Personal Finance

What is CIBIL Score? Is it a number? Is it your score on a test? Or from a game you played as a kid? Well, it’s not really any of these. You see, CIBIL stands for Credit Information Bureau India Limited and is used by Indian financial institutions to compute your credit score. This score is generally referred to as the CIBIL Score. The numbers range from 300 to 900, and the higher you are, the better it is. Learn Finance the Right Way What is a credit score? This is a three-digit number that goes from 300 to 900. It determines your credit risk or creditworthiness, i.e., how likely you are to pay your EMIs and credit card dues on time.  Credit bureaus such as TransUnion CIBIL, Equifax, and Experian publish credit reports and credit score that helps financial institutions to help assess the creditworthiness of the loan or credit card applicant.   There is nothing to worry about if you don’t know how to check your credit score/CIBIL score. You can go to the official CIBIL website to check your credit score.  Payment history, the debt amount, and the credit history timeline can be found in your credit report, impacting your credit scores.  What is CIBIL Score? Your CIBIL score is the primary thing any lender will look at to evaluate your loan application. A good credit score means that you have responsibly handled credit. A CIBIL score ranging from 700 to 900 is considered a good credit score. Your CIBIL score affects more than just loans — it increasingly affects your ability to open certain financial accounts and access investment platforms too. If you’re building your financial foundation from scratch, understanding how savings accounts work alongside credit is a useful starting point: Savings Account — Advantages and Disadvantages. This makes future lenders confident that you will be able to pay back the dues on time.  Here’s how the CIBIL Credit score is segregated:   <600 Low 600-649 Difficult 650-699 Possible 700-749 Good 750-900 Excellent As per the CIBIL website, there is a 90% chance that individuals with a CIBIL of above 750 will be granted loans.  Importance of good credit score  We have seen that a CIBIL score above 700 is considered to be a good CIBIL score. But what is the importance of a good credit score? Let us find out in this section.  Better chance of getting a loan  It is important to understand that other variables play a role when applying for a new credit card or loan. Lenders also analyze vital variables such as the income, existing debt of an applicant.  So, having a good CIBIL score isn’t the only parameter. However, having an excellent CIBIL score can make you more confident while applying for a loan or credit card.  Get the best interest rates  Individuals with high CIBIL scores can qualify for the best interest rates. It is because lenders see the individual as a financially responsible person who can pay the dues on time. So, the low interest rates help people with good CIBIL scores save money on their loans.  Ability to bargain  Having a good credit score means that you will pay less for a credit card or a new loan. If you need extra negotiating leverage, you can use other appealing offers based on the credit score that you’ve gotten from other financial institutions. Creditors are unlikely to compromise on the loan interest rate if you have a poor credit score as you may not have any alternative credit offers or possibilities. Get approval for higher limits  Your borrowing power is based on how much money you make and how good your credit score is. Banks are more probable to let you borrow more money because you have shown that you pay your debts on time. Having a good credit score is one of the benefits of having a good credit score. How to improve CIBIL Score? We have seen the importance of a good CIBIL score. Having a good CIBIL score is an important element of adult life. But what if your CIBIL score is low? Let us know how you can improve your credit score.  Check CIBIL Score: Checking your CIBIL Score and Report should be the first thing on your to-do list. It is because checking your CIBIL report can help you to understand the reason behind your poor to average CIBIL score.  Your CIBIL score may have taken a toll due to a wrong entry, or someone might be misusing your personal details. You can figure out the problem areas after carrying out a detailed analysis of the credit report.  Not applying for multiple loan products You may be tempted to apply for a loan at a different bank or NBFC if a financial institution rejects your loan request. But, hold your horses.     When you apply for personal loans, credit cards, home loans, or any other type of debt, financial institutions do a hard pull to review your credit record to make a subsequent loan decision.  Multiple hard inquiries have a basic problem in that they cause lenders to build a bad image of your credit behavior. Too many hard inquiries in a short period of time portray you as a credit-hungry consumer with a high-risk quotient. When presented with high-risk profiles, most lenders would either reject the application or give a ridiculously high rate of interest, which is simply not what you are looking for.  Pay loans on time  If everything looks fine, late payment of loans or credit card dues can impact your credit score. So, if you are prone to postponing payments to the last moment, opting for auto-payment of credit card bills and loan EMIs can be a better option. Moreover, many credit card holders fall for the minimum required payment. It is nothing but deferring your payments to a later date, which means that you cannot pay your dues on time, which might impact your credit score. Payment history makes up 30%, the highest

Brief on Fundamental Analysis Traders and investors need to make every move consciously and carefully. If you are a trader, you must follow specific methods to analyze and decide how to take the next step in trading. You can follow this principle either by fundamental analysis or technical analysis.  While there are many controversies against the first method, it has helped thousands of traders succeed. Here you should study various elements affecting the trade, analyze the expected result, and apply that to your trading. All the aspects like economic, social, political, and several other factors must also be thoroughly researched and analyzed in the process of fundamental analysis. In this article, let us examine the need for fundamental analysis, methods, and application.  Open your Free Demat Account Why should the fundamental analysis be followed? Any newbie trader will take time to understand the basics of trading to gain a lucrative sum. Though you may find it difficult initially, you can learn how to trade with the help of financial models and methods like fundamental analysis.  The fundamental analysis of stocks will help you know the companies’ current status and market value. More precisely, it tells about the factors that might affect the price of stocks.  You can also analyze the future value of the stocks and understand the financial health of a company and all their cash flow in recent times with the help of this method.  You can easily understand the market’s intrinsic value, which helps in rightly moving the stocks. Moreover, this method is relied upon for carrying out even forex trading. That is why fundamental analysis is key to successful trading, and many professional traders and analysts use this technique.  How to carry out fundamental analysis First, you should know in detail about the instrument that has to be traded. Updating yourself with the current market value, the competing companies, and the factors impacting quantity and quality are all crucial steps. There are various strategies for approaching the stock fundamental analysis, such as top-down analysis, bottom-up analysis, balancing trading rate and interest rate, knowledge of demand and supply, and so on. Let us see in detail about the different approaches. Bottom-up Analysis: This method is opposite to top-down analysis. You should concentrate on the minute factors of the company that influences the trade. The revenues and basic structure on which the company functions is crucial in this approach. Apart from that, you can also analyze the microeconomic aspects like individual stock instruments.  Top-down Analysis: The top-down method works by analyzing macroeconomic factors. Such elements are social factors like the growth of the overall economy relating to trade.  For instance, the employment status of the whole society will impact the trade and you must analyze this function. This approach, therefore, impacts the market on a large scale.  EIC Analysis: EIC known as the Economic, Industry, and Company analysis is a traditional method in trading. You must first analyze the large economy level and the related events affecting the fluctuations in trading. The top-down approach starts with macroeconomic conditions — and of all the macro factors, inflation has the most direct effect on stock valuations. When inflation rises, input costs go up, margins get squeezed, and the RBI typically raises rates — all of which compress what investors are willing to pay for a stock. Inflation — Definition, Types and Causes. Second is to know which industry is on the upper hand in trading. You will come to know about the flourishing industry and can predict the future value of that industry market. Lastly, the company in which you invest the stocks must be studied. The transactions and the cash flow are the factors under this category.  Make sure to concentrate on the company’s strengths and weaknesses first and then invest accordingly. The company’s debt, cash inflow, revenue, expenditure, and many more factors will directly influence the stocks you invest in. Accordingly, you can calculate the rate of return. Cash flow analysis pairs naturally with the income statement and balance sheet — the three together give you a complete picture of a company’s financial health. Cash Flow Statement: Meaning, Examples and How to Prepare It goes deeper on how to read it specifically for stock evaluation. Moreover, knowing about the competitor of the company and their economic status will help predict the stocks’ future. For example, by analyzing and investing in an established company with vast capitalization, you will know that there are equal risks and profit potential. There is much more to be studied regarding fundamental analysis like an expert. Learn Finance the Right Way Application of fundamental analysis in day trading As day trading involves buying and selling stocks the same day before the market closes, the fundamental analysis of the stock market comes into play. When you’re engaged in day trading, the company’s financials must be analyzed first. You must follow the primary economic data of the company daily from different sources.  Moreover, you must plan well ahead of doing day trading. Know about the company’s previous week’s economic calendar, which might help predict the market value of the upcoming week. Accordingly, the stocks can be bought and sold through day trading.  But mostly, technical analysis is practiced in day trading as fundamental analysis works for a long-term trade. Even after this, you can easily analyze the fluctuation and volatility of the stock value using fundamental analysis. When you continuously practice this method, you will get a hold of it, thus further increasing the success rate in trading. Apart from that, the history of fluctuating value of the stocks will help in applying technical analysis where the graphs are almost the same. One metric that bridges fundamental analysis with how a company actually performs day to day is EBITDA. Because it strips out depreciation and interest, it lets you compare operating performance across companies without accounting distortions getting in the way. EBITDA — Definition and Formula. Difference between the technical analysis and fundamental analysis When

Any company that wants to go public will propose its shares for the public to buy. The rate at which the company offers its shares is called an Initial Public Offering (IPO).  When investors think of investing or purchasing shares in an IPO, they look for the ones that give a good return. Grey Market Premium is an unofficial way to know which IPO might provide a good return.  Let’s dive into IPO Grey Market Premium, Kostak rate, and Subject to Sauda rate. Open your Free Demat Account What is IPO GMP? When a company comes up with an IPO, the calculated information based on the company’s demand is called Grey Market Premium (IPO GMP). IPO investors use GMP to comprehend the estimated price an IPO might list when it is announced.  IPO grey market starts in an unregulated market once the IPO date and price bands are publicized. GMP is affected by various factors like the existing market conditions, share subscription numbers, and demand.  Investors mostly look for this premium to gain a fixed return from the stock they purchase.  Grey Market premium increases when the demand for the IPO is high. This, in turn, increases the return of the investors. For example, if XYZ Company is going to issue its IPO in the next 20 days, at Rs 200 per share.  Some investors would not want to wait for these 20 days as they’d wish for the shares as soon as possible. This makes them buy and sell the shares prior to the issuance of the IPO. As a result of this, the Grey Market evolved for the IPO. GMP only exists because of the book building process — it reflects what traders think the cut-off price will be compared to what institutions actually bid. If you haven’t already read how the book building process works, Book Building Process of IPOs in India is the foundation. What’s the Kostak Rate? The amount an investor pays for an IPO application before the IPO listing to the seller is known as the Kostak rate. Kostak rates react to the demand for an IPO just like the Grey market. An investor can buy or sell their full IPO application on Kostak rates outside the market to fix profits. When the Kostak rate is applied to the IPO applications, even if the investor has not received the IPO allotment, the buyer must pay the Kostak rates for the IPO.  Theoretical examples like Kostak rates and public issue gives the likelihood of allocation. It also allows earning good profits. What’s Subject to Sauda Rate? When an investor purchases a share for the firm in the IPO listing, the amount decided in their application is called subject to the sauda rate. In simple terms, the rate at which an investor gets his IPO allotment for his application is Subject to Sauda rate.  If the investor doesn’t get an allotment, the sauda is canceled.  Like Kostak rates, investors cannot fix profits at the sauda rate. Subject to sauda is like a deal. The deal is valid if the investor gets an allotment during the listing. Say, for example, two investors have agreed on a deal to buy or sell shares after the listing at Kostak rates.  If the allotments are given, the buyer is liable to pay the extra amount over the Sauda rate to the seller.  If the buyer does not get any allotment, he is not liable to pay any extra amount. It is also said that the Subject to Sauda rate is directly associated with the Grey market during the IPO listing.  For example, a company called ABC is coming up with an IPO at Rs 100 per share. IPO Shares are expected to list in 20 days. A seller can sell their Retail IPO allocation of Rs 2 lakhs at Rs 5000 on ‘Subject to Sauda.’ If the seller obtains an allotment, they will get Rs 5000. If the seller doesn’t acquire an allotment, they won’t get anything. These are all ways to monetise an IPO application before listing — but they come with their own risks. If you’re thinking about going further and buying shares in a company before it even files for IPO, How to Buy Pre-IPO Stock covers that territory. How to Calculate IPO GMP? Let’s say the IPO of a company is fixed at ₹ 200. If its IPO Grey Market Premium is operating at ₹ 65, then that company will be listed at ₹ 265. This is done so that the investors get up to IPO GMP 65% of the profit on the day of listing.  If the investor trades his shares on a listing day, he earns a profit, and if he keeps it for a long time, it confirms to be beneficial in the long run. Latest IPO GMP rates IPO NAME IPO GMP IPO PRICE LISTING GAIN RAINBOW Medicare IPO ₹10 ₹516-₹542 ₹400 Adani Wilmar IPO ₹24 ₹218-₹230 ₹500 Past GMP rates (Closed 2021) IPO NAME PRICE BAND LISTING GAIN Data Patterns ₹320-₹330 ₹4000 Medplus Health IPO GMP ₹150-₹160 ₹2500 Metro Brands Metro Brands ₹0 MapMyIndia IPO GMP ₹690-₹700 ₹900 Shriram Properties IPO GMP Discount ₹0 Past GMP rates (Closed 2021) The grey market transactions are unofficial. No authorities are part of this. It relies on the trust between both parties. Subscribe only by viewing the Fundamentals of the companies. Trading or investing in Grey Market Premium is risky, and you must take some safeguards. The IPO grey market premium of any company is specified by its Demand. Learn Finance the Right Way Buying and Selling in the Grey Market As the grey market is unofficial, the parties involved need to trust each other while making deals. No authorities are involved in this market, and the lawsuit would be difficult to make if something goes wrong.  Investors make their risks while trading in this market. The fluctuations in this market are high, which again may seem like a risk factor for investors. 

The secret to financial freedom lies not in working for money, but in making your money work for you. Not utilizing your money to maximize your wealth is a lost opportunity. This is a big mistake that many people commit. This is what sets them apart from the rich. Having a wealthy mindset is necessary to get financial freedom. And this can only be achieved by investing in assets that generate income. By investing in income-producing assets, you can earn money without having to actively work for it. But first, let’s understand what exactly income-producing assets are! Open your Free Demat Account What are Income-Producing Assets? A financial asset is anything that you own/purchase, which gives benefit over a long period of time. Adding to this, income-producing assets are those assets that generate income for you in the future. They act as a passive source of income and help you multiply your wealth. Investing in a diverse range of such assets can help you generate higher returns at a lower risk. A diversified portfolio is essential for successful investing. So if one investment fails, you can recover your losses from other assets. Let us look at the top 8 income-producing assets to build your wealth. 1. Business Investing in a business – be it online or offline – is one of the most popular and profitable ways to invest and maximize your wealth. Though businesses require a lot of work upfront, the earning potential in this segment is unprecedented. Most billionaires and millionaires earn their wealth via businesses only. However, there are also some downsides and factors to consider while starting a business. Businesses usually require a high financial commitment from the owner. On top of that, there are many business risks that may affect your venture, which you cannot account for beforehand. Alternatively, you can go for either a traditional offline business or an online business. You can set up online businesses as a side hustle. And once it is up and running, you might not have to monitor it consistently. Moreover, the capital requirements in an online business are lesser, and it can also have a higher profit margin. However, it is important to note that actual capital requirements and profit margins may vary. Such factors actually depend on the nature of business, and the industry you operate in. 2. Real Estate There is no shortcut to making wealth or get-rich-fast method in real estate. However, real estate is an investment alternative that has relatively low risk with minimal barriers to entry. 90% of the millionaires accumulate their wealth by way of real estate investment. But what is to be noted is that most of them were far from rich when they started. One of the major benefits of real estate investing is that there is never any shortage of demand in this sector. Everyone requires a place to live, and with the population rising consistently, it is assumed that this demand is not going to vanish for quite a while. Secondly, there is no need for marketing, and even if there is the marketing cost is very minimal. Appreciation of real estate investments is what enables investors to make the biggest money in this sector. Though real estate generates a steady cash flow in the short run, appreciation or the increase in the value of assets over time is the long game. The annual average appreciation rate in India is 3.6%. So, if you purchase a property for Rs 40 lakh, and it appreciates even by 3%, the property would be worth Rs 41.2 lakh. This appreciation in the value of the asset will not only cover any mortgage that you may have taken to finance the asset but also leave some profit in the hands of the investor. REITs in India are still relatively new — SEBI only introduced the framework in 2014 — but they’ve quickly become one of the most accessible ways for retail investors to earn rental income without owning physical property. REIT — Real Estate Investment Trust in India  covers how they work, how they’re taxed, and the key listed REITs in India worth watching. 3. Stocks Often individuals hesitate from investing in the stock market thinking that stock investing is very risky and time-consuming. However, nowadays investing in stocks has become quite easy. This has become possible because of evolving technology and development in the stock market. Investors can buy and sell stocks with the click of a button, and learn about which stocks are the best performing in the market. Stocks offer portfolio diversification and liquidity and also generate dividend income. Moreover, stock market investments prove to be a great hedge against the rising inflation in the economy. Historic data has shown that in the long run, stock market returns have always been very generous. Patience is the key to stock market investing. Though individual stock prices fluctuate on a daily basis, in the long run, investors most definitely see their money compound and grow. However, it is to be noted that stocks should be picked only after careful consideration and due diligence. This leads to minimum risk and maximum returns. Another way of investing in stock markets for those who lack the time and skills to pick a good stock is investing in mutual funds. Mutual funds are baskets of securities offered by Asset Management Companies. Reputed fund managers head these mutual funds. And they only select the stocks after in-depth consideration and analysis. Of these, stocks and mutual funds are the two that most first-time investors compare directly. Investing in Mutual Funds vs Stocks breaks down exactly how to decide which one fits your situation — risk tolerance, time horizon, and how hands-on you want to be. 4. Bonds and CD’s Unlike stock market investments, Bonds and Certificates of Deposits (CDs) are debt-based instruments. They possess a lower level of risk. These instruments are a good investment for risk-averse investors and those who wish to safeguard their

Many of us feel that investing in the stock market is very difficult and demands vast knowledge. However, a dissection of the fundamentals of dealing in publicly traded companies can offer a thorough knowledge of buying shares. Investors frequently use equity shares as a kind of investment. The enormous gains provided by equity shares are the main factor behind its popularity. Equity shares are issued to the general public to raise money for corporate growth. The major part of the funding for many companies comes from public investors. So, let us understand what is Equity Shares, its risks, features, types, and how equity shares can reward us in the long term. Open your Free Demat Account Equity Shares Meaning Before getting into equity shares, let’s understand the equity meaning. Equity, in simple terms, is the part of the company’s ownership, which is distributed through equity shares to different investors. Equity shares, often known as stocks, are a source of long-term financing for a business. Investors receive equity shares from a business in exchange for a portion of the company’s ownership.  When you buy equity shares in a firm, you become a shareholder and have voting rights over the management of the business. Additionally, the company pays dividends to its equity stockholders to distribute its earnings. Who Would Buy Equity Shares? Equity shares are a terrific investment for people who want to grow their money. Investors can sell their shares to make big profits when their value increases. Another reason one should invest in Equity shares is to fight rising inflations as returns are diminishing everywhere, whether it is fixed deposits or any other mode of investment.  In simple words, it is the way to earn maximum profits in a limited time by purchasing shares of a company.The case for equity is simple: over long periods, no other asset class has consistently beaten inflation the way stocks have. But the key word is “long periods” — equity rewards investors who stay invested through the ups and downs, not those chasing quick gains. If you’re wondering where equity fits alongside other options like real estate, fixed deposits or gold, 8 Income Producing Assets to Build Your Wealth gives a useful side-by-side picture. Types of Equity Shares Ordinary Shares: In order to cover long-term expenses, money is raised by issuing shares. Shareholders have the right to participate in management decisions and other business activities. Therefore, significant voting rights are granted to shareholders who own most of these shares. Preference equity shares:  Before returns are divided among regular shareholders, preference equity shares are typically issued to investors as an assurance of the payment of accumulated dividends. The right to vote for holders of preferred equity shares is prohibited. Bonus Shares:  These shares are issued to investors as a bonus or extra shares when the company earns extraordinary profits. It is a type of reward to the investors who trusted the company and invested. Rights Shares:  Certain shareholders are provided with these shares at a reduced price, thus increasing their ownership in the corresponding organization. A company grants rights shares to investors for a set period while it raises the necessary funds to cover its operating costs. Learn Finance the Right way Features of Equity Shares Irredeemable In Nature Throughout the existence of the company, investors are not given their investment money back. Equity shareholders will either get back their investment when the company closes its operations based on the value of their equity shares, or they may sell their equity shares to redeem them. Participation in Voting The ability to vote in elections for general managers and other company officials, apart from being a part of management decisions, is unquestionably the most significant benefit of owning equity shares. This is because the company’s operations directly affect the returns that equity shareholders receive from the company.  Typically, each share represents one vote. It means that if you own more equity shares, you also have higher voting rights. Participation in meetings  The investor who holds the company’s equity shares is automatically eligible to attend the important meetings of the company. They can give their suggestions in AGMs (Annual General Meetings) and cast votes in favour and against any resolution. Payment of Dividend Dividend payments are also available to equity shareholders. Dividend payments to equity owners are not fixed and may change according to the company’s performance and the achievement of specified objectives. Equity stockholders are therefore entitled to dividend payments, although these payouts are not promised.  High Rate of Return Although equity shares have great risk and volatility, they also promise greater returns. Therefore, investing in equity shares can help you build a sizable corpus with excellent returns if you have higher risk tolerance.High returns from equity don’t come randomly — they come from companies that grow their earnings consistently over time. One of the simplest ways to track this is Earnings Per Share (EPS): if a company’s EPS keeps rising year after year, that’s a company creating real value for its shareholders. EPS — Meaning and Formula. Diverse in Nature Investors can build a broad investment portfolio by investing in business shares from multiple fields or businesses. By exposing you to stocks from multiple companies, diversity helps you to build a solid portfolio with predictable earnings. Limitations and Risks of Equity Shares It is prudent to analyze all the aspects of investment as anything that comes with benefits also have some limitations. It means that equity shares investment doesn’t always produce profitable results.  Although you can make significant profits with equity shares, there is a possibility you could also lose all you invested. Even if it’s not all your investment, you could still suffer massive losses if the business doesn’t make a profit or if the market as a whole is unfavourable. Let’s understand more in detail the limitations and risks of investing in equity shares: Capital Loss The supply and demand for equity shares determine the share price. Shareholders start buying more stocks