PENNY WISE
HOW TO MAKE YOUR MONEY WORK FOR YOU
An average Indian spends more time selecting the clothes he wears than on financial planning. For most people financial planning is a complex topic. However, it isn’t that difficult. It is the simple discovery of finding what to do with your money and what the money can do for you. Financial planning is very important for you and your family. You can’t predict the future—there could be many unforeseen circumstances in life. Proper financial planning will help you face that situation better. Once you have identified your needs, the next step is to find out what asset class you have to invest in to meet those needs. Let us limit ourselves to five asset classes for our examination. The most common asset classes we invest in India are debt instruments, equity, real estate, gold and insurance. I am including insurance here because insurance products have a good level of penetration in India. Let us now see what our approach should be when it comes to insurance. You should buy insurance cover depending on your long-term insurance needs. As for gold, most Indians are overweight on gold. So, I wouldn’t advise anyone to invest in gold. Real estate is the other avenue. Clearly, there is an enormous opportunity in real estate today. However, one should invest in real estate only after obtaining proper advice. The most important thing here is that you should at least own the house you are living in. At least that much exposure to real estate is a must. Coming to debt, we have some money always lying in our bank accounts. My advise here would be to not keep a lot of money in bank accounts. Keep what you need for the next one month. Even if you don’t need the money for three to six months, invest it in a liquid fund. This, as you know, would give you tax-free dividend. Now let us move to equity. Before investing in equity, I would like people to look at these four points: One, they should have enough money for the next five years. Two, you don’t need 20-50% of the money on a temporary period. Three, if you don’t have enough skills, you should seek the help of professionals or a mutual fund. Finally, follow this thumb rule while taking exposure to equity: Your equity exposure should be 80 minus your age. Don’t underestimate the power of debt. When you are investing in stocks you should remember that its price is the reflection of how the company is doing. What are its future prospects and what is the investor perception? Don’t lose sight of important aspects like its past performance record and the quality of management. Always remember that all companies are not the same. Do your research. If you can’t, seek professional help. If you are taking the mutual fund route, check the track record of the fund manager. Remember the old saying: Time in market is more important than timing the market. If you follow the mantra of spending more time in the market, you would do well.

5 lessons from Philip Kotler

Philip Kotler was once told, "I thought you were the author of one book (Marketing Management) and 34 versions of it." The man who's been called the "messiah of marketing" smiles as he recalls the incident, but there's an element of truth in that quote.
Marketing has undergone a sea change in the three decades since Kotler's first book - now considered a Bible for all marketing management students - hit the stands. Today, Kotler says he would be embarrassed if someone asked him to autograph the first edition of the bestseller.
In Mumbai to address a seminar on "Marketing For Results", Kotler says even his 4Ps theory (product, price, place and promotion), that's taught in every kindergarten marketing course, could do with some additions.
"Several Ps are missing. People, packaging...," he proceeds to take class on the A-B-Cs of marketing. The three As that every marketer should swear by are "awareness, availability and access" and the CCDV concept is to "create, communicate and deliver value".
'India is on a roll'
The problems for marketing? "It has become a one-P discipline. Selling," Kotler declares. Maybe he means "peddling", because the guru is clearly unhappy with the stop-gap approach many managers adopt these days: "Marketing professionals lack accountability and hence take short term decisions."
Kotler recommends that CEOs should get a pay-out several years after they leave an organisation, which may engender more long-term decision-making.
Some lessons from the day-long seminar:
Lesson 1: R&D must be market-ready
Kotler had a poser for his audience. His question: "If you were the chief marketing officer of your organisation, who would you prefer to be close to? The CEO, CFO, CIO (chief information officer) or the CRO (chief research officer)?" There was no single opinion, so Kotler decided to have the final say. He would have had it, anyways.
According to Kotler, the CMO needs to be close to everybody from the CEO to the CRO. Typically, the CFO does not see logic in investing behind brands because he is not close to marketing. And, there is an 80 per cent failure rate in new products.
"The R&D is farthest away from customers, hence they often get it wrong," he explained. Now, even in research-focused organisations like IT giant Microsoft, "marketing has become the front door and their new product success rate has become higher".
Lesson 2: Number-crunching is more than just calculating market shares
"In B-schools most students choose marketing because they did not like accounts," quips Kotler. He recommends that instead, most marketing professionals must be "clued into finance" so that the other functions in the company take marketing seriously.
"The CMO must demonstrate the return on marketing investment," he says. Kotler recommends the creation of a marketing scorecard that captures the number of new customers added every year, measures the satisfaction level of current customers and indicates the brand health.
Lesson 3: The co-creation mantra
"Make your business a workshop where your customer can draw what he wants," recommends Kotler, adding "marketing is the delivery of experience". His example is the Four Seasons hotel chain that customises hotel rooms for its guests. Whenever possible, the next time the guest visits the hotel, he gets the same room.
"While the aim of business is to create satisfied customers, the truth is companies continue to lose unsatisfied customers."
The message: plug the leaks by exceeding customer satisfaction and customer delight, moving to a higher level - customer astonishment. Kotler feels that iconic brands like Harley Davidson and iPod reach these higher levels.
What else? Devise a net promoter score to track customer satisfaction levels. Round up your most loyal customers. Ask them if they would recommend your products to others and become promoters for your brand. If the number of those promoters is increasing, it's a good score. Otherwise get the point.
Lesson 4: Expand market size
Kotler begins this lesson with the story of Jack Welch, the legendary CEO of General Electric who made it a thumb rule that GE would only operate in businesses where it was a dominant player.
When Welch asked his managers about GE's market share in their business, the executives would give impressive numbers in the range of 50 per cent.
Welch would reply, "I think it's only 10 per cent. We have not tapped the rest of the market." Kotler's point: in your rush to hit the bull's eye, don't miss out on the markets that surround the sweet spot. The dart board is bigger. There are more places to hit.
Lesson 5: Strategic trajectory for Indian brands
Indian companies face two challenges - defending their markets against the invasion of foreign labels. The second is to develop strong global brands themselves.
According to Kotler, the trajectory for Indian brands is to move from being seen as low-cost average quality products, to low-cost superior quality and finally to higher-end products.
He gives the example of Haier, the Chinese consumer durables company, which has successfully acquired a global brand status. In its first stage, Haier fixed quality. In the second stage, the company diversified its product basket from just making refrigerators to mcrowaves, dishwashers, vacuum cleaners and other products.
The third stage was to globalise. Most importantly, Kotler recommends that Indian companies must lean on research. "Instead of reducing marketing to advertising and selling, it makes sense to stick to research," says the 75-year-old, with child-like enthusiasm for his pet subject.

Mechanism of Stock Market

It was autumn, and the Red Indians on the remote reservation asked their
new Chief if the winter was going to be cold or mild. Since he was a Red
Indian Chief in a modern society, he couldn't tell what the weather was
going to be.

Nevertheless, to be on the safe side, he replied to his tribe that the
winter was indeed going to be cold and that the members of the village
should collect wood to be prepared.

But also being a practical leader, after several days he got an idea. He
went to the phone booth, called the National Weather Service and asked
"Is the coming winter going to be cold?" "It looks like this winter is
going to be quite cold indeed," the meteorologist at the weather service
responded.

So the Chief went back to his people and told them to collect even more
wood. A week later, he called the National Weather Service again. "Is it
going to be a very cold winter?" "Yes," the man at National Weather
Service again replied, "It's definitely going to be a very cold winter."

The Chief again went back to his people and ordered them to collect
every scrap of wood they could find. Two weeks later, he called the
National Weather Service again. "Are you absolutely sure that the winter
is going to be very cold?"

"Absolutely," the man replied. "It's going to be one of the coldest
winters ever."

"How can you be so sure?" the Chief asked.

The weatherman replied, "The Red Indians are collecting wood like
crazy."

This is how stock markets work!!!