04 KALEIDOSCOPE
Ask your query
I have 3 credit cards and an outstand-
ing balance of over Rs. 2 lakh. One of
the card companies has sent me a let-
ter stating that my limit has been re-
duced from Rs. 62,000 to Rs. 30,000
based on my activities. Is it legal for
them to do so? And how do I get out of
my card debt?
Shankar, Thiruvanmiyur
The card company is well with its
limits to reduce your credit limit with-
out asking you. The problem is most of
us fail to read the fine print and the
rules and regulations booklets that ac-
company our new card. It will surely be
stated that the company can at any
time enhance or reduce your limit
without a need to give justification.
As far as getting out of the card debts
is concerned, there are a few strategies
that you could follow. First try to liqui-
date as much cash as possible and set-
tle off what’s possible. No point in
keeping cash in a savings account
which give 5-6% when your negative
out flow is 36% ! Second could be to
take a personal loan and clear off the
outstanding. This helps in two ways,
one, reduces your monthly burden and
two, binds you with a commitment to
pay the EMI. The third and most effec-
tive method is to break your cards into
four pieces and forget them. Learn to
live on cash and forget credit.
(For queries related to personal
finance, mail your queries to
finergo@goergo.in with ‘doctor’ as the
subject line)
Mini Quiz
1: Surgicare is a health insurance
product launched by
A) Apollo Hospitals
B) Cholamandalam MS
C) TTK Health Services
D) HDFC Standard Life
2: ________ Management Company
manages a mutual fund.
A)Audit
B) Automatic
C) Allocation
D) Asset
Send your answers to finergo@goergo.in or
SMS your answers to 92813 98889. For exam-
ple, if you choose A as the answer to question 1
and B as the answer to question 2 type it as
1A2B and send it. Winner will be chosen by
lucky draw from all correct answers. Winner
gets a free 2009-10 budget planner.
Answers for last week’s mini-quiz
A) 11
B) Zero Coupon Bonds
ERGO Monday, April 13, 2009
Long jump lo n g
h
sigh i t
tedn w
KARTHIKEYAN JAWAHAR AND
ess
PRADEEP YUVARAJ
T
he SENSEX has shown excep-
tional growth over the past
week as compared to the last six
months.
It’s a time when those on the edge
of the markets feel the itch to start
investing. So is this a good time to
invest in equities? The answer is that
any time is a good time as long as
you let time nurture and grow your
money rather than greed.
Sounds philosophical, eh? But it’s
true; any long-term investment in
strong stocks will surely give great
returns in spite of various condi-
tions.
Why stocks perform in the long
term?
Dividends: Dividends give imme-
diate cash to the share holders. Even
though the ratio of dividends to the
current market price may be less (1
to 5%) in the long run they will be
significant as the companies grow
larger and the profit base is large.
Bonus Shares: Sometimes, com-
panies may need cash made from
their profits to grow further and
may not declare dividends.
They continue to reinvest
profits in the company it-
self. When the accumulat-
ed profit of a company is
large enough, they
may declare bo-
nus shares. This is
done by convert-
ing the “retained
earnings” into
capital. Thus our
holding value in
the company goes
up. In a 1:1 bonus,
our 10 shares will
become 20 shares.
Companies Inherently Take Time
to Grow: Can our company’s sales
increase by 40% in a month? Can we
expect the projects that we handle to
jump by 25% in a month? No way. including – political issues, terro- an increase in your wealth too if you
Companies are made of people and rism, cost of inputs, management hold its shares.
processes; and growth can be ex- change, labour issues, international Would you believe it if someone
pected only over a period of time. financial markets, takeovers, new said that investing Rs 10,000 in equi-
But can all the three above happen technology, social structure chang- ties in 1992 would be worth 1.5 crore
in say a year? Definitely. es, inflation, financial policies of Go- today? You better believe it. Keep a
The stock market is an indicator of vernment, strength of the rupee, the watch out for the next Monday to
the companies’ growth, leave alone cost of crude and so on. But as a know more … ■
the short term rise and fall which can company grows, its value is reflected Send your feedback to
be influenced by a number of factors in its share price in the market and finergo@goergo.in