How Much Cash is Too Much for Your Portfolio?

Cash Position – 6% - 30% Based on Age/Risk Appetite

As per Charles Schwab Corpn’s – SCHW robo-advisor, Schwab Intelligent Portfolios, the cash position of an investor should be between 6 and 30 percent based on age and risk appetite. If one would be looking for a precise percentage, advice from financial experts will inform the individual to focus on capital allocation of 60 percent stock, 30 percent bonds and 10 percent in cash.

Investors though who are more likely to take risk are the younger generations who don’t necessarily need a stable income and could have more capital allocated to stocks. Cash is king as well as trash and nowhere is cash said to be more controversial than using it by way of investment, where too much of it is considered to be a risk but how much could be `too much’?

The debate came up when Charles Schwab had launched Intelligent Portfolios which is an algorithm based platform that automatically builds and rebalances portfolios like the asset-management services of robo-advisors and his treatment of cash in platform had many eyebrows raised, leading to criticism of allocation to cash, depending on the investor’s risk profile.

How Much Cash an Investor Should Hold …?

Charles Schwab replied that there seems to be no right or wrong answer as to how much cash an investor should be holding as an investment and that it is a strategic decision. He further added saying that it is easy to question cash in the 6th year of a bull market and when the Federal Reserve is artificially suppressing interest rates, but they did not invest based on the last six years.

Investment was based on what can be expected in the future. Bull market end and interest rates increase and when they do, a little cash will feel pretty good’.The question raised was, how much should one hold in their brokerage account to which both sides seemed to agree and there was not a single answer that fits all circumstance. When people tend to discuss their investing portfolios they usually refer to the stocks, commodities, bonds and real estate that they own. Regarding cash and how much to hold in a portfolio is based on who you are and how you are investing as well as your investment perspective.

Cash Not As Asset Class – Call Option Which Can Be Priced

When Warren Edward Buffett an American business magnate, investor and philanthropist and the most successful investor of the 20th century had patiently held around $20 billion in cash, he thought of cash not as an asset class which is returning next to nothing but as `a call option which can be priced, relative to ability of cash to buy assets.’ He put in good use at the time of the financial crisis gathering deeply discounted bargains. Most of the investors, lack the discipline of Buffet.

When the market is rallying, cash in the portfolio tends to drag on performance, returning to around zero. The debate for cash in the portfolio is that it does not go down at the time of market crashes but enables the purchases of cheap assets like Buffett, at smart prices. However, investors rarely tend to buy when markets are crashing and are simple apprehensive, to take the plunge. Those who avoided the 2008 crash were stuck with too much cash in their portfolios as the markets recovered.

New Pensions Crisis as Thousands Can’t Get At Their Own Money

Pension Crisis – Problems at Financial Firm

Problems at the financial firms have left people intending in getting access to their retirement cash under new rules which has become effective in April, blocked by companies’ lack of readiness for the this change. Investigation published in recent Daily Mail conveyed that people have been charged for withdrawals or for changing to rival companies.

To add further to the problem they are also made to wait longer for their pay-outs, in some cases to around three months. Some others state that they have been forced to pay for financial advice up to £1,000 if they say they want their own money. Pension companies in the first month of the alterations, had to handle unprecedented 1.13 million phone calls from individuals intending to take advantage of the new freedom which was an 80% increase in the usual activity leaving several with the inability in coping with the demand.

Besides this, many were caught by the speed of the introduction of the improved rules together with the uncertainties on various aspects of the freedoms leaving them unprepared in dealing with the requests.

New Rule – Individuals Aged 55 Onwards – Distinct Contribution Pension Withdrawal

The head of pension research at Hargreaves, Lansdown, Tom McPhail commented that `given the speed with which the reforms were introduced, it was always likely that some companies would struggle to be ready in time. Investors with these companies should be given the freedom to transfer their money elsewhere without having unnecessary barriers put in their way’.

He further stated that it would be unacceptable for some of the firms in charging people or put barriers to stop them in making use of the new freedoms. He said, `insisting that investors pay hefty exit penalties, use a financial adviser that some may not need or jump through bureaucratic hoops is simply not reasonable or fair’.

The new rule enables individuals aged 55 and above, with a distinct contribution pension for withdrawal if they intend to, though there are massive tax implication if they intend taking it in one go, in other words it is wise for people to get advice before rushing to get hold of their cash. FCA spokeswoman informed that they were monitoring how the firms would be implementing the changes and how it would impact consumers.

Reform Purpose – More Control on Money

Most of the people have been capable of taking advantage of the new rules without much problem thought they were talking to those firms where the problems have come up as the reforms bed in. It is in the interest of everyone to make a note that consumers utilise the new options available to them with confidence. Recently David Cameron indicated that he would be keeping a `careful eye’, on the treatment of companies to pension savers, on receiving rising complaints that the customers have been denied the new freedoms.

He informed that the purpose of the reforms was to give people more control on their money and not to have a new way to charge them and that the need for great transparency in pensions industry is essential. Pensions giant Friends Life, which is now part of Aviva, was forced to apologise recently, to around 1,300 savers who had asked to withdraw an amount of their cash and had informed them that it could not offer them this choice. On the contrary, the savers were told that they could cash in the whole amount which would leave them with a huge tax bill and use the fund to buy an annuity or transfer their money to another company. Friends Life had stated that they would be offering partial withdrawals in due time

India's May Month Iran Oil Imports Hit Highest Since March 2014

India’s Import – Increased to Highest Level – May 2014

Last month, India’s imports of Iranian crude oil increased to its highest level since May 2014 as the refiners enhanced the purchase ahead of a final push by the international negotiator in order to reach a deal on Tehran’s doubtful nuclear program by the end of June.

The increase to a 14 month high just two months after India, dropped its import on crude from Iran to zero under the pressure of U.S. to limit the purchases of the Islamic republics’ oil.For the first time, India did not take any Iranian oil, in at least a decade in March this year. Several analysts state that the United States, Tehran, Britain, China, France, Germany and Russia would be reaching an agreement by or littler later after June 30 deadline for a deal, though the sanctions which have cut Iran’s oil exports to less than half of pre-2012 levels are probably not likely to be lifted till next year.

United States along with its five partners have approved a way of restoring U.N. sanctions on Iran should the country tend to break the terms of any future nuclear deal, clearing a major problem of an agreement ahead of the deadline, though there are several other issues that need to be resolved.

India – World’s Fourth Biggest Oil Consumer

India, being the world’s fourth biggest oil consumer and Tehran’s top consumer after China, had shipped in about 367,900 barrels per day-bpd in nine vessels of Iranian crude in May, up 39% over April, as per preliminary data from trade sources as well as a report compiled by Thomson Reuter Oil Research and Forecasts. The data also indicated that the May imports surged by two-thirds from last year.

Between January to May, India had taken 203,100 bpd from Iran which is about 33% less oil than in the same period of last year, since the nations’ refiners had cut imports in the first quarter. This was to maintain the overall imports from the OPEC producers to a 2013/14 level of around 220,000 bpd. Private refiner Essar Oil was the biggest Indian client of Iran in 2014 which was followed by Mangalore Refinery and Petrochemicals Ltd and India Oil Corp.

Iran – Nuclear Programme – Peaceful/Rejects Accusations

The data also indicated Iran’s biggest Indian client in May which was Mangalore Refinery and Petrochemical Ltd – MRPL.NS that shipped in around 207,400 bpd from Iran. Purchases had been stepped up in May ahead of a three month shutdown by MRPL, during the coming monsoon season of a one point mooring site which enabled it to import oil in large crude carrier, according to a source.

The data also revealed that Indian Oil Corp. – IOC.NS, the country’s largest refiner, received around a million barrels of Iranian oil in May. The data also showed that India’s Iran oil imports surged by 43% to 316,800 bpd, in the first two months of the fiscal year being in April.

According to Iran, it states that its nuclear programme tends to be peaceful and rejects accusations from the Western countries that it wants the possibilities in producing atomic weapons. The data indicated that Iran was the seventh biggest oil supplier to India in 2014 and its share in the overall purchases rose to 7.3% last year when compared with 5.1% in 2013.

Money - Oil Prices Drop on Dollar, Oversupply

Oil Prices down – 3%

Oil price fell by nearly 3 percent recently as traders as well as investors disregarded a fifth straight weekly decline in U.S. crude stock piles and instead focused on big build in distillates which included diesel since the peak season for U.S. road travel gets under way. Core Gulf members of the Organization of the Petroleum Exporting Countries that pumps over a third of the world’s oil intend to have a consensus in maintaining the group’s oil output at the meeting held on Friday.

According to a senior Gulf OPEC sources has informed to Reuters. OPEC delegates informed Reuters in Vienna that `there is consensus among Gulf OPEC countries and others, to keep the –production, ceiling unchanged. Nobody wants to rock the boat.

The meeting is expected to be smooth sailing’. Dollar had gained about 0.4% against a few other currencies since the euro slipped, thus making fuel much more expensive to other currencies holder. Benchmark Brent crude oil for the month of July dropped $1.75 to a low of $63.74 prior to recovering a bit to around $63.90, down to about 2.5%, by 1010 GMT U.S. crude was $1.40 or 2.25% for $59.86 a barrel.

Analyst Gene McGillian – Market Down After Pairing Losses 

Brent had collapsed last year to almost $45 for a barrel in January from $115 last June pressing several oil producers in countries outside OPEC which included U.S. shale drillers as well. OPEC which pumps over a third of the world’s oil is likely to reject any calls for output cuts intending to produce around 2 million barrels per day beyond demand.

Crude stocks at Cushing, Oklahoma, delivery hub for U.S. oil fell also together with gasoline stocks. However distillate stockpiles including diesel and heating oil rose by 3.8 million barrels, which is four times the 1.1 million barrel build prediction.

According to analyst Gene McGillian of Tradition energy in Stamford, Connecticut, comments, `that he thinks the market came back down after pairing losses at first is telling of the sentiment that people don’t really think this is a very bullish report’. He is of the belief that consistent draws for gasoline and distillates would be an indication of demand. He added. `If not with refinery runs of above 93%, we could end up with a glut of refined products in storage rather than crude now’.

Future Seems Positive

Carsten Fritsch, analyst of Frankfurt based Commerzbank tends to agree stating that `a market that does not rally on falling inventories and a slumping U.S. dollar looks vulnerable to the downside’. Ali al-Naimi. Saudi Arabian Oil Minister stated in a conference organised by OPEC in Vienna recently that the group was `currently meeting global demand and does not see this changing.

In terms of the long-term energy outlook, the future looks very positive’, he added. OPEC, by pumping 2 million barrels per day which is more than needed is helping in filling oil inventories across the world and is keeping the price of oil for delivery now at a discount for future prices.

Some of the analysts are of the opinion that there seems to be a chance OPEC could increase its target on production soon. Barclay is said to have stated in a preview note of a recent meeting that `with heightened geopolitical risk threatening oil supplies in the Middle East and North Africa, it is highly unlikely that OPEC will reduce the quote, but an increase is possible’.

Does the Euro Have A Future

Debt Crisis – Important Failings in Design of Eurozone

Debt crisis in Europe had indicated the important failings in the design of Eurozone and predictions stating that the growth would be returning have not done much to inspire confidence according to Emma Alberici. Top economists and politicians besides Former Chancellors Alistair Darling, Nigel Lawson and Norman Lamont convey that the Eurozone cannot survive in its current form.

 During the interviews and articles for The Independent today, they were questioned on their short-term as well as long term prediction for the future of the euro. Though several are of the opinion that the Eurozone could be surviving the current Greek debt crisis particularly, if the political will invest in preventing disorderly default, none are confident that it would stay on.

They are of the belief that the new European Fiscal Compact that has been agreed in principle recently is unmanageable since it would take key financial powers from the national government as well as their electorates. Several of the economists and the politicians have disapproved the rush to strictness imposed on Italy and Greece recommending that it would be counter-productive by depressing growth and competitive imbalances among Eurozone members would be difficult to overcome. They had recommended that the ultimate consequence of the crisis would be quite a smaller Eurozone with Germany at the centre and countries like Greece, Italy, Ireland and Portugal on the external.

ECB Dropped Official Interest

As per Budget Papers `recent policy action in Europe has meant that some of the worst crisis risks have abated since the end of 2012 and global conditions are expected to gradually improve’. It is now over a year since Mario Draghi, European Central Bank President, had been credited with saving Europe by informing financial markets that he would do `whatever it would take’, to save the euro, which scarcely counts as `policy action’ and Mario’s subsequent move are still to yield any apparent success.

ECB had dropped official interests to 0.5 percent for the Eurozone and the Central Bank also had indicated that it was `technically ready’, to cut the deposit rate from the prevailing zero percent to negative territory. It would need the ECB to charge banks for safeguarding the money which would make it smart for the banks to extend credit to household as well as businesses instead of holding their money in Frankfurt, which is at the ECB headquarters.

Lower interest rate do not boost growth as they did early since people in Europe and Australia tend to be extra cautious when it comes to borrowing. With unemployment in the Eurozone, having a record of 12.1 percent, smaller numbers of people tend to have the capacity of repaying the loans they may have.

Severity – An Anti-Growth Approach 

All over Europe, severity has been considered as an anti-growth approach though no reliable alternative has come up to bring back life in the 17 countries that tend to share a currency. Vice president of the European Commission responsible for the euro, Olli Rehn, sounded the only strong note of optimism and predicted that the currency would emerge stronger from the crisis.

He stated that they would be undertaking nothing less than an economic reformation of Europe and step by step, they would be creating financial stability and the conditions for sustainable growth and job creation. However Mr Darling commented that he does not thing anyone could realistically say the Eurozone would survive with its present membership and the longer the inaction goes on, the greater the chance that one or more countries would be forced out.

Eurozone not About to Collapse but Survive …..?

Professor of Economics, Dartmouth College, Danny Blanchflower, commented that `the fundamental problem which has not been addressed is that there is no growth plan for Greece and even if a new loan is given to them, they will have no means of paying it back. The markets seem to have been priced in an orderly default.

The problem lies in a disorderly default which means default and exit for Greece. There seems to be moments to play out at the final hour though two and a half years down, he has little confidence that there would be an orderly way out’.Professor of Economics, New York University, Nouriel Roubini states his opinion that `the Eurozone is a slow motion train wreck.

 Not only Greece, other countries too are bankrupt. There is a 50% probability that over the next three to five years, the Eurozone will break up. Not all the members are able to stay. Greece and probably Portugal may exit the Eurozone, Greece within the next 12 months while Portugal would take a while longer.

According to Jim O’Neil, Chairman of Goldman Sachs Asset Management, Former head of global economic research at the bank states that `the reality is that too many countries joined the euro in the first place and ultimately without dramatic change, they can’t probably survive. According to some the Eurozone is not about to collapse but whether it could be constant over the long term is not known.

When is the Best Time to Buy Foreign Currency

Being Smart Essential – Buy Foreign Currency

Bob Atkinson of TravelSupermarket advises that one could save a tenner for every £100 one tends to spend abroad, by being smart. He states a traveller should `plan what one is going to do and how they are going to spend overseas though not any plastic. Look for credit and debit card which are designed for usage overseas.

The market-leading deals like the Halifax Clarity credit card and Norwich & Peterborough debit card, have no hidden currency loading fees or transaction fees. If one tends to spent for instance 600 euros on one of these cards they tend to actually spend about £470 based on the prevailing rates.

On comparing it to the worst option which is to rock up at an airport and actually buy euros without pre-ordering, they endup spending about £515 on the present day’s rate at some place like Heathrow’. He further adds `that’s a difference of around 10% which means it’s effectively like throwing away £10 for every £100 spent on holiday’.While purchasing holiday cash, most of the people leave it till the last moment and tend to completely ignore it at times till they arrive at the airport.

Commodity loaded with Poor Exchange Rate/High Transaction Fees

Several travellers generally pay more than the going rate for their holiday cash hence some advance planning could help them in avoiding poor exchange rates or exorbitant transaction fees. Most of them tend to leave this job at the last minute resulting in paying extra pounds or more.

Just as one would check for the best deals on hotels and flights, they should also do the same when it comes to purchasing foreign currency which is a commodity that is often loaded with poor exchange rate combined with high transaction fees. Individuals should avoid buying the holiday cash at the airport since it is the most expensive place to purchase the spending money and the rates are extremely bad since the providers have a captive audience.

The main issue is `time’ and one should be wise in thinking about currency much in advance prior to leaving for the holiday. The first step to be taken is to look at the exchange rates which would help in maximising how much local currency one would get from the exchange.

Euro, the single currency, till recently has maintained its strength and customers are recommended to purchase their euros when the pound could make gains against the single currency. In the meantime, sterling has performed more positively against the single currency and holidaymakers need not rush and buy euros now.

Knowledge on Value of Currencies

On the contrary, if one is heading out to the United States, one could be wise in purchasing dollars sooner instead of later since at the moment the pound tends to perform well against the dollar though the same is not expected to last. Gaining knowledge on the value of currencies one could be looking to purchase, could save them of money in the long run.

The only way to know if one is getting the best exchange rate is to be knowledgeable on what the currency rate is. Prior to the trip, one needs to check on currency converter to have an idea of what exchange rate to expect. If undertaking a prolonged trip, check on the rate periodically to remain updated of any major changes.

According to Alistair Cotton, corporate dealer at currenciesdirect.com states that `now is a very good time to be buying US dollars. We are still on multi-year highs and businesses and people travelling abroad this year should be taking advantage at these levels’.

Fastest/Simplest Method - Online

Lucy Lillicrap of AFEX comments `current levels provide an excellent opportunity to buy the dollar at rates rarely seen since before the financial crisis’. Jeremy Cook, chief economist at worldfirst.com on the other hand states that he `thinks that the US dollar will progress through the year as one of the best performing currencies in the G10 space as the economy continues to rebound.

The Federal Reserve is much like the Bank of England, trying to remain vague on when interest rate rises will come but a stronger economy, fuelled by strong domestic industry and receding fiscal drag will increase the pressure on Federal Reserve chair Janet Yellen to normalise policy sooner rather than later’.

According to Josh Ferry Woodard of TorFX, he states that `in the light of Fed chair Janet Yellen’s suggestion earlier that the interest rates could be raised in the USA by April next year, it is possible that the US dollar is the one currency that the pound may struggle to stay afloat against.

For this reason, it is a very good time to buy US dollars; the pound-to-dollar exchange rate may not reach levels this high for a long time’. The fastest and the simplest method to buy currency is online, on the internet where it would be easy to compare rates and one could also get a much better deal.

Beware Credit Card Firms’ Odious Tricks

Credit Card Companies – Reduced Rewards/Cash-backs

Starting a new business and making arrangements for the fund could at times come from friends or family or even a small business loan from the lender or financial institute. However, when these options seem to be unavailable, one could turn to credit card in availing the funds for a small business.

Credit card is not an invitation to spend money one does not own but the consumer needs to be cautious in using the credit card wisely. Several of the consumers do not take the trouble in reading the card statement carefully that would make them cautious of all the small charges which are imposed by the card company.

It means that a credit card is an easy packaged though a terribly priced personal loan which has the utilities but the charges seems to outweigh the benefits. Since updated EU clampdown on charges has been hitting on the profits, Credit card companies have reduced their rewards and cash-backs. Peter Jackson of Stockport speculates on the rewards that these credit card companies tend to hand out to consumers in a way to confuse them on how much they actually pay to use them.

Companies – Hidden Charges

Jackson writes that `any perks that individuals tend to receive have been paid for, by themselves without their knowledge. What makes matter worse is the fact that because everyone pays the same prices in the vast majority of retail outlets, anyone without a cash-back deal is subsidizing the customers who do’.

 He further goes on the same point with regards to current accounts stating that `this has been going on for years in the form of free banking. Banks give free bank accounts and then make their profits from people going overdrawn’.

In all honesty, he could have made the same point about mortgages, energy bills or mobile phone charges and people with the time and energy seeking out the best deals tends to do well. Others get penalised through higher charges or fewer discounts. Jacksons continues that `instead of charging a fair price for a fair service, companies tend to put all their efforts in hiding charges.

Introductory Deals of Zero Percent – Odious Deceits

It ends up with the poor and financially illiterate supporting the well-off. Why is there no open and honest charge, without all the cross-subsidizing?’ he asks. He states that it is a fair enough question and the one which he constantly puts forth to financial institutes over the years.

There are few notable exceptions most of whom are too frightened of losing business should refrain from competing with the same marketing tricks which their rivals tend to have. The introductory deals of zero percent which credit cards tend to offer are one of the most odious deceits, since people get affected by huge balance transfer fees together with high charges towards the end of the term.

 The faster these tricks or deceits are barred, the better. Consumers should bear these facts in mind and be wary while using the credit cards and avoid the traps the card companies and banks utilise to entice consumers getting them to pay all kinds of penalties and fees.

How to Maximize Credit Card Rewards

Credit Card Rewards – Perks of Rewards Program

According to a 2011 research from Colloquy and Swift Exchange, the average household active in rewards program do not redeem a third of the rewards they tend to earn every year which could include credit card rewards. John Ulzheimer, president of consumer education at Smart Credit.com comments that `there are a slew of people out there that has cards with points on all of them and they don’t even realize it’.

 The idea of receiving rewards credit card is to give the person the perks of the rewards program and the best way to ensure that one gets the most out of the rewards credit card is to use the right one and make sure it is paid off each month.

It could be used to the greatest advantage while also being aware of the possible pitfalls like leaving points on the table. The first problem is to ensure that the credit card and rewards program chosen matches the individual’s financial lifestyle.

 If the person travels a lot during free time, then a hotel or airline card could suit the individual while a gas credit card could be best for a road warrior. Those who would prefer an uncomplicated reward system could opt for cash-back credit cards, according to vice-president, Amy Lenander, of rewards programs at Capital One.

Cash Rewards Easy & Straightforward

She states that `cash rewards tend to be easy and straightforward as rewards can develop. Customers who prefer miles and points could save up for a big reward and dream up the possibility, whereas the cash-back customers tend to be more practical’.

Besides this, several cash back cards are provided with various ways of redeeming rewards like in the form of cheques, statement credits, charity donation or gift cards while others tend to automatically deposit the rewards directly in the bank account. It is essential to read the terms and conditions since not all cards are created equal even if they offer a similar form of reward program.

There are various forms of credit cards wherein some may require spending threshold prior to earning rewards while others cap the amount of rewards that is earned. Users should also be aware of blackout dates in redeeming travel rewards or the expiration date on points. Linda Sherry, director of national priorities at watchdog group Consumer Action also informs that these rewards programs are subject to change at any point of time.

Some Advanced Planning

Cash back cards could also involve some advanced planning and while most cards provide one percent to two percent cash back there could also be certain restrictions or requirements. These could include caps on spending in various categories or more rewards on purchases on gas, groceries or dining. Other cash back rewards programs could be even more difficult, with rotating categories needing quarterly registrations.

According to Bill McCracken, CEO of Synergistics Research in Atlanta, states that in some cases, consumers tend to pick the spending category and receive the rewards or the rewards are given to the highest spending category. This could mean more observing by the consumer in taking full advantage of their credit card.

Consumers should be alert for opportunities to double or triple their reward earning power. Lisa Hronek, senior analyst at Mintel Comperemedia informs that several issuers tend to offer an increased cash back return rate each quarter for certain categories usually the ones that go according to the season.

Equity Systematic Investment Plan - SIP

Stocks with good fundamentals are known to be some of the best ways of investment plans and investment in equity stocks has reaped phenomenal returns amongst various other assets if the same has been done in an organized manner with long time horizon. It is very important to select stocks and the right decision of the right price to enter in equity investment where most of the investors often tend to commit errors.

Equity Systematic Investment Plan or SIP is an instrument that tends to help an individual in avoiding the risk of timing the markets and enable wealth development in an organised or disciplined manner by averaging the cost of investments. Saving which tend to be small could create the big corpus in the long run. SIP enables the individual in building a portfolio on a longer time basis with small investment that are done at regular intervals thus reducing the danger of market volatility.

Individuals have the option of choosing between Quantity based and Amount based SIPs, in Mutual Funds, Stocks, ETFs as well as Gold. Quantity based SIP is a type where a fixed amount of quantity of shares of a desired company is purchased at a predefined frequency while Amount based SIP is a fixed amount which can be decided by the individual intending to invest in selected share at predefined frequency.

Disciplined & Long Term Time Horizon

The formula for calculating Quantity is SIP Amount/Market price of the said share. Fractional value is ignored and the order is placed for the remaining quantity. In the case of Quantity based SIP the quantity which is to be purchased is specified by the individual and is fixed at the time of placement of order according to the desired frequency.

The order value is then calculated depending on the usual market price of the scrip while execution of the order. In order to have a long term wealth development through the equity market, it is essential to have a disciplined and long term time horizon that have integral features of SIP. The following features would make an appropriate choice for equity market –

• Disciplined and simple approach to investment
• Based on concept of Rupee Cost Averaging
• Investment possible with small sum of money invested recurrently to mount up wealth
• Flexible intervals like Daily/Weekly/Fortnightly/Monthly basis
• Flexibility with regards to Amount or Quantity based SIP

Avoid Majorly in Aggressive Funds

While investing in equity funds through SIP, though one will gain the rupee cost averaging benefits at the time of the volatile market phase, one should also avoid investing majorly in aggressive funds such as sector, thematic and mid-cap funds. One cannot guarantee better returns in excessive aggression.

On the contrary it could make your portfolio risky and probably disrupting the life stage with regards to investment goals. However, with mid-caps as a section of the portfolio, majority of it could comprise on large cap funds. Individuals often tend to start SIPs without a second thought on the amount they intend to invest comfortably. Often they try to make up for the lost time and then find it difficult to continue with their SIPs after a period of time.

This results in a stop of their investment and their long term life stage goals. Hence with systematic investment plans one should start conventionally and increase their investment amount gradually over a period of time ensuring stability.

3 Valuable Lessons from the NASDAQ Bubble

The NASDAQ Bubble

Looking back, one can recall that the big capitalization technology stocks which controlled the NASDAQwere wildly overrated by out-dated measures. The Wall Street Journal had published on March 14, 2000, a prominent article - `Big Cap Tech Stocks are a Sucker Bet’. This article was contributedby the Wharton School finance professor and fellow Kiplinger’s columnist, Jeremy Siegel. He was of the opinion that `several investors of present time are undisturbed by history and by the failure of any large cap stock ever to justify, by its subsequent record, a (price-earnings) ratio anywhere near 100’. 

 

Bubble is a change and the nature of bubbles is that no one can predict when they could pop. If Nasdaq seemed to be overvalued in 2000, it was also overvalued in 1999 as well as 1998 and 1997. This resulted in investors rushing to buy stocks in late 1990s with the intention of not missing out on profits which their colleagues would be making. Most of the buyers overloaded their portfolios with big cap tech stocks with the belief that they could later sell to make a profit.


Education from the NASDAQ Bubble

Three of the most valuable education from NASDAQ bubble -

• Diversification - The main lesson from Nasdaq COMP, -0.63% bubble was diversification. Having ones’ savings in one high beta sector of financial markets would give rise to substantial risk of long lasting loss. Though the NASDAQ took fifteen years to break, an investor owning a 60%/40%stock/bond portfolio beginning on March 1, 2000 was at risk for less than four years. Besides, while NASDAQ was scrabbling its way back to break even, one generated an annualized return of 5.5% though not bad at buying while it was at its peak
• Price compression creates tail risk–Investors get involved in years’ worth of future returns into a very short time period. If the underlying entity does not give the actual value which it was priced in, this would give rise to disequilibrium. In other words, you would get investors who priced in high growth that does not seem to be profitable. When understanding dawns, the price decompresses and the bigger the compression, bigger is the decompression. As the Nasdaq bubble tend to get expanded, investors were looking forward to gain profits of the Internet, pricing in years’ worth of profits in a very short span of time. This means that they priced in a 15 years value of profit in a few years. When one fails to diversify accurately, one could be exposed to their savings being at risk. They should allocate their savings accurately to avoid being exposed to huge risk to their portfolio.
• Avoid chasing the next hot thing for maximizing returns –If one intending in maximising the primary source of income and allocating some of the income in, with the intention of planning for the future, proper allocation of saving is essential. The purpose of savings is not actual return maximization; on the contrary, return maximization within the boundaries of suitable risk taking. If one is a real saver on the lookout for stability, then the main portfolio goal is not simply a protection against purchasing power loss but the risk of long lasting loss. This means that it could be probably unwise to overweight the portfolio in favour of purchasing power protection.

Conclusion 

Most of the investors unfortunately turn to the stock market as a place where they could raise their profit and improve their financial status. In their eagerness to reach high, the risk factor is often overlook and sometimes ends in disaster. Caution needs to be exercised in every plan of investment to earn the fruits of a good labour.

Impact of New Money Market Rules

Securities & Exchange Commission – Passed New Rules 

When money became a product, the money market became an element for the financial market for possessions for the purpose of lending, in short term borrowing, buying and selling with original maturities for a year or less and trading in money market could be done over the counter.

Securities and Exchange Commission – SEC had passed some new rules which governed money market fund in mid-2014 and these rules were designed to contest the probable problems on liquidity if the economy would envisage a financial meltdown like the 2008-2009. Usually the money market fund is where several investors tend to invest their funds and the shares of the funds have a constant $1 per share value and there was instant liquidity.

 According to the new rules there is some change to these attributes for some money market funds. Some money market funds will be having floating net asset value – NAV when the new rules are applicable and these funds will not be priced at the prevailing $1 per share. This is turn will have an impact on the institutional municipal money market funds as well as institutional prime/general purpose money funds only while retail money market funds will not be affected by this rule.

Two Kinds of Liquidity Fee

The new rule is for two kinds of liquidity fee which could levy rigid fees on redemptions especially those conventionally low return vehicles and if the weekly liquid assets of money market funds tend to fall below 30% of the total fund’s assets, the board of directors connected with the funds could impose a 2% fee on redemption of funds.

Should the money market fund’s weekly liquid resources tend to fall below 10% of the total assets of the fund, then the redemptions could be subject to a 1% redemption fee if the board of directors vote otherwise. This new rule is then applicable to both the institutional as well as retail municipal and prime/general purpose money market funds.

If the money market fund’s liquid assets fall below 30% on the whole assets, the funds’ board of directors are permitted to vote on whether to restrict all fund redemption for 10 days and agreed that money market funds could be used for their low investment risk and liquidity, the burden of redemption could be difficult for several investors.

Vanguard’s Ultra Short Term Bond Fund 

After the announcement of the new rules, some new short term bond mutual funds have come up which include Vanguard’s Ultra Short-Term Bond Fund – VUBFX, but according to Vanguard, the launch was not connected to new money market fund rules. Higher yield than money market funds are offered in short term bond funds though they also have additional market risk depending on their underlying holdings.

The average ultra-short term bond funds, according to Morningstar Inc. – MORN, lost 7.89% in 2008 and financial advisors could be wise in reminding clients intending to seek more yields on the potential risks of presuming that these funds could be a substitute for money market funds. In an effort in preventing a collapse of financial system in case of another economic meltdown, as the financial crisis which occurred in 2008-2009, the SEC have approved several changes in the rules that govern money market funds.

While some will have redemption fees levied on shareholders in some cases and others will see their NAV enabled to fluctuate from the traditional stable $1 per share, these changes will compel investors as well as financial advisors to reconsider how to use the money market funds while at the same time look for other alternatives.

Global Crisis – Threat for Several Financial Institutions

Global crisis had created a threat for several financial institutions during the last few years. A pioneering peer to peer foreign exchange – FX, fintech startup - Kantox which is a platform for businesses, grew 250% in 2014 achieving its biggest transaction earlier, when one of its clients transferred US$29 million through the online platform. What could have been the secret of its success inspite of the uncertainty of global economic?

While the import-export businesses lost faith on traditional banks, Kantox provided an alternative solution in managing foreign exchange risks via a business model which was based on transparency. While businesses were on the lookout for no-banking solutions, this fintech startup became a feasible alternative as an online managing platform as well as a way to reduce costs, making the procedure an easier one.

As per the Co-founder and CEO, Philippe Gelis, the foreign exchange market had a setback from several transparency issues and was in need of urgent restructure. Gelis together with his partner Antonio Rami worked as a team as consultants in Deloitte and planned to develop an alternate option.

Kantox – Tools to Manage Currency Exchanges

Gelis had commented that `the aim was to be trusted as a competitive and transparent platform by financial directors and they wanted to provide them a different option’. The tools were provided by Kantox for the clients to enable them with improvements in managing their currency exchanges as well as consulting services from professionals.

Kantox presently transfer funds to 1,000 clients all across 18 countries in over 25 currencies. Gelis explains that `at the moment, growth is their goal and knowing now the needs of the clients, they have a clearer idea of the market and how to differentiate from their competitors’.

Gelis finds it important to be ambitious and a race for growing up. He states that `when one is immersed in business, they have the feeling that the developing process is long and one would want to grow faster though the process needs time’. Though the fintech space is still in its early development, there are several potential clients for new fintech startup and new business options like Kantox who are striving to compete with banks in foreign currency exchange.

Driving Down Cost/Administration Time

Kantox originated out of the idea of dis-intermediating banks as well as brokers from the foreign exchange procedures, driving down cost and administration time for companies and according to Gelis, instead of trading via a bank or broker, with this fintech startup, two trusted companies tend to trade with each other directly with transparency.

His challenge is to reach 20 percent of the market share in the next ten or twenty years and that `the fintech sector has been changing fast with new business solutions to be included in the whole updated structure. He further states that they are educating the market on these new solutions where the sector is monopolized by banks who own 99 percent of the market and their business model is quite a new alternative.

He adds that the global crisis largely affected the fintech sector and that they believe it was time to change the finance industry introducing the transparency, fairness and efficiency. These changes could come up though it would have a profound positive consequence on the global finance industry as well as economy and technological innovation is and will continue to be the vehicle for this change.

Gold Snaps Seven-Day Rally

Gold Dropped – Investors opt for Uncertain Equity Assets

Gold dropped on Friday as investors opted for the uncertain equity assets after some mixed economic data from U.S and the fluctuating dollar. However, gold future gained 1% for the week and the favourite metal continued making strong gains because of its appeal for the past two days even though global equity markets seemed low amidst the confusion in Yemen.

Earlier gold rallied after officials from Federal Reserve officials’ commented that U.S interest rates would stay at zero for some time till September. In the meantime, focus of the investors was on the comments from the Fed Chief Janet Yellen who planned to address the Federal Reserve Bank of San Francisco Conference and would be delivering a note entitled, `The New Normal for Monetary Policy,’ before the close of markets.

Ms Yellen’s speech is planned at 7.45 pm GMT where traders would be listening for some indication on when the Fed would start tightening monetary policy. According to Senior Manager Ole Hansen of Saxo Bank, he states that `Yellen has been accused of being too dovish and probably she wants to react by making her speech sound a little less dovish’.

Adjustment from Ultra-Loss Monetary Policy

The Presidents of the St. Louis Fed and Atlanta Fed, at separate events on Thursday said an adjustment away from ultra-loose monetary policy would be needed due to US economy’s improvement since 2007-09 financial crises. By 3.24 pm GMT, spot gold has eased 0.5% to $1,197.70 an ounce and the metal increased to 2% on Thursday to its highest since March 2 at $1,219.40 due to reaction to tensions in the Middle East.

The gold futures of US fell from $7.90 to $1,196.70 an ounce for April delivery. On Wednesday, Saudi Arabia and its associates had launched air strikes in Yemen rattling broader markets and backing gold which is usually seen as an assurance against any risk. Julius Baer, head of commodity research Norbert Ruecker commented that `Geopolitics has never been something which could set a trend in gold prices; it only causes a short term deviation from the existing trend’.

Inspite of the Friday’s losses, gold was back on track to finish the week up at 1.3% after its seven day rally and the metal’s longest winning stretch since August 2012.

Holdings Dropped by 6 Tonnes

Gold showed gains after the Fed signalled caution at its policy meeting last week on the pace of interest rate increase prompting the dollar to drop from multiyear high and a violent rate rise path could affect the demand for gold which is a non-interest paying asset.Caution by the investor was obvious as SPDR Gold Trust, which is the world’s largest gold backed exchange traded fund, post outflows continued and holdings dropped nearly by 6 tonnes on Thursday to 737.24 tonnes which was the lowest since January.

As physical demand all over Asia slowed down, the long rally in prices discouraged most of the buyers. Palladium had lost by 3% to a two month decrease of $743.47 an ounce and platinum was low by 1.2% at $1,139.99 an ounce while silver dropped by 0.6% to $16.97 an ounce.

China-Backed AIIB Investment Bank

Australia/Netherlands/Russia Joined AIIB

Australia, Netherlands and Russia, became the latest three countries who have joined the China led Asian Infrastructure Investment Bank – AIIB adding power to an institution which is seen as enhancing China’s regional as well as global influence. Taiwan will also be submitting an application to join the Beijing led Asian Infrastructure Investment Bank in spite of historical hostility and absence of formal diplomatic relation between them.

In a recent revealed statement, Charles Chen, Taiwan presidential office spokesman informed that joining the AIIB would help Taiwan in its efforts at regional economic amalgamation as well as raise the possibility of linking other multinational bodies. It is unclear whether Beijing would be accepting Taiwan’s application in joining the AIIB.

The bank is envisaged as a significant obstacle to U.S. efforts, in extending its influence in the Asia-Pacific region and also in balancing the growing financial influence and assertiveness of China. Several countries inclusive of United State fail to recognize Taiwan due to pressure from China. Taiwan does not seem to be a member of the United Nations, the World Bank or the International Monetary Fund.

Several Countries to Join 

The AIIB seen as a challenge to the prevailing institutions, the World Bank and Asian Development Bank, has drawn a reply from the United State even though European U.S. Supporters whichinclude Britain, France, Germany and Italy had earlier announced that they would join the bank.

Turkey and South Korea have also informed that they too would be joining in while Brazil, one of China’s top trading partner informed that it would sign up and that there were no conditions set. The office of President DilmaRousseff mentioned in a statement that `Brazil is very interested in participating in this initiative’.

Igor Shuvalov, Russian First Deputy Prime Minister, according to an official Xinhua news agency, stated recently at a forum in Boao on the southern Chinese island of Hainan, that the country plans to join AIIB. At the same forum, according to Xinhua, Mathias Cormann, Australian Finance Minister informed that the country was planning to apply as a founder member which was later confirmed on the news agency that Georgia had also made an application.

Deadline Set for Joining as Founding Member - AIIB

Britain and Switzerland had been formally accepted as founding members of the AIIB, a day after Brazil had accepted China’s invitation to join in, according to China’s Finance Ministry. It also informed that Austria also had applied to join and had submitted their documents to China.

Taiwan’s statement has reported that China had set Tuesday as a deadline in becoming a founding member of the AIIB, encouraging a rush of nations which includes Russia, Australia, Denmark and Netherlands to indicate their intentions to join. In all 42 countries have applied.

The United States has advised the countries to think carefully about joining the AIIB till it shows adequate standards of governance as well as environmental and social safeguards. China sees Taiwan as a rebel province and has not ruled out the use of forces in bringing it under its control. Since Taiwan’s present president Ma Ying-jeou took charge in 2008, the enmity had deteriorated considerably and the two parties have signed several deals of trade and investment.

Credit Cards

Credit Card – A form of Borrowing

Credit card is one form of borrowing which involves some charges and its terms and condition could affect the overall cost. It is advisable to do some research on the terms and the fees before any agreement to open a credit or a charge card account.

 Being unaware of the terms and their charges could leave the user disappointed when faced with the overall cost they may encounter. At times shopping with the credit card could save you money on interest and fees. Issuers of credit card tend to have wide scope in charging interest though they should brief the customers on the interest rate. It is also essential for the customer to read the fine print in the original credit card agreement as well as in any supplemental copy.

As per the federal law, interest rate tends to increase on existing balances under some conditions like when a promotional rate may end and there is a variable rate or when the cardholder tends to make a late payment. The interest rate on new transaction may also increase but after the first year. If the customer is faced with an issue regarding the credit card, they should first try resolving the same directly with store or the credit card company or the financial institution.

Consumer Financial Protection Bureau

If the matter is not resolved, they could file a complaint with the Consumer Financial Protection Bureau – CFPB which presently accepts complaints with regards to credit card issues and take them up either through phone or through their site at https://help.consumerfinance.gov/app/ask_cc_complaint. For any guidance regarding credit card debt, fees and high interest rates, customers could contact a credit counselling service or debt Management Company who can render the necessary guidance and support. They could also provide practical as well as legal financial advice with regards to the use of credit. Beside this, they could also make attempts on renegotiate the terms of the credit agreements and make arrangement to pay off the debts. One needs to check on the debt management company though all arenot the legitimate ones.

Credit Card Eligibility Calculator

Some of the following credit card eligibility calculator could be helpful to individuals such as:


• Bad Credit – For bad credit scorers- Those who apply for credit card and have been rejected need not go in for the same. They should check on cards that would fit their profile and try to rebuild credit rating by using the top `bad credit’ credit card and ensure to pay in a timely manner
• Interest free spending- 0% Spending – If the need to borrow for a purchase arises, the right choice needs to be taken, credit cards are far cheaper than loans though if misused it could add debts which may be difficult to pay off
• Balance transfers – Cut existing debt costs – Shifting the prevailing credit card or store card debts to new balance transfer card could save much wherein the balance transfers when a credit card could pay off debts on other credit or store cards. Thus one owes the new card though at a lower rate which means they can be debt free much quicker.
• Travel Money – Several cards add 3% cost than the banks to the exchange rates which can be avoided by a specialist card that does not add this percentage and you get a good exchange rate. This could be used for overseas spending though one should bear in mind to repay in full to avoid the additional burden of interest.
• Balance transfers and spending – All-rounders - Most of the banks offer introduction deals to attract new customers with cards that could be either good balance transfer deals or low rates on new spending. All-rounder cards offer cheap intro rates for balance transfers as well as purchases and if a person needs to move debts from an existing expensive card as well as need to use a card for purchase, they could be checked since they cannot damage the credit score with additional applications.
• Cash back – pays when spend – The cash-back credit card tends to pay you each time you make a purchase where top cards tend to pay around 5% introductory cash-back while other offer 3% on fuel and transport spending. Besides these, there is also other good fee free; cash reward cards which are like cash-back cards offered.
• 0% Cash in Bank account – Money Transfer – The money transfer credit card enables the customer to pay money from their new credit card in the current account with a small fee wherein they get a long interest free period in repaying the debt. Should the customer fail to repay the same within the given time period, they are charged with a high interest rate.
• Get Air miles while spending – Airline credit cards are an addition of regular flyer programs and one could earn points or miles on spending as well as earn bonus for signing up. The miles earned from spending could be added with those earned from flying or by other credit card reward schemes like converting Tesco Clubcard points.

Bitcoin: Government to Regulate Crypto Currency to Avoid Money Laundering

Bitcoin – Issue of Money Laundering 

Bitcoin can be useful in purchasing thing electronically and its like conventional dollars, yen or euros which are traded digitally and its most important characteristic which makes it different to conventional money is that it is decentralized. There is no single institution that controls the bitcoin network and this puts some of them at ease since it means that a large bank in unable to control their money.

However, money laundering has become a major issue which the British government has been facing and most of the people in the government are of the belief that bitcoin and similar crypto-currencies are used by some to launder money and there is a need to regulate bitcoin exchanges. This kind of measures taken could stop their use as money laundering hubs. The Treasury is of the opinion that bitcoin has capabilities of being used for money laundering and in order to curb the issue, it wants to regulate digital currency exchanges for the very first time, though this would not mean that the government is not in favour of innovation in the nascent technology but the prevention of criminal use of the digital currency.

Anti-Money Laundering Regulation – Digital Currency Exchanges 

The UK government released a document with the combination with the announcement of UK’s 2015 budget stating its intention to apply anti-money laundering regulation to the digital currency exchanges in UK. As per the document it would be creating the right environment for legitimate players in the space to flourish though it would also ensure that a hostile environment for illicit users of digital currencies is developed to discourage the users. As per the Treasury it is reported that the Government will be regulating bitcoin exchange in order to stop its use as money laundering hubs. A report published with George Osborne’s annual budget, the Treasury has informed that the new regulation would be supporting innovation to prevent criminal acts of digital currencies and the proposals would be consulted in the next parliament session. It is said that the government would be working with the British Standards Association – BSI for the development of a set of standards which would be helpful in protecting the consumers.

New Research Initiative on Digital Currency Technology

It was also informed by the Treasury that a new research initiative on digital currency technology would be coming up, which would inject an additional 10 million pounds in the area. According to a board member of the UK Digital Currency Association, Tom Robinson, who has been involved in the Treasury’s consulation procedure that `the announcement is significant, which bring bitcoin and other block chain technologies closer to mainstream adoption’.

In the discussion published in February, Bank of England informed that the digital currencies like bitcoin portrayed considerable promise and it showed that it was possible to transfer value securely without the need of a trusted third party. Other queries were also raised by the bank on whether central banks should issue digital currencies themselves. In several developed countries, bitcoin has been regulated by existing money laundering or terrorist financing laws. Traditional financial sector regulation is not applicable to bitcoin according to European Central Bank since it does not involve traditional financial players while other the EU state that existing rules could be extended to include bitcoin as well as bitcoin companies.

Three Ways To Optimize Your Personal Finance In 2015

These days, more and more people are interested in getting their personal finances in order so that they can lead lives of economic freedom. If this is your agenda, you should note that there are numerous techniques you can implement to accomplish your objective of attaining financial freedom. Here are three simple ways to get started immediately:

1. Learn More About Trading. 

One of the great ways to optimize your personal finances in 2015 is to learn more about trading. As many financial experts know, trading is an incredibly effective way to build some substantive wealth. Unfortunately, many people are intimidated by the thought of trading because they don't have any substantive experience in this sector. If this is a challenge for you, you should note that organizations like the Online Trading Academy can help. This organization was specifically designed to provide education and assistance that will help traders obtain tangible results and improve their skill set within this sector.

2. Develop (And Stick To) A Budget.

Another strategy you should definitely consider implementing in order to optimize your personal finance in 2015 is to develop and stick to a budget. Budgets are critically important because they give you the opportunity to see how much money you're earning as well as how much you're spending on things like bills, clothes, entertainment, food, etc. Unfortunately, many people overlook the importance of developing a budget and therefore have only a vague understanding of what they're making and spending. Don't make this mistake. Instead, sit down and devise a budget that will provide you with a clear understanding of your current financial state. You can then use this information as a springboard to cultivate the type of strong financial future you desire.

3. Eat Out Less. 

As many financial experts know, many people tend to spend a substantive amount of money on eating out. If you're interested in cutting back a bit to really strengthen your personal finances in 2015, it's a good idea to consider eating out less. Instead of going out to expensive restaurants, consider the value of learning how to prepare your favorite meals for yourself. If you enjoy eating out for the social experience, be sure to invite friends over to partake in your great meals!

Conclusion 

If you're looking forward to optimizing your personal finances in 2015, you can get started right now. By using some or all of the financial tips and tricks discussed here, you will likely find yourself attaining the level of economic stability and freedom you've always wanted. Good luck!

Emerging Market Infrastructure

Infrastructure in Emerging Market

On-going rebalancing in global economic power has given rise to unprecedented involvement in investment plans in infrastructure in the emerging markets. Though there are common drivers on infrastructure increase in emerging markets like the requirement of added infrastructure together with goals of sustaining the economic growth and managing the fast growing urbanisation, there is a vast difference in the environment and the challenges faced. While engaging in these opportunities, engineering and construction operations, infrastructure management companies, private materials and financial firms need to consider on –

• Who could be the right local and global infrastructure partners?

• What would be the differences in infrastructure in funding structures?

• How would the bid occur for mega projects?

• Are there any demands for green infrastructure?


For instance, as per PwC and Oxford Economics’ Capital Project and Infrastructure spending outlook to 2025 report, the Asian Pacific market, due to China’s growth is expected to represent around sixty percent by 2025 of the global infrastructure spending while Western Europe’s share is expected to decrease to less than 10% twice as from the last few years back. Infrastructure is defined in various emerging markets with provision to insights on goals, risks and opportunities, challenges that are connected with infrastructure developments in those markets, in PwC’s Emerging Markets Infrastructure Series.

Urbanization – Trend in Emerging Market 

Urbanization is the only trend in the emerging market which means that infrastructure needs to keep up with the pace. As the income tends to rise in several countries, there is a need to indulge in the purchase of cars and roads would tend to be used with the need to have new ones built.

 According to Magee, `in developing markets, private sectors tend to play an important role financially in roads, telecom and power plants and water as well as waste water investment would be critical. Water related companies tend to have a small part of infrastructure universe though are expected to become much more significant going ahead while in Europe, they are in the early stage of transforming power generation from coal. Germany on the other hand needs to make some headway since their nuclear power plant are closing, while China will have to gradually move away from coal incorporating cleaner energy sources from power generation’.

Country Risk/Infrastructure Risk

Emerging markets are about country risk while infrastructure risk is about not taking risk though in the case of infrastructure asset sector, there are provisions of investment and growth and the emerging markets are avenues where there is a great demand for infrastructure capital. Emerging market infrastructure investment does not have to carry the full country risk of the host nation. Sovereign risk is often under the coverage of sovereign risk insurance which is purchased in the commercial market or provided by International Financial Institute – IFI, like the World Bank or any other related global institution.

The net return on sovereign risk after the insurance premiums will exhaust the yield on the credit of the surety provider and when combined with structured project risk, on properly evaded investment, the net return would not probably reach 30% though it could almost reach 20% which according to an asset-based uncorrelated investment could be quite good. Those on the lookout for yield, emerging market infrastructure investment could be part of the solution and for those with global diversification; real assets could be another option to the various listed securities.

Dedicated Card and Payment Crime Unit

DCPCU – Protect Security of Card Payment

The function of UK Cards Association is to protect the security of card payments system with focus on tackling organised criminal activity. In order to accomplish this, the UK Cards Association, funds a specialist policing team known as the Dedicated Card and Payment Crime Unit – DCPCU to identify organised payments fraud. The Dedicated Card and Payment Crime Unit, a special police unit comprises of police officers who have been appointed from the City of London Police as well as the Metropolitan Police Services who operate together with industry fraud investigators.

Their focus lies in identifying and targeting the organised criminal gangs which are responsible in attacking the payment industry. The Unit was established in April 2002 and is fully sponsored by the card and retail banking industries which was created due to the rising growth in payment card crime during 1999 and 2001. From the time of its establishment, the banking industry has been put in an investment of around £4 million per year for the operation of the Unit.

Experts have attributed to the growing incidents of organised crime in the area and the lack of dedicated police investigatory. The main purpose of the DCPCU is to identify, check and seek appropriate prosecution of offenders who have been responsible for organised cheque and payment card crimes.

Organised Criminal Gangs - Targeted

It is headed by a Detective Chief Inspector who brings together the officers as well as civilian staff from the City of London Police and Metropolitan Police forces. Moreover, expertise and payments industry knowledge is also given by industry secondees. Though it is a London based unit, investigations are nationwidewhere the organised criminal gangs responsible for payment related fraud are targeted. Some of its achievement since its formation is –

• Achievement of £450 million in the form of saving from reduce fraud activity equating to £800,000 weekly
• Recovery of around 700,000 counterfeit card
• Recovery of 346,000 compromised card numbers
• Secured 346 convictions on matters related to fraud, which is an average of more than one successful prosecution per fortnight over the past decade.

Areas of Priority 

The impact on a wider perspective is the link to organised and serious crimes. The Unit’s investigation has established that a significant proportion of fraud has been committed by these criminal gangs, having strong links to other kinds of serious crimes, which also includes people, drugs, and trafficking as well as violent crimes. The Unit has also been responsible in providing key fraud prevention messages to the people such as with the help of television and radio work as well as through direct meeting with groups that represent consumers who could be at high risk. The Unit’s priority areas are:

• Project Sandpiper – The Unit secured European Commission funding in 2013 which was funded by UK Cards Association and PFF in order to finance the project focused in tackling Romanian criminality that affected the UK payment industry. This involved connecting with the UK payments industry as well as law enforcement individuals in Romania in tackling its organised criminal groups.
• Staff Insider – Work with banks that sponsored to reduce harm caused by dishonest staff and targeting organised criminal groups.
• Social Engineering – Telephone – To locate criminal groups responsible in fast rising fraud cases who are aiming vulnerable individuals as well as businesses causing great harm to the UK payment industry.

Right of Rescission/Right to Cancel

Image credit:Homeowner today.com

Right to Rescission – A Known Power/Law

A person has the privilege by law, with the right to cancel a mortgage refinance or home equity loan if they tend to act quickly and adhere to the rules. A known power or the law known as the `right to rescission provides the borrower with the ability in some situations, the right to cancel their loan deals within a period of three days with no questions asked and be free.

 In other words it could mean as another way of saying `right to rescind’ or `cancel’a given contract without losing any money. Within a period of 20 days, the lender then has to give up its claim to the property as collateral and should refund the fees which may have been paid by the borrower. According to Margot Saunders, counsel or the National Consumer Law Centre, states that it has been designed with a view to provide lenders with accurate disclosures and that consumers do not sign up for loans which are different than what could have been described to them.

This right is intended to safeguard the consumer from the risk of using family home or the equity in order to secure a loan and is not applicable in situations where the mortgage is made to buy the house itself. Nessa Feddis, Vice President and Senior Counsel to American Bankers Association, states that it is not to protect the (home) purchaser but to protect the person having equity in the home.

Covers Mortgages – Companies/Banks Etc.

Categories where the right of rescission are applicable are – home equity loan which is often known as second mortgage, mortgage refinance – if the new loan does not come from the same lender which had financed the original home purchase loan, home equity line of credit, cash-out refinance – irrespective of whether it is a new loan that comes from the same lender who had made the original home purchase loan though only the new money is covered by the right of rescission. According to Saunders, it does not matter what kind of lenders the money is borrowed from and the right of rescission covers loans from mortgage companies, banks as well as other lenders.

No exclamation is essential in the case of cancellation of the transaction within a three days’ time, as per Carole Reynolds, Senior Attorney with the Federal Trade Commission and the fact that the said loan is not needed is sufficient enough for an exclamation.

The Truth in Lending Act

The law - `The Truth in Lending Act’ was for the purpose of shielding borrowers from unscrupulous lenders with the right of rescission and was intended to oppose smooth talking lenders intending to fleece borrowers out of their money and their homes. Some of the borrowers may be under the wrong impression that there is a right of rescission with all types of mortgages which is not so.

Since state and local statutes differ, the federal right of rescission is specific which is mentioned in the Truth in Lending Act. Saunders state that there is no right of rescission for the purchase money mortgages and some of these categories with regards to the right of rescission which is not applicable are –loans made to purchase a house, any loans either 1st or 2nd mortgages, refinancing mortgages, etc., which involve properties which are not the primary residence and business loans.