Boo! - The Honest Truth By Ajit Dayal
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Investing in India - Honest Truth by Ajit Dayal
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18 SEPTEMBER 2008

Halloween is traditionally celebrated on October 31st. Its roots lie in the Celtic tradition of celebrating the harvest and trying to ward of the dangers of the impending winter. The evil spirits, it was feared, would disease the crops and the cattle and harm the ability of people to survive winter.

To ward of the evil spirits, it was tradition to keep a hollowed out pumpkin with a candle inside. The evil spirits, it was believed, would stay away from this lighted pumpkin. In modern days in modern homes the children go around the neighbourhood dressed to scare and say, "Boo - Trick or Treat?"

Boo! it is
Well, Halloween has come early this year.
The evil spirits of greed and excess have made some pretty loud "Boo!" sounds and the global financial markets are in a complete state of panic.
Bear Stearns had to be rescued.
Lehman has filed a USD 631 billion bankruptcy protection.
Freddie and Fannie - owners of 30% of the total home loans in USA - had to be rescued by the US government.
AIG - the world's largest insurance company - has just been given a rescue package by the US government which now owns 80% of AIG.

Central banks around the world are lending money to these financial giants - who were hailed as geniuses by all the media - to keep them alive.

Announcements of losses of hundreds of millions of dollars and rescue packages of tens of billions of dollars seem like daily occurrences.

Boo! Or Shoo?
But should you be worried of all these boo! sounds?
Or should you ignore them like the way you would shoo! away a pestering dog.
What should you do?

Well, answer these questions, and see if you are in the "boo" or "shoo" category.

A: a definite Boo
Do you work for any of these genius companies? Or did you get a big salary or bonus for doing very little except some financial engineering while you were employed with these genius financial companies?
If the response to any of these questions is "Yes" then you need to be worried. You may need to look for a "real" job and do some "real" work.

B: a possible Boo
If you answered "no" to both the above, you are in good shape. Sounds like you have a "real" job and you are getting a steady salary for your "real" work.
But you may still have some risks.

Did the company you work for invest its extra cash in the bonds or stocks of these companies? Or did the company you work for sign some financing agreements with these geniuses so that the company you work for can grow faster? Like funding the development of that new 500 acre real estate project? Or if you work in a call centre, did your company build 500-seats which were to be "sold" to these now-busted financial companies?

If your employer or your work was excessively reliant on these geniuses of the global financial world, then you could be in for some Boo times. Don't expect your boss to give you a raise. In fact, some of those free lunches and holidays at company expense may be at risk.

C: a likely Shoo
If you are a doctor, engineer, or even a financial person working - and I mean working, not packaging wrongly priced home loans and having some rating agency lie about how good those loans were - chances are that what is happening in the world around you has little relevance to your daily life. You had nothing to gain from these greedy folks on the way up. And you have little to lose from what happens to them on the way down.

So, your life is pretty safe if you were sensible and selected a sensible career.
But before you congratulate yourself, run another test on your investments - and your selection of your fund manager or financial advisor. If you selected wisely you are clearly in the Shoo! category.
But, if you were greedy, or got carried away by fashion you could be in the Boo! category. Sad, isn't it? You work hard and do all the sensible things and then you give your money away only to feel the pain of a wrong selection. Time to make the right selection and do the right things.

Suggested allocation in Quantum Mutual Funds
Quantum Long Term Equity Fund Quantum Gold Fund
(NSE symbol: QGOLDHALF)
Quantum Liquid Fund
Why you should own it: An investment for the future and an opportunity to profit from the long term economic growth in India A hedge against a global financial crisis and an "insurance" for your portfolio Cash in hand for any emergency uses but should get better returns than a savings account in a bank
Suggested allocation 80% 15% 5%

Disclaimer: Past performance may or may not be sustained in the future. Mutual Fund investments are subject to market risks, fluctuation in NAV's and uncertainty of dividend distributions. Please read offer documents of the relevant schemes carefully before making any investments. Click here for the detailed risk factors and statutory information"

Note: Ajit Dayal, the author is a Director in Quantum Information Services Private Limited and Quantum Asset Management Company Private Limited. Views expressed in this article are entirely those of the author and may not be regarded as views of the Quantum Mutual Fund or Quantum Asset Management Company Private Limited or Quantum Information Services Private Limited.

Mutual Fund Investments are subject to market risks. Please read the offer documents of the respective schemes before making any investments.


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