Home   |  Issues  |  The Daily Star Home   |  Volume 7, Issue 04, Tuesday, January 24, 2012

 

 

SPOTLIGHT

7:20 am The wake up call
9:00 am Off to work
12:00 pm At the bank

A day with my best friend

Those who say, "Dogs are a man's best friend" are, without an iota of doubt, wrong. To opt for dogs leaving aside friendlier aides is a true form of injustice.

Consider this, you wake up in the morning, and stretch your hands to snooze the sound of the alarm clock. Lazily you shift to the washroom, do your morning rituals, wash your face and clean your teeth.

You then put on your office garb, sit for the omelette-and-bread breakfast and head out to work on a CNG.

To cut the long story short, our complete existence is befriended by this friend. If we look deep into our materialistic world, the omnipresence of money, in every sphere of our academic, professional and even our social lives, will surely stupefy.

This week, Star Lifestyle zeroes in on our apparent best friend, money.

We start off, on a humorous note as Sharier presents a day in the life of a beggar with his best friend. Come to think of it, it is not all too different from a life of one of our own, despite being from a more affluent stratum.

M H Haider presents for you investment options, traditional and unorthodox. If you were thinking of investing on stocks or bonds and the current global recession stopped you, think again because there might still be ways of making your investments secure. Flip to Page 6 for more.

On Page 7, Osama Rahman explains the need for plastic money a.k.a. credit cards. Keeping pace with the events of the more developed nation, we, Bangladeshis have now caught up with the fever of living on credit. Is it justified, is it reasonable and more importantly, is it viable? Read as Osama explains in detail.

You are probably reading this sipping morning tea, or on your way to work or maybe late at night. You close your eyes to get some sleep, how many of you don't dream of money? Maybe for a car that you really need, a vacation you can't afford or a college degree you are just struggling to get. So the next time you think money is not all around you, think twice!

Concept: Based on the award winning stamp exhibit of Ezio Gorretta, A Day with my Best Friend. (www. fipthematicphilately.org)

2 pm A look at your investments
5 pm A walk for shopping
8 pm Dinner with the fiancé
11:30 pm Dreaming of millions

SPECIAL FEATURE

Investment for dummies

For many, making a simple investment decision can be mind-numbingly difficult. Many fear downfalls whilst others never even try as it seems like a puzzle. However, the augmented income can provide for many luxuries that have been a bit tough to afford with your current income. Hence, this week, Star Lifestyle presents to you a beginners' guide to some of the common investments you can make in our country.

When you read about investments these days, the first thing that probably pops in your head is the stock market.

There are two kinds of stock markets within the whole: the primary market and the secondary market. The primary market is where a company releases its new shares -- Initial Public Offering (IPO). You apply for IPO shares, and a handful are selected by lottery. If you win, you buy shares and sell when the price goes up.

The secondary market is where pre-existing shares are traded. That's where the thrill is!

You can make money in two ways out of the stock market. You may buy with the objective of earning the company's dividend. When you own a company's share, you are basically the owner. Hence, we are entitled to that percentage of the profit too.

Of course, the company may not distribute dividends in some cases, for example, in periods of loss.

The second way of earning money by investing in the stock market is by earning net capital gain. You bought a share spending Tk.200 for example. Today, you see that it has increased to Tk.280. You sell it off and make a net capital gain of Tk.80. But, you also pay a commission to the broker every time you buy or sell.

Stock prices are determined like any other goods or services: the demand-supply dynamics. But amidst all the chaos our stock market has stirred up, is it wise to invest there now?

The bubble indeed saw a burst. There was a time when it seemed that literally everybody was investing in the stocks and making huge profits.

Conditions have now changed. It is not impossible to make profits, but the margins are likely to be low, whilst bearing high risk. One may argue that the market is not stable now and prices are at a free fall. Be extremely careful.

On the other hand, if you consider long term potential, it might just be the good time to buy shares -- since they are now at very low prices.

But if you want to buy and sell quickly, but are anxious about whether you can make a profit or not, here's what you can do: “rehearse!”

Analyze the real graphs, news and information you have and run an imaginary, virtual investment for a few months. Do everything you would do if you actually invested. Keep a record of your buying and your forecasts. See if you make a profit. This will give you experience without actually investing, and will also help you decide whether you are capable of actually investing or not.

 

Investing in the stock market is a relatively risky investment when compared to some others. But, as a general rule, high return ventures come with high risks and vice versa; high risk, high return; low risk, low return.

If you want a low-risk investment, bonds might be right for you. You might also consider it a good investment if you find the share market to be a rough ride.

Bonds are issued by the government to raise money. The government, over time has released numerous bonds for various purposes.

Buying a share makes you an owner; buying a bond on the other hand makes you a lender. Hence, you earn interest. Here's how a bond basically works: you buy a bond which has a maturity date of, say, 5 years. At the end of the five years, you get your money back plus the interest.

If you sell the bond before the maturity date, you get your money all right, but you earn interest at a lower rate.

Bonds are relatively simple to deal with. The beauty of bonds is the low level of risk. You can buy bonds from banks and post offices.

A different form of bond is a prize bond. Prize bonds pay a handful of people, decided through lottery. If you don't win, you can get the money back. You can actually get cash back anytime, even before the lottery takes place.

Another option you have for investments is bank schemes. As you know very well, banks have come up with various plans that promise to multiply your money. Here again, the risk is relatively low.

Different banks have so many different offers to choose from. Some offerings enable you to earn monthly, whilst others yearly or sometimes even at the end of the period.

But if you personally don't like dealing in interest, there are some Islamic law based schemes on the basis of profit-and-loss sharing. Here, you might not get a steady, constant flow of return every period since it depends on the profitability of the bank.

Some banks have special schemes that pay for your child's higher education. You are required to deposit an amount regularly till the end of the term, when they pay back all the installments, plus interest.

Whether you invest in bonds or bank schemes -- or even shares -- make sure you don't overdo it: do not invest so much that you'll end up with less cash in your pocket.

Liquidity crisis is the problem people, organisations and even countries suffer from when there is a shortage of cash. Emergencies and sudden and unexpected need for money do occur; make sure you don't tie-up all your money in an investment.

If possible, try to have a diverse portfolio. A portfolio is simply the collection of all your investments. So, if you invest in the stock market, don't restrict yourself to one company stock, try to get hold of other companies' stocks too; whilst also having a stake in bonds or bank schemes.

But the field of investment doesn't end here. Ask yourself whether you can turn a hobby into a venture; at least small-time. For example, if you like gardening, you might think of growing or taming orchids, bonsai plants, etc and selling them. Pigeons, stamps and many others can be investments too if you are passionate and have the right connections.

Make sure you have extensive knowledge about what you are dealing with, be it the stock market, orchids or what have you. Study hard and do your homework well. It is only then that you make the best investment decision ever: investing in yourself.

By M H Haider
Photo: Lifestyle Archive

     
 

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