Ashish went to a nice restaurant for dinner with his 4 colleagues six months back. They had a fun evening and the bill for the dinner came to Rs 12,000, which was split between 5 of them. Manish paid the bill and the others had to transfer their share to Manish's account. Everyone paid, excepting Rakesh, he forgot to transfer the money.

Today, Rakesh walks up to Ashish's desk and says, "Hey, I just realized I forgot to bring my wallet, can you lend me 1,000 rupees?" And suddenly Ashish goes into a flashback and recollects that dinner and Rakesh not paying his share. Ashish, with a fake smile, unwantingly stretches his hand to reach his wallet kept in his trouser pocket. He opens the wallet, with the unbroken fake smile, he sees that he has around Rs 5000 cash, but decides to lie to his friend and says, "Sorry Manish, I just have a 100 rupee note in my wallet". Rakesh to Ashish, "No problem Ashish, I'll ask someone else" and he left.

Why did Ashish choose to not help his friend?

Because of lack of credibility

You would not want to risk your money by lending it to someone who is not credible, because there is a likelihood of him defaulting again.

This was an everyday scenario. However, when it comes to the organised sector and if you want a loan, you must make sure you don't have a credibility issue. Because you might not even get a fake smile here, and the bankers won't even pretend to stretch their hands to reach their lockers.

Banks will decide whether to give you a loan or not, on the basis of your ability to pay. And they gauge your ability to pay through your CIBIL score.

What is a CIBIL score?
TransUnion CIBIL Limited, collects and maintains credit records of individuals on the basis of their loans and credit cards holding and repayment history. These records are used to create credit scores, which are provided to banks and other credit institutions in order to help them evaluate and approve loan applications.

The CIBIL score ranges from 300 to 900. Higher the score, the better. Ideally you should have a CIBIL score of above 750 to increase the chances of your loan application getting approved.

If a person is in urgent need of money, the worst thing that can happen to him is a bad CIBIL score. It is mandatory for banks to review a loan applicant's CIBIL score among other checks.

Having a good CIBIL score will not only help you get loans easily, but also you'll be eligible for higher loan amounts, lower interest rates on loans, longer duration of loans, etc. To avail these benefits, you must maintain a good CIBIL score.

How do I maintain a good CIBIL score?
Check your Credit report. The first step is checking if you have a low CIBIL score or not. If you have a low score, then you have to get it right. You shall:

• Pay off your credit card debt and any unpaid loans.
• Pay your EMIs on time.
• Reduce the number of loans and credit cards you apply for.
• If your credit card or loan application is rejected, do not apply for it again immediately.
• If you notice any errors in your report, you must appeal for its rectification on the CIBIL website.
• You must not exhaust your credit card limits. Ideally, you shall use 30-40% of your credit limit each month.
• Use the oldest credit card, the one which you have been managing well and have a timely repayment history. Get rid of others.
• Do not be card hungry. If there are 6 different banks offering you credit cards. Do not take all of them as you do not need them.
• Maintain an optimum balance between your secured loans (Eg. A home loan) and unsecured loans (Eg. car loan).

The above points will help you increase and maintain your CIBIL score. Even if today you have a good CIBIL score, keep the above points in mind as a small mistake can bring bring your score down. A high CIBIL score will help you get those loans easily and on better terms and conditions.

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Warren Buffet, one of the greatest investors of the world, the Chairman and CEO of Berkshire Hathaway, in his annual letter to the shareholders, presents investment insights, which are eagerly awaited by investors all over the globe. The annual letter to Berkshire Hathaway's shareholders 2016, was recently released. It encompasses Berkshire's performance, it's operating units, the American economy and the most looked forward to, pearls of wisdom from the investment guru. Out of the 28 pager annual letter, we have brought to you the key elements, which are particularly relevant in the Indian Investing context:

He says

“We’ve experienced both outcomes: As is the case in marriage, business acquisitions often deliver surprises after the “I do’s.” I’ve made some dumb purchases, paying far too much for the economic goodwill of companies we acquired. That later led to goodwill write-offs and to consequent reductions in Berkshire’s book value.”

Our view

When you buy stocks of companies, you pay for its fundamentals, it's past performance, it's future outlook, and for its brand value or Goodwill. The goodwill increases the PE multiple of the stock, which means you are paying a higher price for a given level of earnings. Purchasing a stock at a higher PE is not wrong as it may be high because it has good growth prospects, but it may be inflated because of higher goodwill. Hence you must be very cautious as this goodwill may fade away with time, bringing down the value of the stock. So, when you take a decision, don't just look at the name, rather focus on the fundamentals and the future prospects of the stock.

He says

Charlie Munger, Berkshire’s Vice Chairman and my partner, and I expect Berkshire’s

normalized earning power per share to increase every year. Actual earnings, of course, will sometimes decline because of periodic weakness in the U.S. economy. In addition, insurance mega-catastrophes or other industry-specific events may occasionally reduce earnings at Berkshire, even when most American businesses are doing well.

Our View

Be positive and have conviction in your investment. Your investment might sway due to periodic macro economic factors like the economics of the country or turbulence in the industry, but in the long term you'll have a positive average annual growth rate.

He says

Charlie and I have no magic plan to add earnings except to dream big and to be prepared mentally and financially to act fast when opportunities present themselves. Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.

Our view

Buy Low and Sell High is the simple formula for profiting. But the tendency of the investors is the other way round. They invest when the markets are bullish and panic and sell when the markets start falling. So, eventually they are buying high and selling low = Loss. Wise are those who see a fall in the markets as an opportunity, you get to invest in good companies at lower prices. Investors should invest in market downturn because when the market starts accelerating, and your investment takes the upturn, your gains would be soaring.

He says

You need not be an economist to understand how well our system has worked. Just look around you.

See the 75 million owner-occupied homes, the bountiful farmland, the 260 million vehicles, the hyper-productive factories, the great medical centers, the talent-filled universities, you name it – they all represent a net gain for Americans from the barren lands, primitive structures and meager output of 1776. Starting from scratch, America has amassed wealth totaling $90 trillion.

Our view

Believe in your country. India is the fastest growing economy in the world. Just look around, see the tall buildings, the flyovers, the new cars on the roads, the airplanes flying in the Indian sky, look at your own house, how you grew from a 2bhk to a 3bhk, from a Bajaj Super to a Swift Dzire. We are growing each day, it is an opportunity that we are living in a growing country, so it makes sense to invest when the graph is moving upwards, help the country grow further and relish the rewards from its advancement.

He says

Moreover, the years ahead will occasionally deliver major market declines – even panics –

that will affect virtually all stocks. No one can tell you when these traumas will occur – not me, not Charlie, not economists, not the media.…....... During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted. Investors who avoid high and unnecessary costs and simply sit for an extended period with a collection of large, conservatively-financed American businesses will almost certainly do well.

Our View

The markets have historically declined and risen again, and the only certainty is they will fall again and rise again. But no one can tell you when. The news analysts will advise you to sell your stocks during a slump, there will be panic. During such times, be calm. When there is panic around, consider it as an opportunity. When others sell, you get to buy at cheaper prices, and you'll be the one benefiting amid all the tension. If you panic, you'll be essentially contributing to your loss and an intelligent investor's gain.

So, the above were the important ideas, among many, extracted from Warren Buffet's Annual Letter 2016. Let's consider these insights as pious sermons of investing and incorporate them in our investing demeanor. Happy Investing!

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Post the chaos faced by the virtue of Demonetisation, the Aam Aadmi of India was hopeful of a liberal budget. And the budget did stand up to the expectations of the Common Man to some extent. The Budget 2017 has brought some good news for the common man. Following are some key highlights of the budget which a Common Man should know:

Tax: Individual Taxation has witnessed a number of welcome changes in this budget,

The biggest announcement made for the Common Man is the slashing of tax rate by 5% for individuals falling in the Rs 2.5 Lakh – Rs 5 Lakh Slab. This is a big relief for the taxpayers. There is a tax rebate of Rs 2,500 for individuals having an income of less than Rs 3.5 Lacs. This means if the income is Rs 3 Lacs, there will be zero tax liability, if the income is Rs 3.5 Lacs, then the tax payable will be Rs 2,500 only and if the limit of Rs 1.5 lakh under Section 80C is fully used, then the tax liability would again be zero for people with an income of Rs 4.5 lakh. For individuals falling in the subsequent slabs, there is a benefit of Rs 12,500 in total for them too.

The tax filing process has also been simplified by introducing a one pager return for individuals having a taxable income of upto Rs 5 Lakh.

However, the rich taxpayers falling in the slab of Rs 50 lakh to Rs 1 cr will have to pay an additional surcharge of 10%, while those whose income exceeds Rs 1 cr will have to pay a surcharge of 15%.

The budget has also put to an end to the RGESS scheme, under which the first time equity investors could claim for a deduction of upto Rs 25,000 for three years under section 80CCG.

Real Estate The budget has brought reasons to cheer for home buyers.

The unit size calculation under the scheme for profit-linked income tax deduction for promotion of affordable housing has been changed from "built up" to "carpet area", thereby increasing the size of the unit by around 30%.

For calculation of Long Term Capital Gains for immovable property, the holding period has been reduced to 2 years from 3 years.

Further, for those whose land is being pooled in for the creation of Andhra Pradesh's state capital, they will be exempt from Capital Gains for holding such land as on 2 June 2014.

For those living on rent and not claiming a deduction in respect of rent paid under any other Section of the Income Tax Act, you can now claim a deduction of up to Rs 60,000, up from the previous Rs 24,000 under Section 80GG.

The base year for indexation has been shifted from 1981 to 2001 now. So, for those holding property since ages, it is a good news. Since the cost of acquisition will be inflated while calculating Long Term Capital Gains.

Traveling: The budget was travel friendly.

There wasn't any announcement on increase in the railway fares. And the icing on the cake is you do not have to pay any service tax for railway tickets booked through the irctc website.

You will get clean coaches as an sms based 'Clean My Coach' service has also been started.

A new facility 'Coach Mitra' has also been announced which will provide a single window interface to register all coach related complaints and requirements.

Students

An e-learning platform called SWAYAM to be launched with 350 online courses, to enable students acquire knowledge virtually taught by the best faculty. And the best part is it comes for free. It is an effort towards providing the best education to all, including the most vulnerable.

Two new AIIMS for medical Students to be set up, one in Gujarat and another in Jharkhand.

Others: In addition to the above,

The banks have targeted additional 10 lakh new POS terminals by March 2017 and encouraged to introduce 20 lakh Aadhar based POS by Sep 2017. So, if you do not have a debit card or credit card or other modes of cashless banking, Aadhar based Sale Terminals will come to your rescue.

For senior citizens, Aadhar based smart cards, containing their health details will be introduced. This is a vital step taken to provide affordable healthcare and a good quality life to senior citizens.

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