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How can you say...Its a good investment.

Before writing about good investment, lets have a quick view about investment. I
nvestment is nothing but money invested in any field, whether it s financial stuff
s (bonds, shares, treasury bills etc) (note-- please don t bother much about these
words... sooner or later you ll come to know once you start investing), real esta
te or anything which add some rows into your asset column. But the aim should b
e, In the long run the asset column should start filling your pocket in addition
to its net worth . Let me explain it with an example.
Suppose you have bought a piece of land worth 15lakhs. Now this will add an asse
t worth 15L as per current real estate condition. Now you can do so many things
with your land. Some of them are
1. You can wait and watch, finally if you get a better deal you can sell it in
20L (say). This option is good if you want to make quick money, but market sent
iments should support you.
2. You can use it for rental purpose by putting some more money for constructio
n and then you can earn some decent amount per month. It s a good option which tak
es care of your monthly expenses and in addition to that you ll own that asset too
.
Let s get deeper into the first option (which is the best way to explain a good in
vestment). Suppose you have waited for two years after purchasing the land. The
key factor for good investment is Inflation . Let s say within two years of span inf
lation rises to 10 %. Now you need to do some calculations here. Net worth of 15
L invested, will become 18.15L within two years by taking the rate of interest 1
0% compounded annually( which is nothing but inflation). If you didn t understand,
simply calculate compound interest with principle amount 15L, rate of interest
10% and no of years 2. You ll get the same value as 18.15L. But as per our assump
tion you have sold it for 20L which is more than the value calculated by taking
inflation into consideration. This explains, you are in safe side and made a not
good but the best investment.
What if you have sold it for 17L.. Though you have earned 2L in two years and as
per your business budhhi you have made a good investment but you haven t consider
ed the market sentiments and as per investment logic you are in loss of 1.15L wh
ich you have not given through your pocket but your asset could have put more th
an this if you would have considered inflation.
I prefer second option because somehow it fulfills the definition of good invest
ment and it has two benefits, first it will put some money on your pocket on mon
thly basis which you will get through rent and secondly you can sell this after
five years or so in a decent amount by considering inflation as well as your tot
al expenses including construction and maintenance etc.
so moral of the story, first of all start investing if you haven't and initially
don't bother much about profit and loss but keep inflation factor in mind. Alwa
ys go for long term investment and study the market, sooner you'll find your poc
ket in a positive side.

Nuts and Bolts of GDP (Gross Domestic product)


For this term I have to admit, it is not easy as it looks like.
Let s try to find out the basics behind the complexity of this term. For that, we
start with the very basic term Domestic . When we say Gross domestic product of a c
ountry, we directly refer to the domestic behavior/health/output of that country
excluding all monetary relation with foreign countries except money earned thro
ugh export.
Till now it is clear that whatever we are going to deal with, are taking place w
ithin the boundaries of the country.
In common terms, GDP basically signifies the health of a country or specifically
financial health of a country. There are various methods through which GDP is c
alculated Product approach, expenditure approach, and investment approach. Whate
ver approach you take, result comes the same. India uses expenditure approach.
Remember, we are trying to find out economic health of a country which depends o
n various factors such as consumption/spending power of people, government expen
diture, investment made by private or public sector organizations( non Governmen
t), exports made by the country etc.
Whatever way you take, money spend by someone will always go into someone else p
ocket. It s either this way or that way the final output remains the same. We can
consider all the factors as either expenditure made by each one of them or inves
tment made by each one of them or we can take directly the product value for whi
ch expenditure/investment are made. Factors explained above are self explanatory
but we ll have a quick look on each one of them.
---: Consumption refers to personal expenditures pertaining to food, households,
medical expenses, rent, etc made by common men.
---: Government spending stands for the total government expenditures on final g
oods and services which include investment expenditure by the government purchas
e of weapons for the military, and salaries of public servants etc.
---: Investment by public/private organization stands for business investment as
capital which includes construction of a new mine, purchase of machinery and eq
uipment for a factory, purchase of software, expenditure on new houses, buying g
oods and services but investments on financial products is not included.
Finally exports refers the difference between total export made and total import
made. It may be positive or negative and directly affects the GDP of the countr
y.
To calculate the GDP, we add up all the expenditure and compare the final value
with the last year GDP and we come to know whether health is in good condition o
r bad. If the total expenditure is increased that means the power to spend/purch
ase of people/government is increased and overall it s a good sign.
(-->>In one line: GDP shows the power of people/government of a country to purch
ase something, to produce something, to invest on something, to expend more or i
n other terms it s a measure of a country s overall economic output.

How do Card Companies make money..


Now a days, credit card has become a fashion or you can say, for some people it
has become a Mazboori . God bless me, I have applied for this little piece approx s
ix times and I didn t get it. So finally I thank to god for not giving me an oppor
tunity to use this master card.
When I came across this term Credit card , suddenly one question came into my mind ho
w these credit card companies make money. After doing a bit google and consultin
g with my friends I got some points which I would like to share. I hope these po
ints may give you a little bit answer if you already have this question in your
mind.

1.Let s start with a real time experience which I had when I went to shop with my
friend. Here is the conversation which I had with cashier of the shop.
Me do you accept credit card?
Cashier yes we accept.
Me any discount for TATA employees.
Cashier--- yes we have, if you pay by credit card then 7.5% discount and if you
pay by cash then we ll give you 10% discount.
So here you can see the difference in discount percentage (2.5%) which is basica
lly due to the mode of payment. If you pay by credit card then the shopkeeper ha
s to pay some amount to the bank who issues the card. This happens with all the
purchase done by credit card and the percentage varies from 1% to 4%. Now you m
ay ask why the shopkeepers accept card at all. Well now a days nobody carries ca
sh with him. So ultimately there is no option left with the shopkeeper but to ac
cept the card to improve his sell.

2. This is an example which happened with one of my friend. He has HDFC credit c
ard and the limit is up-to 25k. Previous month somehow he crossed the 25K limit
and the best part is the card was not denied at the time of transaction even tho
ugh it crossed the limit. When he got the bill, additional Rs 500 was charged t
o him due to over limit. Immediately he called to bank and asked how the credit c
ard was accepted if it crossed the limit , finally he got to know that he was a ve
ry old card holder that s why bank has allowed him to cross the limit.
So I hope you understand the moral of the story. Over limit and late payment is
one of the innocent ways to make money even if it is the mistake done by bank.

3. You might have seen the advertisement on the credit card bill if you have one
. You ll find lot of offers which give you some discounts if you use this card for
some service. For example if you book a flight ticket through this card you will
get 15% discount etc. this may be one of the way to make money. It s all depends u
pon the deal made between the bank and other service providers.

4. Service charge, higher interest rates, cancellation fee, charging more for us
e overseas, charging fee for card protection etc. are the ways to make money.

So ultimately there are several ways you can be charged either by mistake or int
entionally, or as a normal process.