@Leisure - Vol-5 | srei
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@Leisure - Vol-5

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Ponzi Schemes – The Million Dollar Scams

A Ponzi scheme is an investment scam. Investors are lured with the promise of extremely high returns at little risk, which they cannot earn through other avenues. In reality, the scheme generates no profits on its own. Old investors who ask for their money back are merely paid with the money put into the scheme by new investors. However, the scheme falls apart when new investors dry up or when authorities nail the scam.

These kinds of schemes tend to attract people who are not financially savvy and are lured with the promise of very high returns. Many of these schemes run for years and come to light only when there is turmoil in the financial markets and the scheme no longer gets fresh clients. Bernard Madoff’s scheme was one such scheme which collapsed in the 2008 meltdown.

This form of investment scam has been in existence for decades and has even been described by Charles Dickens in his novel Little Dorrit. But it got its name from Charles Ponzi who gained notoriety in the 1920s when he duped an unprecedented number of people. There have been many Ponzi schemes over the years. The following are the top five Ponzi schemes in history

Creator of Scheme Year of Collapse Instrument Used for the Scam
Charles Ponzi 1920 International Reply Coupons
Bernard Madoff 2008 Financial Markets
Adriaan Nieuwoudt 1984 Skincare Products
Sergei Mavrodi 2012 Financial Markets
Haiti Cooperatives Early 2000s Cooperative Socities
 
 

Srei BNP - The Right Choice
Srei Advantage

Strong Pedigree 

  • Srei BNP Paribas, is a 50:50 joint-venture between –
    • Srei Infrastructure Finance Limited – India’s only private sector NBFC in the infrastructure space
    • BNP Paribas Lease Group – the largest leasing group in Europe with a presence in over 15 countries.

Market Leadership

  • Largest construction & mining equipment financier in India with over ~30 % market share, with a customer base of over 30,000 built and nurtured over last 24 years.
  • Have entered in new sectors like information technology, healthcare, rural, logistics etc. to tap the attractive growth opportunity.
  • Current AUM of Rs.18,307 crs as on 31st March, 2014.

Presence & Tie Ups

  • Pan-India distribution network of 86 branches including 12 regional offices
  • Partnerships with over 210 leading domestic & international equipment manufacturers.
  • Full time employee base of 1,448 people as on 31st March, 2014.

 

 

 
 

Bond Returns: More than just coupon

When the government needs funds for public expenditure, it issues bonds. Bonds are debt securities on which the government pays interest. Now, in order to figure out how much you earn from a bond, you need to consider two aspects – the interest income and capital gains or losses if you sell the bond in the market before it matures. If you are wondering how one earns profits or incurs losses on sale of bonds in the market, read on to find out…

Let’s say you invest in a 5-year bond whose face value is Rs 100 and it offers interest of 9%. Now, this bond will be listed on the debt segment of the stock market. Like you, those who have invested in this bond, may not want to hold the bond for the entire 5 years. They can sell the bond in the markets anytime during these 5 years. This offers investors liquidity i.e. in case they need cash and don’t want to continue staying invested in the bond, they needn’t wait for 5 years till the bond matures.

Now, let’s say that market interest rates fall to 8%. This will immediately result in a rise in the price of your bond. The reason for this is that interest rates and bond prices have an inverse relationship. The logic for this is simple. A bond that offers a higher interest rate than what is prevalent in the market will naturally be quoted at a premium. Now let’s say the market price of your bond rises to Rs 110; at an annual interest amount of Rs 9 per bond, the yield on this bond will now become approximately 8%, which is the prevalent interest rate in the market. Now you have the option to sell your bond at this price and earn a capital gain of Rs 10 (Rs 110 minus Rs 100). This means that not only have you earned Rs 9 as interest on the bond you have also earned Rs 10 as profits or capital gains. However, if interest rates had risen, you would have seen a fall in the price of your bond, which would have resulted in a notional loss (if you held on to your bond) or actual loss (if you sold the bond) to you.

To conclude, when you invest in a bond, you need to have a view on the expected movement of the market interest rates.

 
 

Buddy Jokes

1. Chintu was sitting at the staircase and crying. His dad asked him why he was crying. Chintu replied “Dad, I've lost my ten rupee note.” Hearing this, his dad kindly said, “Don't worry; here, take this ten rupee note.” Now, Chintu cried even louder than before. His dad asked him, “Now why are you crying?” He replied, “I wish I had said twenty rupees!”

2. While performing a magic show, the magician asked a viewer, “Imagine that there is a five hundred rupee note in every pocket of your coat. What would it mean?” He replied, “Simple; that I have someone else's coat!”

3. Assume you have won lots of money in a lottery; your thought process would be:
(First day) I am rich! I can handle all this money!
(1 week later) I know how to use money wisely…
(1 month later) I know how to get into debt.
(3 months later) I know how to lose all my money.