Investor Using A Share Broking Firm? You Are Not A Consumer, Says Consumer Forum.

Posted on January 11, 2013 by Runjhun

investor trading in shares not a consumer says consumer forum

One of the issues that keeps recurring in the complaints filed with Akosha is whether an investor treated as a consumer?

Addressing this question yet again, Thane District Consumer Forum has held that an investor cannot be considered as a consumer because he is indulging in trading in shares for commercial purposes.

This issue was addressed by the forum in response to a complaint filed by an investor using the services of a share broking company, India Infoline Ltd.

As per the complaint, the consumer had opened a Demat account with India Infoline for selling and purchase of share. She deposited Rs 60,555 with the company and Rs 0.05 paise was to be taken as brokerage for trading. It was noticed by the complainant that instead of charging Rs 0.05 paise, they charged Rs 0.10 paise as brokerage. Also, despite a request to stop the transactions from the investor, the company continued the transactions.

However, when the matter was filed with the consumer forum, the forum dismissed the complaint stating that the complainant being an investor trading for commercial purposes was did not fall within the purview of the definition of ‘consumer’ and hence cannot file a complaint with the forum.

Investor trading in shares is not a consumer: Consumer Disputes Redressal Forum (Indian Express)

3 Things Young Investors Must Know About Equity Investment

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Posted on November 8, 2012 by Runjhun

3 Things Young Investors Must Know About Equity Investment

Equities are the proverbial ‘double edged sword’ in the field of investment. Technically, they are dubbed as ‘high risk, high return’ assets. And the fact that they are ‘high risk’ automatically pushes them into the forbidden category for the ones who are planning to start off in the field of investment.

While it is true that one should not invest in anything, least of all equities, without understanding their dynamics, it is equally foolhardy to steer clear of an excellent investment avenue just because it seems too daunting or scary.

Equities are an essential component of any effective investment portfolio and young investors must not make a complete exclusion of this category if they want to create an efficient investment scheme for themselves. While it is not possible for us to delve into the dynamics of equity investment as a whole in a single article, we have culled out the three most important and basic things that a young investor must know and keep in mind when dealing with equities.

The Best Time To Start Is ‘Now’- Of course the markets are volatile and the returns hardly look like what they did in the pre-recession era. But if you are waiting for the markets to improve and equity assets to prove their worth, it is probably the most disastrous investment error that you can make. Equities fluctuate directly with the markets and hence, a downward curve is never a bad time to invest in equities if you plan to remain invested for a long period of time. This way, you are assured of reaping the benefits of the inevitable upward swing in the market which succeeds the lean phase.

As far as young investors are concerned, time is their biggest asset and irrespective of market conditions, our standard advice for any young investor is to start investing as soon as possible. The longer the investment time-frame, the greater are the benefits that are reaped. And of course, a longer time frame also increases the risk appetite of the young investors who have the security of income generation to cushion any unexpected loss, hence giving their investments time to recover through varying market cycles.

Invest Small, Invest Systematic- Bulk investing is almost never advisable, especially in the current market conditions. A systematic investment in small fractions ensures that your investment is evenly spread out, thus reaping the maximum benefits from the varying market conditions. SIPs or systematic investment plans offered by most funds are the best way to ensure that your money in simultaneously regulated and invested in a disciplined manner. Apart from the fact that this is an excellent way to discipline your savings, SIPs are also recommended to weather the changing market conditions efficiently.

Don’t Be Conservative. Do Diversify.- Being conservative is a cardinal sin for young investors when it come to investment. The risk appetite of the young investors is their biggest strength and it should be utilized to the hilt. However, this does not imply that the young investors should be careless with the way their investment is positioned in the market. It is crucial for them to understand the dynamics of various asset classes and then diversify the investment as per their long term financial goals. However, we reiterate, risk is an essential feature of a young portfolio and young investors should take the maximum advantage of high risk asset classes like equities. Even while investing in equities, there must be careful consideration of the nature of the equities (large cap, mid cap, small cap stocks/funds; diversified or sectoral funds etc.) and the investment must be distributed according to individual goals and capacity.

The young investors must understand that investment is not a sleep walking exercise or else, they would be confined to a portfolio that would be ‘safe’, but definitely not efficient. And once the young investors do get into the investment scene, they must be keen, aware and vigilant. The best way to ease oneself into equity investments is through mutual funds. (Read 3 Reasons Why Every Lay Investor Should Invest In Mutual Funds). They are relatively easier to understand and manage.

Irrespective of the mode of investment, young investors must understand the risks involved, always have an emergency corpus to deal with unexpected situations, in market or otherwise and be extremely aware and well researched on the asset classes they include in their portfolio. Investment in equity is hardly an avoidable proposition if one intends to get the maximum value for money and hence, young investors should delve into it with an aware gusto.

3 Reasons Why Every Lay Investors Should Invest In Mutual Funds

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Posted on September 20, 2012 by Runjhun

3 Reasons Why Every Lay Investors Should Invest In Mutual Funds

Investment is a tricky business. Most of the aam janta, till a couple of years ago gladly stayed away from anything that had anything to do with bulls and bears unless they were nicely caged and chained live specimens. A huge section of the masses, for the longest period of time equated stock markets with scams ala Harshad Mehta and considered it wise to stay away.

However, with a booming Indian economy that celebrated the advent of 21^st century, markets became more and more open and accessible, quickly and effectively moving beyond the traditional perceptions.

This change has been extremely positive, not just in terms of macro benefits for the economy but also micro benefits for the individual investors. Amongst these numerous positives, diversification of investment tools is one of the most important benefits that accrued to the common investors.

Mutual funds are one of the many investment tools that are available for the investors that can be used to harness the market benefits with varying degree of risks. (See our analysis of another investment tool, ULIP To ULIP Or Not To ULIP)

Mutual funds, by design, have a lot of benefits for the common/lay/first time investors. Based on our interaction with Akosha regulars including consumers, agents and related finance veterans, we culled out the most straightforward reasons from basic investment wisdom. We deliberately avoided complex reasoning and stuck to the basics of why any lay investor should consider mutual funds as an investment option.

Easy to understand, easy to allocate— Mutual funds can be broadly divided into equity, debt and balanced funds. For any first time investor, if they are aware of these three categories and how they operate, allocation of investment as per their long term financial goals is fairly simple.

For starters, equity funds are high risk, high return funds that invest directly in stocks and hence gain or lose directly from market fluctuations. Debt funds on the contrary are low risk, low return funds that primarily invest in debt instruments like government bonds, fixed deposits and approved private deposits. Balanced funds allocate resources to both stocks and bonds, striking a balance between risk and gains.

Risk Appetite Based Allocation To Maximum Benefit—In simpler terms, mutual funds allow investors to allocate their resources to various funds based on the extent of risk they are willing to take or capable of taking. A simple thumb rule—if you want to stay invested for a long term (anywhere between 5-10 years), equity funds are your best bet because despite being high risk funds, equity funds are known yield rich returns to investors who remain invested in them for long enough. For people who can’t afford that long a span (mostly retired individuals in later years of their lives), debt fund is the way to go. Safer than their equity counterparts, they usually give a guaranteed return. Fixed deposits in banks serve similar purpose and there is usually no drastic difference between interest rates offered by debt funds and foxed deposits. However, market cycle does have a role to play and debt funds can be used as a way to diversify the portfolio and avoid concentration of money in fixed deposits.

As an essential bottom line, mutual funds are NOT short term investments. If you don’t plan to remain invested for 3 years or more, or if you are prone to impatience, mutual funds are definitely not for you.

Systematic Investment, Disciplined Investment, Maximized Gains—Systematic Investment Plans (SIPs) are the best feature of mutual funds. For the uninitiated, SIPs allow investors to distribute their investment into periodic (usually monthly) installments that are, in most cases, auto-deducted from the investor’s account. This is very easy and manageable mode of investments, where investors don’t need to spare bulk of their savings. Besides, maintaining investment discipline, SIPs have a technical benefit in maximizing the gains and neutralizing the market fluctuations over a period of time. Simply put, when the market is low, your SIP amount shall fetch you a larger number of units as compared to when the market is on a high and the same amount shall fetch lesser number of units (because unit value or NAV fluctuates with the market), thus effectively neutralizing the fall. The pre-requisite, however is the same—you have to remain invested for a long term to secure the benefits.

There are plenty of other reasons why mutual funds are a preferred mode of investment. But as we mentioned, we have stuck to Grandma’s piece of wisdom for the lay investors. With experience, investors gain more knowledge about various instruments and market dynamics but these pointers are sufficient to get any investor started.

Complaining Can Get You Somewhere-Consumer Forum Orders General Post Office To Compensate The Account Holder.

Posted on July 17, 2012 by Runjhun

GPO Ordered To Compensate Account Holder

The consumers routinely experience the trauma of being penalized for a fault they had never committed especially when dealing with banks and post offices. It may be wrongly recorded information, missing documents or simply an oversight; the end trauma always rests with the consumer. A similar instance repeated itself in Chandigarh but in this case, the consumer chose to step beyond a frustrated threat to any and everybody in the concerned office. He went ahead and filed a compliant, to be richly rewarded with a compensation.

In response to his complaint, UT Chandigarh Consumer Forum has ordered the Senior Post Master at General Post Office (GPO) in Chandigarh to compensate the account holder whose account term was extended without his permission and to make things worst, he was refused interest on the deposited amount on the extended period. The complainant held the PPF account as Karta of a Hindu Undivided Family (HUF) and post the maturity of account in 2005, it was further extended for another 5 years without the consent of the account holder. Upon the expiry of the extended term, the account holder was informed that he was not entitled to receive interest for the extended period as the government regulations did not allow the extension of an HUF account beyond the maturity date,.

The forum, however, held that there was no valid reason backing the denial of interest to the account holder. It was illegal and amounted to deficiency in service and hence was ordered to compensate the account holder.

Court Orders General Post Office To Compensate An Account Holder (Indian Express)

Picture Courtesy Vivek Kumar Verma (http://creativegenes.wordpress.com

No Laughing Matter! Consumer Forum Slaps Rs.25000 Fine On HSBC For Rs. 838 Credit Card Surcharge.

Posted on June 22, 2012 by Runjhun

Levying charges from consumers based on false/misleading information is unfair trade practice and a violation of the Consumer Protection Act, stated the Mumbai Suburban District Consumer Forum while hearing a complaint filed by a Mumbai resident. HSBC had imposed an additional surcharge of Rs.838 in the complainant’s bill. The complainant alleged that the surcharge was payable only if the purchase of fuel at a petrol pump exceeded a certain amount which was not the case. the back on the other hand argued that the surcharge was payable for every transaction at the petrol pump. The Forum held the bank liable for providing incomplete and false information to the consumer. For complete story, see http://www.hindustantimes.com/India-news/Mumbai/HSBC-Bank-fined-Rs-25-000-for-Rs-838-credit-card-surcharge/Article1-876836.aspx.

10 Things Your Bank Will Never Inform You About

Posted on June 13, 2012 by Runjhun

Banking transactions happen to be the most frequent transaction in our day to day lives. Yet, most of us remain oblivious of our rights and our bank’s obligations under various circumstances. In order to acquaint you with some of the most common but often ignored facts about banking transaction, Quick Tens this week brings forth 10 things your bank will never inform you about:

Deduction of fine for non- maintenance of minimum balance from an account holder’s account is not allowed without due information to the account holder-Banks cannot debit fines for non-maintenance of minimum balance from an account holder’s account without informing the account holder about this term.
No amount can be debited from an account holder’s account at the bank’s discretion without hearing the account holder-It is the responsibility and obligation of the bank to ensure that proper hearing opportunity is given to the account holder.
While making online payment through debit/credit card, ensure the transaction is secure- Look for https instead of http in the website’s name. The additional‘s’ stands for secure.
The banking ombudsman can be approached if the bank rejects the complaint or does not respond to it within a month-The banking ombudsman should be approached within one year of the bank rejecting or not responding to the complaint.
The award passed by the ombudsman is binding on banks but not on the consumer-It is only the bank against which such an award can be enforced, not the consumer.
In case of a mismatch, the amount in words on a cheque is given preference-When the amount in the figure and the words differs on a cheque, it is the amount in words that is to be considered.
In case of theft of an ATM card, any loss after the customer has requested the bank to block the card is the responsibility of the bank- An FIR should be filed with the police as soon as the ATM card is stolen to help establish the time of theft.
If a stolen ATM card is found, do not use it again-Cut it diagonally and dispose it off. The bank will issue a new card for nominal charge.
Bank is liable to pay compensation if the contents of a locker are damaged/destroyed-You can claim compensation from the bank if the contents of your locker are destroyed as the bank is liable for their safety.
Banker’s cheques should be presented to the bank within 3 months from the date of the cheque- RBI has reduced the validity of Cheques/Drafts/Pay Orders/Banker’s Cheques to 3 months from the existing six months with effect from April 1, 2012.