Concerns: The investment community woke up to a rude shock last Friday. The capital market regulator, SEBI, banned Karvy Stock Broking (KSB). SEBI found that Karvy Stock Broking had fraudulently pledged the shares of some of its clients – after transferring the shares from their Demat accounts without informing them – and raised funds, which were transferred to one of its sister firms, Karvy Realty Pvt Ltd.

2. The PMC Bank has been put under restrictions by the RBI since September after an alleged Rs4,355 crore scam, following which the deposit withdrawal was initially capped at Rs1,000/- causing panic and distress among depositors. Eight depositors have since committed suicide.
3. Non-banking financial companies (NBFCs) are facing a crisis, particularly the smaller ones that are struggling with asset-liability mismatch amid corporate governance issues. NBFCs had borrowed short term from banks and mutual funds while lending to developers of long-term projects, which got held up due to lack of buyers.
4. Reducing Interest rate on Bank deposit: Fixed deposits (FD) are ideal for investors with a low risk appetite looking for assured returns. Deposits rates have been falling over the past few months, much to depositors’ anguish. SBI interest on FD of more than 1 year now got reduced to 6.25%. Many pensioners who have parked their retirement corpus are worried now.

 What should the investors do? The basic principles of investment. Goal based investing; The first question to be asked before investment is for what goal you should invest? The goals may be Children’s education/marriage, Retirement corpus, Buying a house etc. Investing for a goal provides answers on horizon of the goal. The longer the goal horizon, the lesser the volatility of the performance due to mean reversion. Risk appetite; Risk tolerance varies across investors. The investors’ categories are aggressive, moderate or conservative. The aggressive investors believe in “higher the risk, the higher the return “but at the same time they are ready for absorbing any loss. The conservative investor cannot tolerate loss and hence should be satisfied with risk free and average returns. Further the capacity of the investor to absorb loss also affects investment decision. Now days, online tools are available to determine risk appetite scores (We use Finametric tool). Before giving investment advice, the Financial Planners take a call on risk appetite depending about the investor. Asset allocation; Warren Buffet’s saying goes “Do not put all your eggs in one basket”. Different asset classes’ i.e. Real estate, Gold, Equity and Debt perform in varying degrees in different market periods. Asset allocation is determined having consideration to the age of the investor, goal horizon and risk appetite. A simple rule is; equity allocation is 100 minus age. Review & monitoring; Once asset allocation is arrived at, it is advisable to periodically review it and restore the balance. For example, if the original Equity: Debt allocation is 60:40 and rally in the equity market makes it 65:35; it is advisable to book profit in equity (5%) and bring the allocation back to 60:40 . Rupee cost averaging; Retail investors are influenced by greed & fear and they lose by trying to time the market. Market volatility is best addressed through Rupee cost averaging which is buying periodically in different market conditions/periods. Investment through SIPS in Mutual Funds is the best example on this. Products: A comparative chart on the indicative returns, liquidity and taxability are;

Popular Investment Products
Assets Class	Returns (%)	Liquidity	Taxability
Gold	4%	Medium	Capital Gain
Real Estate (Residential)	2-3%	No	Capital Gain
Postal TD	6.90%	Yes	Slab rate
Bank FD	6.25%	Yes	Slab rate
Equity (MF)	10-12%	Yes	Capital Gain
Debt (MF)	6-8%	Yes	Indexed Capital Gain

It is better to select products based on the duration of investments. One should never over invest physical assets i.e. Real estate and Gold. For short term goals, Bank and Debt Mutual Funds and for long term goals diversified equity mutual funds, preferably Direct Mutual Funds are better. One should not go for insurance products for investment. Direct Mutual Funds Mutual fund investments are not free of cost. When an investor invests in a fund, they are ‘hiring’ a fund manager in a fund house to manage their money for them. And for this service, there is a fee that the investor pays over time. This fee is called the expense ratio (TER) of the fund, and it is a percentage of the investment amount. If the TER of a fund is stated as 2.50%, that means, on an annual basis, 2.50% of the investment amount goes to the fund house as fees. This includes commission paid to the agents say @1%. In case of Direct Mutual Funds, the Fund house charge only 1.5% to the investor as expenses since the commission to be paid is NIL.As such the investor gets higher return.