Risk versus reward

Risk is always directly proportionate to reward. The same holds good in investments also. The riskier investments are always give good returns. For example, Investing in Stock is riskier than investing in Real estate. Investing in real estate is riskier than investing in Gold. Investing in Gold is riskier than investing in Bonds. Investing in Bonds is riskier than fixed deposits.

When taking into consideration, investing in Stocks are looking riskiest of all. Dow was trading around 14000 in 2007 and it traded around 7000 in 2009 march. The Indian BSE Index Sensex was trading around 2100 those on January 2008, but by 2008 October, it depreciated by more 60 percent. The Chinese stock market Index was trading around 6100 in October 2007 and by October 2008, it was trading around 1670.

Investments in Stocks would have given negative return to one’s portfolio. Whereas, those who have invested in Gold, would be in good profits till now. Likewise those who have invested in fixed deposits would have got a fixed small return.

But in the longer run, say in another 5 years, Dow may be trading above 25000, Sensex may be trading above 50000 or Shanghai Index may be trading above 15000. If you take in to consideration the return we get from these Indices, it would be phenomenal. Stocks are riskier but in the longer run it will perform above other assets.

So risk is always is directly proportionate to rewards. In one’s portfolio all types of investment of various risks should be maintained for successful investing. One should not choose only a particular asset class. One should choose right mixture of assets including high risk stocks and low risk fixed deposits.

Happy investing.

Scams and Stock Markets?

Whenever a bull market is over, a scam would emerge at that time. The person who is so bullish on that Market or a sector would be jailed because of scam. In 1992, Harshad Mehta a leading Stock Broker at that time was arrested for frauding some leading Banks and Financial Institutions.

In 2000, Ketan Parkeh, a leading Investor and operator of the Stock Market was arrested for swindling some Bank’s Money. In 2009, Ramalinga Raju of Satyam Computers was for cooking up his company’s accounts.

In US, Bernard Madoff, who was running a ponzi scheme based on Stock Market, was arrested for defrauding the Investors. In Germany also a major scam was known at that time. And also in all countries minor scams were unearthed.

Why scams are are being unearthed only during the start of the bear market or in middle of the bear markets. Let me explain the mechanism. During Bull Markets, price of stocks are moving steadily up. So, a confidence has been built over these years about the market that the price will go forever. Once the trend changes as no trend will continue forever, the scamsters failing to foresee the change in trend get trapped in their own landmines only to be blown away.

Don’t think any trend will be there forever.

Brain Drain has stopped or not?

In India, IITs (Indian Institute of Technology) was incorporated in various parts of the Country by the Indian Government, after a special resolution was passed in the parliament.

These Institutions remained the premiere Institutions in India, as for as higher studies are concerned. The Government pumped so much of money into these Institutions to boost the academic levels of the Country and to make students as competitive as any students in the developed Country.

But for the past thirty years, most of the passed out students placed them in jobs outside Indian, mostly in USA and European. Though the purpose of starting IITs is for improving the Country, the purpose is not fulfilled, as those who studied here in IITs had gone to US or Europe for the jobs and the investment put by India on those students were not utilized for India.

For the past three decades, the debate on this subject of Brain drain has taken place in all circles of the Country. But, now the trend has changed. We have seen some US and European Nationals have come to India for working in leading IT and Telecom Companies.

Now it seems the brain drain has started to stop. The sole reason for this is the massive economic growth we have seen in India. The GDP grew more than 8% for the past three years. Becoming of an IT Capital of world has boosted the pay for the employees and for some of them, the salary is much more than what their counterparts are getting in US or Europe.

This has stopped the brain drain as the IITician’s are getting abundant opportunities in India itself.  The purpose of starting the IITs has fulfilled after more than 3 decades. If this growth continues in India further, even foreign would come to work in India.

The days may not be too far.

Financial power would translate into Super power

The Country which flourishes in the Trade and Commerce would automatically turn into a financial power and then into a Military Power and then into Super power.

Since, the beginning of the 15^th Century, the British started trading with all parts of the World and slowly started conquering the world and soon became the super power of the world. Their financial power turned into Military power.

After the Independence of USA from British, they started growing as a business power and by the start of 20^th Century they become the center of world trade. The free society and vibrant democratic system of the USA attracted the Investors, Professionals and Business-mans all over the world, to live and do business. Their rule of the law atmosphere has made USA a conducive place for Investing.

Soon USA grew as a financial power and then it slowly grew as a Military power and by another fifty years it is the only super power in the World.

Any country which is growing financially would one day become a financial power and then into a Military power and then as Super Power. In the present days, China followed by India has started growing as Financial powers. G-8 Grouping lost its significance and G-20 grouping has become the new power bloc of the world which includes China and India.

If the financial growth is sustained in China and India in years to come, then surely these two countries are likely to be the Super Powers after USA.

No Super power is going to rule the world forever

We all know the might of British Empire in the 17^th,18^th, 19^th , and 20^th Century. There was a saying ‘ The sun never sets in British Empire’ which means almost all the parts of the world were ruled by the British. Such was the mighty of British Empire. They brought most of the world under their rule spanning from America to Asia to Africa. They were the dominant powers in the world affairs at that time.

But they were outclassed by USA and USSR after the world wars. USA and USSR became the superpowers of the World. World politics revolved around them. But after the disintegration of USSR in the 1990s, USA remained the sole super power of the world.

Before the 15 Century, the world was under the control of Muslim rulers. The Arabian and Persian Muslim rulers conquered most part of the world except Americas since it is too far away from their countries and also sea expedition is not possible for far off continent. Sulaimansait even expanded his kingdom to Spain in Europe. Muslim rulers conquered most of the Asia except the Mongolia. They conquered African continent. That is why most of the North Africa was Muslim populated Countries. But their might and importance vanished since the emergence of British Empire.

Before 10^th Century, the world is dominated by the rulers from the Indian subcontinent and Mongolians. Chenqish Khan one of the Mongols ruler had made a expedition to conquer the world. But their Importance and power vanished by the arrival of Muslims rulers from Arabia.

No power center will rule the world forever. The super power status of USA would be challenged one day by some other country. But the rotation will  continue forever.