave Ramsey
By being modest in your spending, you can ensure you will have enough for retirement and can give back to the community as well.

13. "Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas." - Paul Samuelson
If you think investing is gambling, you're doing it wrong. The work involved requires planning and patience. However, the gains you see over time are indeed exciting! (For more reasons to be patient, check out Patience Is A Trader's Virtue.)

14. "I would not pre-pay. I would invest instead and let the investments cover it." - Dave Ramsey
A perfect answer to the question: "Should I pay off my _____(fill in the blank) or invest for retirement?" That said, a credit card balance ringing up 30% can turn into a black hole if not paid off quickly. Basically, pay off debt at high interest rates and keep debt at low ones.

15. "The four most dangerous words in investing are: 'this time it's different.'" - Sir John Templeton
Follow market trends and history. Don't speculate that this particular time will be any different. For example, a major key to investing in a particular stock or bond fund is its performance over five years. Nothing shorter.

16. "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
In the beginning, diversification is relevant. Once you've gotten your feet wet and have confidence in your investments, you can adjust your portfolio accordingly and make bigger bets. (For more reason to reduce your diversification, read The Dangers Of Over-Diversifying Your Portfolio.)

17. "You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets." - Peter Lynch
When hit with recessions or declines, you must stay the course. Economies are cyclical, and the markets have shown that they will recover. Make sure you are a part of those recoveries!

The Bottom Line
The world of investing can be cold and hard. But if you do thorough research and keep your head on straight, your chances of long-term success are good. Refer back to these quotes when you're feeling shaky or are confused about investing. How are they relevant to your experience? Do you have any favorite quotes to add? (To learn more from great investors, read Greatest Investors.)

 Sources:- Investopedia

Indian Railway Budget Highlights 2011

Yesterday (25th Feb 2011) Railway minister of India Ms Mamta Banergee Presented Railway Budget in Indian Parliament House for the Year 2011. Railway Declared 2011-12 as a "Year Of Green Energy".Some of the Highlights are:-

COMMON PEOPLE

# No increase in passenger fares and freight rates in FY 2011/12.

# New Express Trains, 3 new Shatabdis and 9 Duronto trains to be introduced.

# AC Double Decker services on Jaipur-Delhi and Ahmedabad-Mumbai routes.

# New Super AC Class to be introduced.

# A new portal for e-ticketing to be launched shortly.

# Booking charges will be cheaper with a charge of only Rs 10 for AC classes and Rs 5 for others.

# Pan-India multi-purpose smart card 'Go India' to be introduced.

# 236 more stations to be upgraded as Adarsh Stations.

# 47 additional suburban services in Mumbai and 50 new suburban services proposed for Kolkata.

# Two new passenger terminals in Kerala and one each in Uttar Pradesh and West Bengal proposed.

# Feasibility study to raise speed of passenger trains to 160-200 kmph to be undertaken.

# A special package of two new trains and two projects for the states managing trouble free run of trains through out the year.

# Anti Collision Devise (ACD) sanctioned to cover 8 zonal railways.

# GPS Based 'Fog Safe' Device to be deployed.

# All unmanned level crossing up to 3000 to be eliminated.

# All India Security Help line on a single number set up.

NEW TRAINS

#New Janambhoomi trains Between Ahmedabad and Udhampur

# Krambhoomi Train for working class specially for Migrents.

# Bharat thirth train to be launched on Rabindranath Tagore's 150th Birth day Anniversary 

# Matribhumi Special Trains for Women

SOCIAL INITIATIVE

# A scheme for socially desirable projects, 'Pradhan Mantri Rail Vikas Yojana' with non-lapsable fund proposed.

# 10,000 shelter units proposed for track side dwellers in Mumbai, Sealdah, Siliguri, Tiruchirapalli on pilot basis.

# Concession to physically handicapped persons to be extended on Rajdhani and Shatabdi trains.

# Concession of 50 per cent to press correspondents with family increased to twice a year.

# Senior Citizens concession to be hiked from 30 per cent to 40 per cent.

# Medical facilities extended to dependent parents of the Railway employees.

# Scholarship for girl child of Group-D railway employees increased to Rs 1200 per month.

# 20 additional hostels for children of railway employees to be set up.

# Recruitment for 1.75 lakh vacancies of Group 'C' and 'D' including to fill up backlog of SC/ST initiated, 16,000 ex-servicemen to be inducted by March 2011.

# Free Journey for cancer patient in Sleeper and 3rd a/c & 75% concession for companion.

FACTS & FIGURE

# Gross traffic receipts estimated at 1.06 trillion rupees ($23.4 billion) in FY 2011/12

# Passenger numbers estimated to grow by 6.4 percent in coming financial year.

# Freight traffic estimated at 993 million tonnes in the coming financial year.

# Fresh investment of 576.3 billion rupees ($12.68 billion) into Indian Railways in the FY 2011/12.

INVESTMENT

# The government to provide 200 billion rupees ($4.4 billion) to Indian Railways in coming FY.

# Total amount of borrowing by Indian Railways Finance Corporation (IRFC) estimated at 204.54 billion rupees ($4.5 billion) in FY 2011/12

# Tax-free bonds totalling 100 billion rupees ($2.2 billion) to be issued by IRFC in the coming financial year.

#Railways development bank Rail Vikas Nigam Limited to borrow 1.4 billion rupees ($30.9 million) in coming financial year.

#Total public-private partnership investments estimated at 15.26 billion rupees ($336.5 million) in FY 2011/12.

INFRASTRUCTURE

# 1,300 kilometres (808 miles) of new rail lines to be added in FY 2011/12.

# 18,000 new wagons to be purchased.

# Two wagon units to be set up in conjunction with private partners.

# 700 megawatt gas-based captive power plant to be set up.

# A Bridge Factory in Jammu and Kashmir and a state-of-art Institute for Tunnel and Bridge Engineering is proposed at Jammu.

# A Diesel Locomotive Centre will be set-up in Manipur.

#A Centre of Excellence in Software at Darjeeling proposed under the aegis of CRIS.

# Rail Industrial Parks at Jellingham and New Bongaigaon proposed.

# Additional mechanised laundry units to be set up at Nagpur, Chandigarh and Bhopal.

Do's and Dont's Before Choosing Your Broker

DO'S

• Always deal with the market intermediaries registered with SEBI / Exchanges
• Give clear and unambiguous instructions to your broker / agent / depository participant
• Always insist on contract notes from your broker. In case of doubt of the transactions, verify the genuineness of the same on the Exchange website.
• Always settle the dues through the normal banking channels with the market intermediaries
• Before placing an order with the market intermediaries please check about the credentials of the companies, its management, its fundamental a recent announcements made by them and various other disclosures made under various regulations. The sources of information are the websites Exchanges and companies, databases of data vendor, business magazines etc.
• Adopt trading/ investment strategies commensurate with your risk bearing capacity as all investments carry risk, the degree of which vary according to the investment strategy adopted.
• Please carry out due -diligence before registering as client with any intermediary. Further, the investors are requested to carefully read and understand the contents stated in the Risk Disclosure Document, which forms part of investor registration requirement for dealing through brokers in Stock market.
• Be cautions about stocks, which show a sudden spurt in price or trading activity, especially low price stocks.
• Please be informed that there are no guaranteed returns on investment in stock markets.

DONT'S

• Don’t deal with unregistered brokers / sub-brokers, intermediaries
• Don’t deal based on rumors generally called 'tips'
• Don’t fall prey to promises of guaranteed returns.
• Don’t get misled by companies showing approvals / registrations from Government agencies as the approvals could be for certain other purposes a not for the securities you are buying.
• Don’t leave the custody of your Demat Transaction slip book in the hands of any intermediary
• Don’t blindly follow media reports on corporate developments, as they could be misleading.
• Don’t get carried away with onslaught of advertisements about the financial performance of companies in print and electronic media.
• Don’t blindly imitate investment decisions of others who may have profited from their investment decisions

Six Ways To Cut Business Costs

In times of financial crisis, every business needs to focus on cutting costs, just to stay afloat. Here are the top six ways any business can make reductions in expenditure, without reducing the quality of product or service the business offers its customers.

1 – Reduce Employee Costs

Even if your business is not looking to reduce the number of staff, there are ways of reducing staffing costs during lean business times. Offering overtime to individual employees means you pay that employee up to twice their usual hourly rate.

Rather than pay overtime rates, try re-organising the work rosters and routines to prevent the need for overtime. Perhaps some staff members would prefer to start earlier in the day and others to work later in the afternoon, allowing coverage during all opening hours, without the overtime costs.

Another way of reducing labour costs is to offer staff incentives for reducing their personal days and sick leave taken. Each time a staff member is sick, you need to replace the employee, either by offering another employee overtime, or by working a shift down and reducing productivity. Either way, sick days and personal leave add costs to the company.

Some companies have successfully introduced a reward scheme for employees who do not take any sick days in a year or six-month period. The cost of the reward is minimal compared to the savings made by the company.

2 – Increase Safety

Safety is one area where an increase in initial spending can cut overheads dramatically. Think about all the costs, direct and indirect, involved in an injury in your workplace. These costs include:

* Medical costs;
* Increased insurance costs;
* Loss of productivity while the injured worker is taken care of;
* Resources and time to investigate cause of injury;
* Shift coverage and loss time for injured worker;
* Decrease in employee morale;
* Loss of company’s reputation and public relations costs; and
* In some cases, fines and court costs from government authorities.


Therefore, increasing safety measures and preventing injuries in the first place will cut costs for the business.

3 – Review Procedures and Ensure Efficiency

This is a good time to review all your procedures and work processes to trim the fat. Is your team double handling a particular task? Can you reduce the amount of photocopying and therefore save paper and toner costs? Can you encourage employees to reduce printing by saving electronic files rather than hard copy files? Are there other processes that have become redundant but employees are still spending time completing them? Is there a more efficient method of completing the task?

Look at where you can save someone’s time or resources that the company pays for. Consider saving energy by turning off office lights at night and only having the office cleaned every two days instead of daily. Working more efficiently saves valuable resources.

4 – Reduce Damage to Equipment

Damage to equipment affects business expenditure in two ways. Firstly, damage reduces productivity while the repairs take place. Depending on the importance of the piece of damaged equipment to the overall process, this could put a whole factory floor out of production for some time. Secondly, damage to equipment costs to repair in labour, time and parts.

Ensuring that employees follow processes to prevent damage to equipment can add up to huge cost savings for the company in the long term. Regular checks and maintenance of equipment can replace worn parts before more serious and costly damage occurs.

5 – Shop Around for Suppliers

Make sure you are getting the best deal for essential supplies for your business. You may need to invest some time to shopping around but the cost savings can be enormous.

For example, if you can buy the same quality of paper for the office cheaper by just 50 cents per ream, how much could your business save over a year? If your business purchases just 100 reams of paper in a month, you would save $600 a year. If you made this kind of saving on every product you purchase by switching suppliers, you could add up substantial cost savings over a year.

Obviously, this kind of saving does operate on economies of scale and the larger business will achieve greater savings, but any business can save by switching suppliers to cheaper options.

6 – Staff Incentives for Cost Cutting

Some companies are offering employees a share in the cost savings made over a specific period. This encourages and motivates staff to work more efficiently, reduce injuries, damage and to participate in reducing costs themselves, rather than leaving it all up to the managers.

For example, if your employees can reduce costs by $10,000 a month for six months, your company will save $60,000. If you give even 50 per cent of that back to the employees in staff incentives and bonuses, your business will still save $30,000 in six months. Offering staff a share of 25 or 10 per cent of the cost savings would give your company even more benefits, while still encouraging the staff to reduce expenditure on behalf of the business.

There are many other ways of reducing expenditure by the business. Every cost saving you can make, gives the company more profit and reduces the impact of the global financial crisis. Cutting costs now can ensure the business survives the tough times and is still viable when the economy improves.
Link for this article:- http://www.yourstory.in/resources/finance/1333-six-ways-to-cut-business-costs-

8 key ratios to spot the right stocks

It's a very common dilemma for first time stock buyers. You want to invest in 'safe' stocks yet have no idea about the process involved. Should you trust your broker? Or should you trust the markets analysts. And at the end of the day you are left confused by the myriad of opinions and advices that are thrown at you.
Instead, why not understand the parameters yourself so that you can make the best choice? To help you understand the intricate art of choosing the best stocks to invest in, here are eight key ratios. Read on, understand and happy investing!
Ploughback/reserves: Every year, a company divides its net profit (profit left after subtracting various expenses including taxes) in two portions: plough back and dividends. While dividends are handed out to the shareholders, plough back is kept by the company for its future use and is included in its reserves.
Plough back is essential because besides boosting the company's reserves, it is a source of funds for the company's expansion plans. Hence if you are looking for a company with good growth prospects, check its plough back figures.
Reserves are also known as shareholders' funds, since they belong to the shareholders. If a company's reserves are twice its equity capital it can then reward its shareholders with a generous bonus. Also any increase in reserves will push the share price of your share.
Book value per share: This ratio shows the worth of each share of a company as per the company's accounting books. It is calculated as:
Book Value per share = Shareholders' funds / Total quantity of equity shares issued
Shareholders' funds can be computed by subtracting the total liabilities (money owed to creditors) of the company from its total assets. It can also be calculated by adding the equity capital to the company's reserves.
Book value is an old record that uses the original purchase prices of the assets. However it doesn't show the present market price of the company's assets. As a result, this ratio has a restricted use when it comes to estimating the market price of the shares, but can give you an estimate of the minimum price of the company's shares. It will also help you judge if the share price is overpriced or under-priced.
Earnings per share (EPS): One of the most popular investment ratios, it can be computed as:
Earnings Per Share (EPS) = Profit Post Tax / Total quantity of equity shares issued
This ratio computes the company's earnings on a per share basis. E.g. you own 100 shares of ABC Co., each having a face value of Rs 10.
Assume the earnings per share is Rs 10 and the dividend declared is 30 per cent, or Rs 3 per share. This implies that on every share of ABC Co, you earn Rs. 6 each year, but you actually get Rs 3 via dividend. The balance of Rs 4 per share goes into the plough back (retained earnings). Had you purchased these shares at par, it implies a return of 60 per cent.
This example shows that instead of looking at the dividends received from to company as the base of investment returns, always look at earnings per share, as it is the actual indicator of the returns earned by your shares.
Price earnings ratio (P/E): This ratio highlights the connection between the market price of a share and its EPS.
Price/Earnings Ratio (P/E) = Price of the share / Earnings per share
It shows the degree to which earnings of a share are protected by its price. E.g. if the P/E is 40, it means the share price is 40 times its earnings. So if the company's EPS is constant, it will need about 40 years to make up for the purchase price of the share, after taking into account the dividends and the capital appreciation. Hence low P/E means you will recover your money quickly.
P/E ratio shows what the market thinks about the earnings potential and future business forecast of a company. Companies with high P/E ratios are the darlings of the investors and thus enjoy a higher market rating.
In order to use the P/E ratio properly, take into account the future earnings and growth projections of the company. If the current P/E ratio is low, as against the future prospects of a company, then the shares make an attractive investment option.
But if the company is saddled with losses and falling sales, stay away from it, despite the low P/E ratio.
Dividend & yield: Dividend is the portion of the profit that is distributed amongst shareholders. Companies offering high dividends normally don't have much of growth to talk about.
This is because the plough back required to finance future development is insufficient. Similarly, those companies in high growth sector don't give any dividend. Instead here they give sharp capital appreciation, which ultimately will lead to higher dividends.
So it makes much more sense to invest for capital appreciation instead of dividends. Rather it makes more sense to invest for yield, which is nothing but the association between the dividends and the market price of the shares. Yield (dividend yield) can be calculated as:
Yield = (Dividend per share / market price of a share) x 100
Yield shows the returns in percentage that you can expect via dividends earned by your investment at the current market price. It is more useful than simply focusing on the dividends.
Return on capital employed (ROCE): ROCE is the ratio that is calculated as:
ROCE: Operating profit / capital employed (net value + debt)
To get operating profit, add old taxes paid, depreciation, special one-off expenses, and special one-off income and miscellaneous income to get the net profit. The operating profit is a far better indicator of the profits earned by the company instead of the net profit.
Hence this ratio is the better indicator of the general performance of the company and the company's operational efficiency. It is one of the most useful ratio that lets you compare amongst the companies.
Return on net worth (RONW): RONW is calculated as
RONW = Net Profit / Net Worth
This ratio gives you an idea of the returns generated by investing in the company. While ROCE is an effective measure to get a general overview of the profitability of the company's business operations, RONW lets you gauge the returns you can earn on your investment.
When used along with ROCE, you get an overview of the company's competence, financial standing and its capacity to generate returns on shareholders' finances and capital employed.
PEG ratio: PEG is an essential and extensively used ratio for calculating the inbuilt worth of a share. It helps you decide whether the share is under-priced, totally priced or overpriced.
To derive the ratio, you have to associate the P/E ratio with the expected growth rate of the company. It assumes that higher the growth rate of the company, higher the P/E ratio of the company's shares. Vice versa also holds true.
PEG = P/E / expected growth rate of the EPS of the company
In general, a PEG lesser than 0.5 is a lucrative investment opportunity. However if the PEG exceeds 1.5, it is time to sell.
These are some of the most critical ratios that must be considered when purchasing a share. Extensive reading of the financial performance of the company in newspapers and magazines will help you get all the relevant information to get the correct decision.

Investment Myth

Few myths about investing

What do you do when your entire stock market investment suddenly halves in value - as it has for many people since January last year? Curse fate? Rail against market manipulators? Abuse the government for failing to protect your wealth?

You can do all that, but none of it will bring your money back. The best thing you can do is to look back and learn from it all. The world's best investors have done just that and made tons of money in the process. They then proceeded to write books on their successes, and made even more moolah.

Good for them, but not for you. Peter Lynch's bestseller, One-Up On Wall Street, earned him good money, but don't assume you will achieve the same success by following his methods. Success can never be copied.

The best way to start is by exploding a few myths and questioning the half-truths that pass for timeless wisdom. Let's start by examining them one by one.

Myth 1: Stock market investments will always outperform bonds and fixed-return avenues in the long run.

It's been true so far only if you stretch the definition of long run. Is five years long run enough, or 10 or 15? If you had invested in stocks in 1992, you wouldn't have beaten a bank fixed deposit in terms of returns for 10-12 years. In other words, the best definition of long run is almost forever. If you invest at market peaks, and the times are bad — as they seem now — you may have to wait 10-15 years to beat ordinary bank deposits. You may be lucky, and the markets may revive immediately, but if you aren't, stocks will outperform fixed avenues only over very long stretches. So, be prepared to wait.

Myth 2: Look at stock fundamentals, and you can never go wrong.

Again, this is partly untrue. The value of your stock — any stock — can rise only if others keep buying it. Even an Infosys can rise only if lots of people think its price will rise. This could be influenced by its profitability and other "fundamental" factors, but what gives you returns is liquidity — the willingness of other people to keep buying your stock in large numbers.

Myth 3: The amount you must invest in equity is 100 minus your age.

This is not bad advice, but the real point is your ability to shoulder risk. The assumption behind this formula is that when you are 20, you don't have dependents, and thus can afford to invest 80% of your spare cash in equity. I would restate this proposition by saying that the amount you invest in equity should depend on how much you are willing to lose forever. Equity should get as much money as you are willing to write off from your wealth. At 60, with my children married and a decent pension, I might want to risk 80% of my wealth in equity. It's fine, as long as I am prepared to lose it all.

Myth 4: Time in the market is more important that timing the market.

This is the same as myth 1, which says that the longer you stay invested, the more chances of you making money. Again, only partly true. Good investors know that timing is all. While no one can call market peaks or troughs correctly all the time, we all can figure out whether the market is in a bearish phase or bullish. You must time the market by investing more in bearish phases and less at other times.

Myth 5: Government bonds and debt investments are risk-free.

This is completely wrong. All listed instruments carry risks — including government bonds. At the very least, they carry interest-rate risk. When interest rates rise, the value of your bond falls — and you lose money. The only way to not lose money is to hold bonds to maturity, which is not a bad option for pensioners and others who want the income.

Myth 6: Buy land, for they ain't making any more of it no more.

This has been true for so long that people actually believe in it. However, the proposition depends on two premises — a growing population and economy, and fixed supplies of land. In stable economies with stable populations, real estate gives you returns similar to other avenues. In populous countries like India, realty prices do keep rising, but largely in urban centers and largely because the market structure is weak.