Is Insurance needed ?

          Insurance is needed to face unwanted death or unexpected accident in one’s life. Insurance is ensuring your family’s good life after your death or ensuring a good life for you after an unwanted and unexpected incident in your life. If you have a motor vehicle, you need to insure it for the same purpose.

Types of Insurance

Life Insurance
This insurance is to cover your life. You can have a term insurance or a endowment policy.
In term insurance, you will get coverage but you will not get any money back. But the amount paid here is very meager.
In endowment policy, you will get coverage and also some many back in a future date. But the premium here is more than the term insurance premium.


Accident Policy
In this policy, in case of any accident, the amount insure will be given. Otherwise, you wont get any return.

Vehicle insurance
In this insurance, the cost of repairing the damage or theft, the life of the driver and the life of the third party who is injured by the vehicle will be covered. In case, if none of the above it claimed, you will not get a return.

Mediclaim
This policy is to cover all your medical expenses.

A person should take all these policies to secure his family from any unexpected events. In particular, the breadwinner of a family should compulsorily have these insurances.

Risk involving in Foreign investment

Foreign direct investment plays a vital role in the international business. It provides a new market and marketing facilities, production facilities in lesser cost, access to latest technology, new products. Foreign direct investment simply means a firm from one country making raw physical investment to build a factory (direct investment is the investment in buildings and equipments not in portfolio investment) in another country.

                In FDI there are so many risks ply with let us analyze one by one the first and foremost one is the country risk. All business dealings involve risk. When the business cross the national boundary then it faces additional risk beyond our control let us analyze one by one. These risks are of national differences in economic conditions, policies, socio political situations and the currency values. You may categorize them in to following six main headings.

                Economic Risk

               

                Transfer Risk

               

                Exchange Risk

               

                Location Risk

                Sovereign Risk

                and

               

                Political Risk.

               

                Economic Risk is the significant change in the economic conditions that can produce major change in the expected return of a foreign investment.

                Transfer risk simply means the risk arising from the decision of the foreign government to restrict capital flow. As the governments have the liberty to revise their policy at any time the transfer risk is also high.

                Exchange risk is an unexpected change in the exchange rate. As the currency hedging mechanisms is impractical over a long period, the exchange risk can be developed.

                Location risk is the risk which includes spillover effects caused by the problems of the particular region or the problems in the partner country.

                Sovereign risk procedures of a government’s capability to pay are similar to transfer risk measures. Sovereign risk has close association with transfer risk.

                Political Risk concerns risk of change in political climate, change in government, and change in society or any other non economic factor.

                 Hence every foreign company examines various methods to measure the risk of investing in a foreign country and the lay a strategy to minimize the risk.

                                                                                                                                          (to be continued)

Carbon Trading

After the Kyoto Summit, all the developed countries agreed to limit their emission level and if not they have to pay a price for their emission. Here the carbon trading comes to ply. The main idea behind carbon trading is to curtail the emission levels of each country and give monetary benefits to the countries with low emissions. As the developing countries can start with clean technologies they will get more monetary benefits from the developed countries.

          For example if a company in India cuts X tones of carbon, it can sell this much amount of points to a company which is emitting carbons in the developed country. The World Bank itself is the monitoring authority.

                Hence carbon trading allows carbon emitting industries in the developed countries to set of their emissions by investing in a large scale mass reforestation projects in the developing countries to nullify their emission. 100000 hectares of forest can eliminate one million tons of carbon in a year from the environment.

                The calculation is very simple. Half of the trees dry weight is carbon. The amount of carbon stored by the trees is calculated from their volume (the volume is calculated the height and the area of cultivation of forest).From the volume the dry wood is calculated and from this carbon proportion is estimated. These projects not only directly fetch money but also indirectly give social, economic and environmental benefits to the developing country.

                India is the second largest country after china. India has generated 30 million carbon credits and expecting 140 million credits in the long run. Around thousand carbon credit projects have already started and around two hundred new projects every year added every year.

                Presently, carbon credit from thermal projects gives 7 to 8$ in the international market. Now NCDEX  is to commenced carbon trading in Indian market. Carbon trading is one of the fast growing volatile market.

Are ULIPs Good Investments?

The unit linked Insurance plans are simply called ULIP. ULIP are financial instruments which will give a term insurance coverage and, investment in stocks  In ULIP, the premium paid by investor goes to two separate investments. One goes for your insurance and the other goes for the investment in stock market. The insurance part consumes less amount and the investment plan consumes more amount. But, in the first year, a major portion of the premium goes to insurance companies as administrative costs which includes the commission paid to the Agents.
So, in the first year, a major chunk of the premium goes to the company and a small amount of the premium is invested in stocks and a small portion is taken for the term insurance. From second year onwards, the administrative costs will be reduced substantially and the balance will be used for investment in stocks and also for the insurance.
If the premium is paid for a long period, at the end of the maturity, one will get a good return. Will this investment option get benefit to the investors? Stock market investments are destined to give good results in the long term, say, more than 10 years.
But people attracted to these plans only during bull market. Their investments get eroded in the next bear market. Now they get confused whether to hold or get rid of it or to invest more. As I said earlier, stock market are bullish in the long term, always, and it will give good results in the longer run. So if an Investor continues his investments even in bear market surely investment in ULIPs will be beneficial.

Is the Indian Stock Market topping out?

     The Indian Stock Market bench mark Index Sensex has scaled 21150 on January 2008 and it followed by a big crash and by October 2008, it tested a low of 7700, a level achieved in just 10 months. Stock Market crash was followed by economic slow down. The Indian Economy which was growing around 8% at that time, saw a downturn in its GDP growth.

     Now the same Bench mark Index Sensex is trading well near its all time high of 21150. When Sensex was trading in 2008, its PE ratio is 21. It was at that time a high Price to Earnings ratio. Historically when ever Sensex trades above the PE ratio of 20, it tops out.

    Now, with Sensex trading above 20000, already the PE ratio has crossed the 21 mark and it is trading well above that. Fundamentally, a top has to form around this level. Technically speaking, a double top formation is a possibility. Technical and Fundamental indicators point to a top at this level. Sentimentally, euphoria is seen in stock market circles. The continuous flow of FII funds in the market is boosting the sentiment. The bullish sentiment has reached the levels that was seen in January 2008.

    I feel it is the right time to withdraw the funds from stock market. With everything getting saturated, a bullish sentiment alone cannot take the market further. So a correction is going to be there in the near future.

    Protect your capital and don’t get sucked into the crowd. Beware, in stock markets, crowd is always wrong.