Changing Role of Indian Banks

The following points briefly highlight the changing role of banks in India. Better customer service, Mobile banking facility, Bank on wheels scheme, Portfolio management, Issue of electro-magnetic cards, Universal banking, Automated teller machine (ATM), Internet banking, Encouragement to bank amalgamation, Encouragement to personal loans, Marketing of mutual funds, Social banking, etc.

The above-mentioned points indicate the role of banks in India is changing. Now let's discuss how banking in India is getting much better day after day. 1. Better Customer Service Before 1991, the overall service of banks in India was very poor. There were very long queues (lines) to receive payment for cheques and to depositmoney. In those days, some bank staffs

were very rude to their customers. However, all this changed remarkably after Indian economic reforms of 1991. Banks in India have now become very customer and service focus. Their service has become quick, efficient and customer-friendly. This positive change is mostly due to rising competition from new private banks and initiation of Ombudsman Scheme by RBI.

2. Mobile Banking Under mobile banking service, customers can easily carry out major banking transactions by simply using their cell phones or mobiles. Here, first a customer needs to activate this service by contacting his bank. Generally, bank officer asks the customer to fill a simple form to register (authorize) his mobile number. After registration, this service is activated, and the customer is provided with a username and password. Using secret credentials and registered phone, customer can now comfortably and securely, find his bank balance, transfer money from his account to another, ask for a cheque book, stop payment of a cheque, etc. Today, almost all banks in India provide a mobile-banking service. 3. Bank on Wheels The 'Bank on Wheels' scheme was introduced in the North-East Region of India. Under this scheme, banking services are made accessible to people staying in the far-flung (remote) areas of India. This scheme is a generous attempt to serve banking needs of rural India. 4. Portfolio Management In portfolio management, banks do all the investments work of their clients. Banks invest their clients' money in shares, debentures, fixed deposits, etc. They first enter a contract with their clients and charge them a fee for this service. Then they have the full power to

invest or disinvest their clients' money. However, they have to give safety and profit to their clients. 5. Issue of Electro-Magnetic Cards Banks in India have already started issuing Electro-Magnetic Cards to their customers. These cards help to carry out cash-less transactions, make an online purchase, avail ATM facility, book a railway ticket, etc. Banks issue many types of electro-magnetic cards, which are as follows: Credit cards help customers to spend money (loaned up to a certain limit as previously settled by the bank) which they don't have in hand. They get a monthly statement of their purchases and withdrawals. Along with the transacted amount, this statement also includes the interest and service fee. The entire amount (as reflected in the statement of credit card) must be paid back to the bank either fully or in installments, but before due date. Debit cards help customers to spend that money which they have saved (credited) in their individual bank accounts. They need not carry cash but instead can use a debit card to make a purchase (for shopping) and/or withdraw money (get cash) from an ATM. No interest is charged on the usage of debit cards. Charge cards are used to spend money up to a certain limit for a month. At the end of the month, customer gets a statement. If he has a sufficient balance, then he only had to pay a small fee. However, if he doesn't have a necessary balance, he is given a grace period (which is generally of 25 to 50 days) to repay the money. Smart cards are currently being used as an alternative to avail public transport services. In India, this covers Railways, State Transport and City (Local) Buses. Smart card has an integrated circuit (IC) embedded in its plastic body. It is made as per norms specified by ISO. Kisan credit cards are used for the benefit of the rural population of India. The Indian farmers (kisans) can use this card to buy agricultural inputs and goods for self-consumption. These cards are issued by both Commercial and Co-operative banks. 6. Universal Banking

In India, the concept of universal banking has gained recognition after year 2000. The customers can get all banking and non-banking services under one roof. Universal bank is like a super store. It offers a wide range of services, including banking and other financial services like insurance,merchant banking, etc. 7. Automated Teller Machine (ATM) There are many advantages of ATM. As a result, many banks have opened up ATM centres to offer convenience to their customers. Now banks are operating ATM centres not only in their branches but also at public places like airports, railway stations, hotels, etc. Some banks have joined together and agreed upon to set up common ATM centres all over India. 8. Internet Banking Internet banking is also called as an E-banking or net banking. Here, the customer can do banking transactions through the medium of the internet or world wide web (WWW). The customer need not visit the bank's branch. Through this facility, the customer can easily inquiry about bank balance, transfer funds, request for a cheque book, etc. Most large banks offer this service to their tech-savvy customers. 9. Encouragement to Bank Amalgamation Failure of banks is well-protected with the facility of amalgamation. So depositors need not worry about their deposits. When weaker banks are absorbed by stronger banks, it is called amalgamation of banks.

10. Encouragement to Personal Loans Today, the purchasing power of Indian consumers has increased dramatically because banks give them easy personal loans. Generally, interest charged by the banks on such loans is very high. Interest is calculated on reducing balance. Large banks offer loans up to a huge amount like one crore. Some banks even organise Loan Mela (Fair) where a loan is sanctioned on the spot to deserving candidates after they submit proper documents

11. Marketing of Mutual Funds A mutual fund collects money from many investors and invests the money in shares, bonds, short-term money market instruments, gold assets; etc. Mutual funds earn income by interest and dividend or both from its investments. It pays a dividend to subscribers. The rate of dividend fluctuates with the income on mutual fund investments. Now banks have started selling these funds in their own names. These funds are not insured like other bank deposits. There are different types of funds such as open-ended funds, closed-ended funds, growth funds, balanced funds, income funds, etc. 12. Social Banking The government uses the banking system to alleviate poverty and unemployment. Many social development programmes are initiated by the banks from time to time. The success of these programmes depends on financial support provided by the banks. Banks supply a lot of finance to farmers, artisans, scheduled castes (SC) and scheduled tribe (ST) families, unemployed youth and people living below the poverty line (BPL).

HIERARCHY OF MANAGEMENT IN BANKS

Board of Directors The main job role of the Board of Directors is to protect the interest of the shareholders. They establish various compensation committees and review the financial statements of the bank at regular intervals of time. Chief Executive Officer

The chief executive officer is responsible for enacting the operations and policies. The CEO reports to the Board of Directors regarding the various financial data. Chief Operating Officer The chief operating officer analyses the market constraints, and set forth new business initiatives and plans in order to increase the quality of operations of the bank. The COO manages all the regulatory issues and issues related to the operations and public relations. General Managers The general manager manages the bank staffs and assigns specific tasks to them. S/he prepares the regular work schedules and coordinates various financial activities. Deputy General Managers The deputy general manager assists the general manager in several of the duties. They review the various budget activities along with the general managers. Assistant General Managers The assistant general managers act as a communication line between the principal officers and the general managers. They take part in the various administrative activities. Principal Officers The principal officers form an important rank in the bank management hierarchy. They perform various targeted functions like negotiating new transactions, rescheduling and restructuring of the portfolios. They develop new financial structures according to the emerging needs of the bank. Moreover, they lead and manage the junior staff members and develop professional relationship with the various clients. Senior Officers/Probationary Officers The senior officers are responsible for meeting the monthly sales targets assigned to them by the executive officers of the bank. They evaluate the sales prospects in the particular geographical area assigned to them and coordinate with the internal and the external teams.

Clerical Staff Members Clerical staffs of the bank are also referred to as tellers. The staffs manage the cash deposit and the withdrawals. They pay and receive money from the customers by evaluating their authentic signatures. Non-Clerical Staff Members The non-clerical staff members are also called as office assistants and they are at the bottom of the bank management hierarchy. They perform duties like filing and record keeping of banks record, attending the visitors, and delivering various documents of the bank.

WHAT IS A LOAN REVIEW AND WHY IS IT IMPORTANT?

Effective loan portfolio management is crucial to controlling credit risk. In order to control risk, however, a CDFI must know the types and levels of credit risk in its portfolio. Loan review is an important tool which can help CDFIs identify this risk. A loan review provides an assessment of the overall quality of a loan portfolio. Specifically, a loan review: Assesses individual loans, including repayment risks. Determines compliance with lending procedures and policies. Identifies lapses in documentation. Provides credit risk management priority findings. Recommends practices and procedures to address findings. For CDFIs that risk-rate their loans, a loan review evaluates risk grades and their

accuracy.

A thorough and correctly completed loan review provides management and the board of directors with objective and timely data on loan portfolio quality and recommendations for addressing weakness. What Are the Steps Involved in a Loan Review? A loan review can be broken down into three steps: 1) pre-file review; 2) file review; and 3) post-file review.

Loan portfolio monitoring

Lending is a key business activity in the financial services sector. The loan portfolio is one of the largest assets and a chief source of revenue for banks, but is also a great source of risk to a banks safety and soundness. Whether due to lax credit standards, poor portfolio risk management, or weaknesses in the economy, loan portfolio problems have historically been the major cause of bank losses and failures. Identifying control breaches, anomalies and high-risk activities early, and employing a firm remediation strategy, often prevents, and certainly minimizes, the impact of any potential impairment of the portfolio. The CaseWare Monitor Loan Portfolio solution automates the definition of governance, risk and controls within a financial institution's lending process. The financial institution can then define the control environment from loan origination to servicing and portfolio management. Once completed, the monitoring framework examines all electronic activity to detect control breaches and alert the relevant personnel automatically. Continuous monitoring of the loan portfolio allows stakeholders to quickly determine, by review of electronic records, any activities or conditions that require attention before they become problems.

Key benefits include: Better risk management Immediately detect anomalies and errors that are not in accordance with company or regulatory policies as they relate to approval limits, schedules, refinancing, delinquencies, etc. Proactive management of the portfolio Immediately recognize loans in arrears or improper disbursements to prevent a negative impact on the balance sheet.

INVESTMENT POLICY GUIDELINES

Formulate and adopt a written Investment Policy that provides: 1) the basic foundation on which plans and strategies are based, 2) the Board of Directors with the necessary controls for adequate supervision and measurement of portfolio performance, and 3) the portfolio manager with clearly defined goals. The responsibility for supervising the bank's investment account rests solely with the Board of Directors and should not be delegated to a correspondent bank, an advisory service, a brokerage house, or a rating service. The policy should establish standards for selection of investment opportunities that allow for thorough consideration of the following: A. Statement of the purpose and goals of the investment account in relation to the bank's overall objectives of safety, liquidity, and profitability. B. Administrative responsibilities: 1. Establish the responsibility of the Board of Directors for initial approval of said policy, annual review, and approval of any subsequent changes; 2. Establish the responsibility of the Board of Directors, at each Board meeting, to thoroughly review and approve all investment decisions and transactions made since the previous Board meeting; 3. Establish the responsibilities of the chief executive officer or Investment Committee regarding

policy and strategy and review of portfolio performance; 4. Establish the duties of the investment officer for implementing strategy and recommending changes in policy and strategy; and 5. Specifically designate individual authority for the purchase and sale of securities and establish individual dollar limitations. Security type and quality may govern limits. C. Portfolio composition, characteristics, and limitation: 1. Designate a listing of acceptable portfolio investments. If applicable, establish guidelines for the purchase and monitoring of structured notes and provide for annual stress tests on all collateralized mortgage obligations; 2. Establish limitations on the minimum and maximum amounts that can be invested in securities in relation to total assets. Additionally, ranges on the securities mix should be established. Factors that should be considered include: a. Industry standards; b. Quality of the investment securities to be acquired; c. Liquidity needs; d. Collateral requirements; e. Tax position; f. Regulatory requirements; and g. Income levels desired; 3. Provide for acceptable portfolio maturity ranges. The maturity structure within desired limitations should be based on asset/liability management considerations and economic/market conditions; 4. Establish acceptable lot sizes of investments purchased;

5. Establish acceptable municipal quality ratings; a. Acceptable quality rating levels for purchases by your bank in comparison to Moody's or Standard and Poors should be designated. (Note: The OSBC views any municipal bond graded below the top four (4) ratings as a low quality asset subject to criticism.); OSBC 3/15/2005 1 Investment Policy Guidelines b. Non-rated purchases, including industrial revenue bonds, should have specific volume limitations and be confined to those credits in the bank's general market area. Proper credit documentation on these issues should be maintained and the credits reviewed periodically to ensure that they continue to be of investment quality; and 6. Designate appropriate geographic distribution in the municipal portfolio. D. Acceptable portfolio activities: 1. Establish specific guidelines on when and under what conditions the bank may interchange securities to improve yields, quality, and or marketability as well as to realign the composition of the portfolio. Compliance with FASB 115 should be maintained at all times and include, but not be limited to: a. Provide authorization for individuals to execute transactions on available-for-sale securities; b. Provide a description of the required accounting for available-for-sale securities; and c. Develop internal controls requiring available-for-sale securities to be priced at market and periodically evaluated; 2. In light of the bank's earnings, tax and capital positions, establish guidelines as to when the sale of securities for gains or losses should be undertaken; and 3. Adopt guidelines to ensure that all applicable laws and regulations are followed in these activities. E. Unacceptable portfolio activities:

Specific guidelines should be formulated regarding trading account activities. Certain trading account investments that exhibit characteristics that are distinctly or predominately speculative are prohibited by Kansas Administrative Regulation 17-9-1 and should be prohibited by policy. F. Acceptable portfolio pledging practices. G. Acceptable safekeeping locations: Provide a listing of acceptable safekeeping locations. For ease of administration, limiting the number of different institutions should be considered. H. Acceptable securities dealers: 1. Designate a list of acceptable securities dealers. A list of references should be made available for directorate and examiner review; and 2. Establish a procedure to investigate and approve all brokers not affiliated in a correspondent bank relationship with whom the investment officer may do business. I. Federal funds sold (if made a part of Investment Policy): 1. Provide a listing of banks that are authorized for sales and purchases and in what amounts; and 2. Establish guidelines for compliance with Regulation F. OSBC 3/15/2005 2 Investment Policy Guidelines J. FDICs Revised Policy Statement on Selecting Securities Dealers, Establishing Prudent Investment Policies and Strategies: (Financial Institutions Letter effective May 26, 1998, i.e., FIL 9845b). K. Compliance with all Federal and State Laws and Regulati

Definition of 'Corporate Debt Restructuring'

The reorganization of a company's outstanding obligations, often achieved by reducing the burden of the debts on the company by decreasing the rates paid and increasing the time the company has to pay the obligation back. This allows a company to increase its ability to meet the obligations. Also, some of the debt may be forgiven by creditors in exchange for an equity position in the company. The need for a corporate debt restructuring often arises when a company is going through financial hardship and is having difficulty in meeting its obligations. If the troubles are enough to pose a high risk of the company going bankrupt, it can negotiate with its creditors to reduce these burdens and increase its chances of avoiding bankruptcy. In the U.S., Chapter 11 proceedings allow for a company to get protection from creditors with the hopes of renegotiating the terms on the debt agreements and survive as a going concern. Even if the creditors don't agree to the terms of a plan put forth, if the court determines that it is fair it may impose the plan on creditors.

THE NATURE AND FUNCTION OF INVESTMENT MANAGEMENT

Investment management is a part of general management. Accordingly, the investment management - a combination of techniques, principles of management of the investment process, traffic control, investment resources to produce income (profit) in the future while minimizing costs and expenses.

Management activities associated with the investment process, can occur at different levels: state, territory, region, industry, enterprise. This creates a particular investment management across the state and within individual businesses. However, management at all levels is based on a common methodological framework assessing the effectiveness of limited resources.

Investment management performs several functions: Plan - the stage of the management process by which the development of investment strategies and investment policies. The investment strategy is directly linked with the general policy of

industrial - economic activities of economic entities aimed at ensuring its stability and reliability in the current period and in the future; organizational - for developed investment strategy and policy is necessary to determine the funding needs, the relationship between own and attracted resources, forms of fund raising. Necessary to seek strategic investors, the most profitable investment projects and portfolios, algorithm organization controls the investment process in general; co-ordinating - to get effective results from investing activities is required at each stage of the investment process to monitor and coordinate all actions and activities on the achievement of investment policy objectives and targets, corrective action decisions taken in connection with changing conditions in the investment market.

Investment management is aimed at the following tasks: Ensuring economic growth and productive capacity of business entity; maximize profitability of the investment object; minimize the risk of investment activities;

Investment management involves the analysis, selection and evaluation of investment projects, taking into account risk and return.

The purpose of investment management is to choose the investment that would give the greatest benefit (income) and was accompanied with the least risk.

Thus, investment management can be defined as a system of effective measures aimed at preserving and increasing the capital of an economic entity. Large role in the implementation of effective management of the investment process is an investment manager.

The Investment Manager performs the following functions: provides investment activity of business entity;

 determines the investment strategy and tactics; developing an investment policy; is a business plan of the project; reduces the risk and increase the profitability of various investments; examines the financial state of businesses to invest; determine the number and quality characteristics of investment securities; seek to optimize the investment portfolio; performs the adjustment of investment portfolios; predicts the evaluation of investment attractiveness and selection of specific projects; Evaluate the effectiveness of investment projects; provides planning and operational management of the implementation of specific investment projects; Provides management of the investment process.

The investment manager must be a qualified expert in their field. He must know the theory of investment management, accounting, micro-and macroeconomics, principles of technical and fundamental analysis, mathematical modeling, the basic laws and regulations, including those relating to taxation issues. Manager must be able to organize the collection of necessary information, conduct analysis and on that basis make a business plan. The task manager is to assess the effectiveness of programs and investment projects, the adoption of adequate investment decisions and bringing it to successful completion.

Investment Management - is an art. It appears that certain investors can choose the investment properties that generate more income than other investors, sometimes with less risk. But intuition is not enough. Without knowledge, without calculations, without appropriate analysis of the investor can not achieve successful results. For fruitful work in the field of investment management requires knowledge of many disciplines. Developed the theory on which the established method of calculating the risk / return investment funds, investment optimization, evaluation of investment projects. The development of such methods, techniques, principles, it is desirable for anyone who intends to engage in investment.

PRINCIPAL OF SECURITY INVESTMENT

If you ask any investor what the secret for success or failure is, they would probably tell you that one of the key factors is: Your principles. In fact, regardless of whether you are a budding or experienced investor, it is quite right to say that your principles play the biggest role when making your investment decision. Most of the worlds prominent investors base their investment decisions on principles, with many of the successful ones such as Benjamin Graham, Warren Buffet and Thomas Rowe Price, Jr even going on to found investment concepts, principles and teachings. Notable investment principles include security analysis, fundamental analysis, financial analysis, growth investing and quality investing.

With numerous investment principles available, how do you decide which one suits you best, especially if you are just getting started in the world of investing? This leaflet aims to answer that question for you with THE 10 FUNDAMENTAL PRINCIPLES OF WISE INVESTING. We have analysed the words of the best investors and narrowed it down to these principles.

By the end of this leaflet, you as an investor will be able to:

identify the ten fundamental investment principles of wise investing; and define the characteristics of each fundamental investment principle.

What Are the10 Fundamental Principles Needed to Become a Successful Investor?

1) Understand the Difference Between Investment and Speculation 1. Most new investors fail to distinguish between an investment and a speculation. The main difference between speculating and investing is the amount of risk undertaken. Typically, high-risk trades where your decision becomes almost a gamble is speculation, whereas lower-risk investments based on below-average risk. On fundamentals and analysis is investing. The wise investor will seek to generate a satisfactory return on capital by taking on average or the other hand, speculators are try to make abnormally high returns from bets that can go one way or the other.

Example of a speculative trade: Invest in a volatile startup gold mining company that has an equal chance over the near term of skyrocketing from a new gold mine discovery or going bankrupt.

With no news from the company, investors would tend to shy away from such a risky trade, but some speculators may believe that the company is on the verge of striking gold and may buy its stock on a hunch.

Example of investing: Invest in a large, stable multinational company. The

company may pay a

consistent dividend that increases annually, and its business risk is low. An investor may choose to invest in this company over the long-term to make a satisfactory return on his or her capital with relatively low risk.

2) Perform a Detailed Analysis

Stocks represent a share of the business, and for this reason it requires a detailed analysis. To do this, try to create a mindset where you treat the act of buying stocks as if you will be owning a piece of the business. You will need to evaluate the stock price from the perspective of the underlying asset value, financial strength and future earnings prospects, instead of focusing on the short-term fluctuations in the market. Performing a detailed analysis will then enable you to identify the intrinsic value of the company.

3) Build a Margin of Safety Benjamin Graham, considered by many to be the father of value investing, often stressed the need to build a margin of safety. During the Great Depression, where a string of terrible days led to a more than 40% drop in the market from the beginning of September 1929 to the end of October 1929, Graham became a very cautious investor, placing the safety of the investment principal as the main priority via a simple calculation. For example, if the intrinsic value of a stock is RM1 and you buy the stock at the price of 67 sen, then your margin of safety is 33%. This serves as a cushion to your investment in the case of a market downturn while providing a margin of error in calculating the intrinsic value, so that the chances of you losing your principal is at its lowest.

4) Have a Realistic Return Objective The objective of investing is to make more money or earn a profit. However, we would advise against aiming for unrealistic return objectives. If you expect an abnormally high return from your investment, chances are you will be exposing yourself to unnecessary risks in order to achieve

them. This will turn your investment into speculation. Remember, there is no shortcut or quick way to make money! Instead, set a realistic return objective and then make investments based on sound investment principles and have the discipline to maintain the course throughout. Additionally, remember to consider the factors that may affect your returns such as the type of investment product, risks involved, fees and charges and more.

5) The Market is Your Servant, Not Your Master In principle, low risk equals low returns and high risk equals high returns. However, there are some investors who believe that risks and returns do not increase proportionately, and see opportunities in market volatility. For wise investors, the stock market is an almost manicdepressive[1] place! This is why wise investors should hunt for bargains during a market downturn instead of being fearful of investing. Risk can also be significantly reduced by understanding the businesses and exercising good judgement. Carefully searching for opportunity in a volatile market will help you obtain good fundamental stocks, especially those which are temporarily depressed due to market reasons 6) Invest in Products You Understand In order to be successful investors, we must acknowledge that there are some types of companies that we understand, and some that we do not. We should because to do otherwise is akin to earn good returns only invest in what we understand speculation. You dont have to be able to read the future to business model

from your investments. Instead, just try to identify well-run, growing as well as the financial side of

companies with reasonable valuations that you understand. Understand the and the various risks and opportunities that the company has, their business. You can make then educated qualitative opinions about the company.

predictions derived from quantitative facts and

7) Diversification Is Your Best Defense Against Risk Invest in a variety of assets and asset classes. Invest in different companies, industries, and perhaps even countries. To achieve true diversification, consider investing in different industries and, if possible, countries that are not subjected to the same economic factors or risks. Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk. For example, lets assume you own shares in a bus company. If supposing the bus company announces that its drivers are going on strike because of the lack of profitable routes, causing the trips to be cancelled, the share prices of the bus company are also likely to drop. If, however, you diversified your investments by also investing in, say, taxi companies, only part of your portfolio would be

affected. In fact, the taxi company share price may also increase as the public is forced to find new methods of transport due to the bus drivers strike. Remember to also diversify among different asset classes. Different assets - such as bonds and stocks - will not react in the same way to adverse events in the market.

8) Thinking of Timing the Market? Think again! It is very difficult, expensive, and time-consuming to try and beat the market (to gain returns in excess of the returns on the major asset classes) by market timing. In what is effectively a gambling approach to investing, market timing almost always leaves the investor burned.

Although opinions on market timing are divided, we say without doubt that it's very difficult to be successful at market timing continuously over the long-run. For the average investor who doesn't have the time (or desire) to watch the market on a daily basis, there are good reasons to avoid market timing and focus on investing for the long-run.

9) Do Not be Afraid to Seek Help

A fatal mistake often made by new investors is being too afraid or proud to ask for help. You may have read the best investment books and garnered knowledge from the best investment gurus, but it does not mean that you will be ready to jump into the investment world without any help! Good information and knowledge from qualified, licensed, and experienced financial planners, financial advisors, and brokers will help you achieve your investment goals.

Use the best resources available, but be aware of any possible fees and charges. After all not all knowledgeable experts are willing to share their knowledge for free. In addition, make sure advisors have the required licenses to counsel you on the broad range of investment assets you are (and should be) considering. Work only with licensed and registered advisors. Wondering if you are getting legally recognised and certified advice? The best way to verify this would be to log on to the Securities Commission Malaysia website at www.sc.com.my and refer to the Licensed Intermediaries section where you will find a full, updated list of individuals or organisations who are licensed to deal in securities.

10) The Investment World and the Fashion World are Not the Same! Do you consider yourself stylish, always following the latest trends and designs? Always eager to get your hands on the latest fashions, gadgets or must-have novelties? Well, in the world of investing, following the crowd usually brings nothing but disaster. More often than not, it results in paying way more than a company is worth. If you find that the price of a company is dictated by short-term exuberance rather than long-term rationality, avoid it at all costs. In fact, when making an investment decision:

Dont listen to hot tips or rumours Think about it, if the tips were really hot, how could so many people already know about it? And the trouble with rumours is that the chances of them being true AND false are 50/50, so dont bet on it!

Arm yourself with as much information as possible. From business magazines, to speaking to licensed capital market intermediaries, analysing the annual report and prospectus, and attending annual general meetings, knowing as much information as possible is crucial in helping you make a smart investment decision.

Ultimately, to become a successful investor you need to go above and beyond the aforementioned fundamentals. However the wise investor knows that mastering THE 10 FUNDAMENTAL PRINCIPLES OF WISE INVESTING is the stepping stone towards going above and beyond. So do your homework by obtaining, analysing and dissecting the right financial information. In addition to that, be highly sensitive to any news that affects the performance of the company or its relevant industries. Having the ability to derive your own conclusion from your research is an instinct that can only be honed by combining good fundamentals with the right investment attitude, perseverance and effort. Practise these 10 fundamental principles to help increase your own determination and faith in your ability as an investor, and prevent yourself from being blown away by the stock market!

SECURITY INVESTMENT

Investment securities held by banks are usually one of two main sources of revenue, along with loans. Investment securities provide banks with a source of liquidity along with the profits from realized capital gains when they are sold.

Investment securities are any type of investments that are purchased with the intention of holding onto the securities for the purposes of generating revenue. This is in contrast to securities that are bought with the intent to resell the investments within a short period of time. The idea is to acquire securities that are capable of providing some sort of steady return that can be used as a source of income for business operations or similar purposes. One of the most common examples of investment securities is found with commercial and investment banks. Along with the revenue generated from loans, securities of this type typically constitute one of the main sources of revenue that is used to fund the ongoing operation of the institution. This means that not every type of investment opportunity is ideal for this purpose, since some investments are not capable of generating a consistent return that is considered within an acceptable range. This means that investment banks that are looking to acquire investment securities will tend to steer clear of securities that carry a level of volatility outside of what the institution considers an acceptable range. Investment securities are selected based on their ability to generate an ongoing source of revenue that the investment bank can utilize for funding the day to day operations of the bank, such as providing cash to customers and writing new loans. The exact nature of the assets used for this purpose will vary, depending on the condition of the marketplace. In many nations, holdings of this type are considered acceptable as collateral for any type of business deal that the bank engages in, since the assets do have a proven value and a record of generating returns. There are several common examples of investment securities that just about any investment bank will include in an investment portfolio. Government-issued securities such as bonds are often considered ideal for this type of investment strategy. Along with the government-issued bonds, an investment bank would also consider any type of debt securities issued by national, state or even municipal government entities to be worthy of consideration. Generally, corporate securities are not held as a means of generating steady returns that are used as operating income.

In some nations, there are laws that prevent investment banks from making investments in any equity securities that are associated with non-financial businesses, creating a situation where banks often invest in other banks as a means of generating an ongoing revenue stream.

REVIEW OF INVEST PORTFOLIO

It is important that your implemented investment portfolio is reviewed on a regular basis to confirm that it continues to meet your financial concerns and objectives. The performance of your investments should also be reviewed regularly to assess the effects of changing economic and market conditions.

Specific factors that can impact on a financial plan or investment portfolio include: - Changes to your circumstances; - Regulation changes affecting Commonwealth government payment entitlements, taxation, superannuation or insurance; - Economic and investment cycles; and - Fund manager and investment/direct share performance.

Such factors explain why we offer an ongoing review service to our clients.We don't just place your investments and forget about you!

The goal of our ongoing service is to provide you with peace of mind and confidence that your money is wokring to secure your financial future. Our ongoing service fee is agreed up-front in writing and, in many cases, is tax deductible.

Article from economic times Are you a passive investor, who believes in investing and forgetting? Or do you monitor your investment portfolio closely, checking the performance on a daily, even hourly, basis? Neither approach is an effective way to grow wealth. If you fall into a slumber after investing and don't check the performance of your investments periodically, your portfolio may get out of shape. On

the other hand, if you can't sleep without checking the daily gains and losses in your portfolio, you might make rash decisions that would harm its long-term prospects. For best results, take the middle path to managing your portfolio. Don't make a habit of running through the numbers every day, but do not ignore the performance completely. You must review your portfolio at least once a year, advise experts. "Just like your car, your investment portfolio needs a check-up once in a while," says Neeraj Chauhan, CEO, Financial Mall, a Delhi-based financial planning outfit. Check the asset allocation The most important thing to assess during the annual review is the asset mix of your portfolio. This is simply the proportion of your corpus invested in different asset classes to diversify and contain risk. When you started investing, you must have decided how much to allocate to equity, debt and other classes like gold and real estate. Over time, however, this allocation would have changed because investment classes give different returns (see graphic). For instance, if you had decided to allocate 40% to equity and 60% to debt at the beginning of 2012, by the end of the year, the equity portion would have grown to about 44% of the portfolio. A change to this extent is tolerable and can even be ignored. However, in a year like 2009, when the stock market surged 71%, the equity component would have grown to 51% of the portfolio.

The change in allocation also alters the risk profile of the portfolio. You need to bring it back to the comfort zone by rebalancing it at this juncture. However, this is easier said than done. Rebalancing sounds practical, but is difficult to practise because it requires you to offload the winning investments and buy out-of-favour assets. Your stock investments may be doing well, but you should still sell them.

Rebalancing is another name for profit booking. When you reorient the allocation, you are essentially selling high and buying low. If you don't do this, you could be holding more equity in your portfolio than you would be comfortable with. You need to ask yourself if you can afford to expose your near-term goal of funding your daughter's higher education to the stock market vagaries? "Rebalancing takes away this play of emotions on your investing decisions. It ensures

that you remain invested in different asset classes regardless of the market behaviour," says Hemant Rustagi, CEO, Wiseinvest Advisors.

There are some practical gains that accrue to the disciplined investor who rebalances his portfolio. We tested how a portfolio diversified across stocks, debt investments and gold would have done in the past five years. The exercise threw up interesting, but predictable, results. An investor who put 50% in stocks, 30% in debt and 20% in gold, in 2008, and did not touch the portfolio after this, would have earned an overall compounded return of 7.5%. On the other hand, a person who invested in the same ratio, but rebalanced the investment every year, would have earned a return of 8.5%. Not tracking your progress or reviewing your portfolio is like walking with your eyes shut. Even the best asset allocation strategy might fail if it is not reviewed. "One cannot accurately predict how different asset classes will perform over time. Having the right asset allocation strategy can limit wide fluctuations in the portfolio," says Pankaaj Maalde, financial planner, ApnaPaisa.com. Mumbai-based Nila Pandit, who manages the investment portfolio of her family, learnt this the hard way. The portfolio had become sizeable over the years, but was concentrated in equity. It was impacted badly in 2008, almost halving in value. Pandit has now taken advice from a financial planner and has started investing in fixed income instruments as well. She also rebalances her portfolio to align it with her risk profile. "Today, I am more aware of the importance of proper asset allocation," she says.