Spend or Save

 It is always a conundrum for young earners who are told to save, but they have their own aspirations/desires and FOMO and to be seen as part of the young up swinging crowd.

While it may stem from pent up desires to spend on things you want, UNLESS you are earning a phenomenal amount of money, SAVING is a key ingredient for life long success.

Going out, travelling, buying things for short term use etc. should be done if at least 30% of your salary saving is done apart from your day to day expenses. If money is still left over after that, think of spending. Till such time, belt tightening or holding on to your gratification is key for a financially peaceful old age.

In older generation, investment in the house was key  and once that was done, pension used to take care or expenses were kept to minimal in terms of food/health.

Expectations from children were very high to take them through old age. Saving and Investment was not possible given the frugal income, large family of own and taking care of their parents.

But today's world is changing. The children have their own life and parents should have saved. The children also should start saving as they will be left in a no man's land with parents not leaving much and having spent their money in their youth, find themselves in a difficult situation.

Most of the realizations come when someone is in their 40's when they start to panic as they feel that in next 10-15 years they will retire and do not have the CASH or financial comfort to manage their old age.

40's also brings in panic investment and Banks usually bank on this insecurity and provide products which are more to get commissions than a safety net for the investor.

Believe it or not, a comfortable financial security at the time of retirement will bring far more happiness than the spends done at young age and in particular taking Debts or EMIs. If gratification can be postponed, and savings encouraged when young could lead to a peaceful retirement without the need to worry about the next meal. 

Read an interesting post and thought I will update this post on saving.

Method 1

Suppose you earn 100 - You will spend ,say, 60 on Needs like food/shelter/basics etc., you will spend 40 on Wants - like buying a new phone, new clothes, eating out, entertainment etc. You will end up saving Zero, which will impact you going forward.

Take the other saving scenario. 

Method 2

Suppose you earn 100- you save 20. You will spend 60 on Needs like food/shelter/basics etc. Now you are left with only 20 for your Wants and that will decide which of the want is critical and will buy or wait till you have enough money.

This will ensure you save going by the 2nd method.

The thumb rule for spending money wisely is

50% on Needs - housing, food, transportation, utilities, insurance etc.

30% on Savings -investments, emergency funds

20% on Wants - Travel, entertainment, clothes, electronic purchase etc.

1 and 2 can vary, but ensure the 2nd is maintained as closely as possible to the %age to avoid retirement worries.

 

 

 

THE DEBT TRAP

 Debt - such a simple word, but that is one which puts people into so much trouble.

It is primarily using tomorrow's income today. Debt is such a compounding quicksand that once you fall into it, it is near impossible to retrieve yourself.

When you are borrowing, you are not doing a simple debt, but you are borrowing your future. Living within your means is a universal truth for peace and harmony, but the moment you step into debt, your life is marooned and some at end feel giving away life as the only solution.

Why is DEBT such a bad word. It is because of poor management and thinking. A person in dire strait thinks he can quickly repay the debt, not understanding the interest, the penal interest etc and the pressure to meet the deadline.

Eg. You take 10,000 Rs for 1 year at an interest rate of 8% (which is normally 2-3% higher than fixed deposit interest in normal circumstances, but depending on whom you go to and your credibility and collateral can be 10% or more too).

Thus 10,000 @8% is 800 rs interest. So, you assume you pay 10,800 Rs at end of year. But the loan giver generally deducts interest upfront. So you are given 9,200 only. This makes the rate go to 8.7%. A subtle nuance but significant change.

You default in the first year, saying you will pay in 2nd year as you have used that money and income is not supporting the repayment.

Now it jumps to 10,000*8%=800 or you have to pay overall 10800 when you got only 9200. That is 10800/9200= 17.4%. This quickly jumps if there is a penal interest or you have hoodlums coming and knocking your door.

So many farmers commit suicide in India, till a bit of micro finance came. The local lenders used to charge 50-60% interest and take the children from the parents to work for them. The farmers take small loans thinking their crop will be good their prices will be good and can pay 50-60% interest and return their loan. But unfortunately, they are bonded and whole life they work for these money lenders who exploit them and also take away their lands.

Thus DEBT IS ONE OF THE DEADLIEST MEDICINE TO TAKE AND I AM TELLING ABOUT PERSONAL DEBT.

Companies taking debt, is though equally bad, however has a logic as they expand their business (i.e for revenue generation) by building more capital items. Thus if demand exists, say a cola company, as predicted by a hot summer and company puts manufacturing plant to make extra bottles of cola and sells it, it can recover its money and pay off the loans. Where instead of a hot summer, it is a cool weather, the Company can get into a debt trap.

Reason why the Companies take Debt is something called Debt Leveraging. For a company to get equity funds (no expectation of return, but take the risk that company will pay you good dividends if it makes profit) is difficult as equity holders give out at say Risk free govt bond rate (say 7%) PLUS Risk premium (which can be say, 4%). That is equity holders expect a 11% return. If company can get from Bank @ 8%, and generates income, it effectively saves 3% (11%-8%).

Investors when investing thus look at financials and see if the Debt is reasonable for a company- what is called the Debt/Equity ratio, which is a standard 2:1. You are taking Debt at max of 2 times your equity. Normally, business without hiccups can manage this and still pay a good dividend and helps in expansion in a growth economy. Investors will not touch a Company with Debt in declining growth company as they know that the Company will not be able to service their Debt. This is calculated in another ration called Debt Servicing Ratio (EBIT/Interest). This shows how many times you interest is covered by Profit. Higher the ratio, better is the Company.

On a personal Debt, 

1) Never borrow, unless you have sufficient Assets that can pay off the loans if required. (If you have gold or other FD amount invested and for short term you need Debt, you may take a chance as when time comes to pay Debt, you can sell gold or liquidate FD)

2) Never borrow on the assumption that your income in future will be sufficient to pay off the installments. If income stops for any reason, a huge burden will fall.

3) Never borrow, if you are not 500% sure that it can be repaid in your life time. You may die, but your children, wife carry that burden through generations.

4) Always maximize down payment, in case of large purchase like house, which will keep Debt at a Sane level as well as save on interest to avoid falling into a Debt trap.

5) The Debt trap is sometimes so bad that you get BP, Diabetes (all stress related) and on top of Debt you are burdened with medical expenses and repayment becomes near impossible.

6) Like someone said, Debt is like modern day slavery. Be free.

7) Debt induces Ostrich effect - Bury the head in Sand thinking Danger will be over.

Marriage and Expectation

 Charlie Munger's take on lowering expectations: “That's how I got married. My wife lowered her expectations.”

This got me thinking on Women getting married. Their initial expectation of a six pack, understanding, Shahrukh features etc. But as they grow older and don't find their expectation starts to go a notch lower. Investments are also like that. People start thinking of greats like Buffet worth in billions and soon realize that it is a long term plan and not an overnight success. Slowly, their expectations get lowered and invest slowly over  a period of time or some take huge risks and think they can easily earn money and put in investments which may turn out to be duds.

This interestingly brings a statistic test called Chi Square Test - an expectation test.

A chi-square test is a statistical test used to compare observed results with expected results. The purpose of this test is to determine if a difference between observed data and expected data is due to chance, or if it is due to a relationship between the variables you are studying.

Rich Charlie Munger died yesterday -28th Nov 2023 and remembering his famous quote on expectations.

Many people take trophy wife, more to show off, than having a real partnership. Both lead their own lives and come together for parties or for the paparazzi photo ops.

Like I mentioned in other blog that wife should be a person you grow old with and would greatly help if there is a common thread between them- either music, reading, watching movies or such other common hobbies that hold them together in old age. Young and high end hormones help for a short time, but what afterwards. That is the question on expectations and reality. Both have to be balanced. 

 

 

 

 

 

Diversify or Concentrate

 One of the biggest hurdle which a young investor faces is whether to concentrate or diversify your investment.

This persists over your life time of investment and in particular when you read one story that small and midcap has done 40-50% return or sometimes you see that small and midcap has collapsed. Thus at times, in particularly hindsight, you feel you should diversify or concentrate.

My personal take is as follows, Though I respect each individuals risk taking and risk losing ability.

If you are a person looking for a steady growth over a period of time and not bothered about 40-50% some one made or is making, then go for DIVERSIFICATION. That is out of 100 Rs, you put some in index fund, some in large cap, some in midcap, some in small cap and some in gold.

On the other hand if you are a person who likes to take risk and does not mind losing a large chunk of money (like a lottery), you may go the risky funds way. Like if you have 100 Rs, invest 50 in small cap and 50 in mid caps. It may or may not give you the returns you want.

Finally, if you have reached your goals of having sufficient money by following diversification at a certain point of life, you can take a chance and risk some in IPOs, small caps or midcaps or direct equity.

Thus Diversification on Concentration is a state of mind play as well as the backup funds you have. 

As a note of caution, while diversification is good, too much diversification will also not help. Thus 100 rs is invested in 50 stocks. A gain of 1 re in some will not generate wealth. Maximum recommended is 10-15 stocks or 5-6 mutual funds. This helps you to concentrate your understanding on these rather than getting lost in too many stocks.

Lemmings

 Lemmings are small rodents and not fish as some wrongly assume. Lemmings term is used when a crowd blindly follows something which it does not know. Just because some one is running on a fear or rumour, it also runs.

Investments are also something like Lemming. People flock to that particular investment just because returns are higher and the fear of FOMO is there and just flock to it. This can have negative effect and investment should not be on the basis of Lemmings.

To generate wealth over long term, requires steady, constant investment that grows 10-15 or even 20% beating the inflation. It's not like a dip into the sea when tide is low and come out when tide is high. It may work once or twice, but invariably people get caught in high tide and when low tide comes they are left without any clothes.

There are many examples in the last few years like the Real Estate, Sectors like Chemicals, Pharma, Banks, FMCG where people have put in investments at PE of as high as 50 and above and suddenly get disheartened when the stock crashes. This creates a negative mindset on investment and poor returns over long term.

Many people when they see some investors (over a long term) has made money in stock market, think that is the best place to invest and jump into it, losing a lot of wealth. People should realize that wealth is created over a long period of time layer by layer and not a quick dip.

Earn-Keep aside for investment-Spend should be the mantra for youngsters just about tipping their toes in the field of investment. This will help in generating long term wealth. As nations people become rich, investments will generate more companies to innovate and bring products creating a market and this cycle goes on.

Begin early investment to have a wealthy portfolio at the end of the twilight years.

 

Health Insurance

 While we are young, we eat all the junk foods as it is tasty and full of high sodium by way of salt and high fat by way of oil.

While some do exercise and eat moderately, for most of us it becomes difficult to burn off the excesses and over a period of time it leads to an unhealthy body.

Most of us are covered by medical insurance by the company when young (at least partly), but once a serious issue comes it can lead to a financial disaster.

As a prudent practice, it is always wiser to have a medical insurance apart from the Company provided to a) build a history of no claims and b) to gain confidence of the insurance company that you are taking care of health and easier to cover up pre existing as well as insurance above 60 years which are difficult to come by.

So, what are the medical insurance policies key things to be kept in mind

First, is one should take a Base policy. This can be, say, (in year 2023) INR 10 lakhs

Second one should take a TOP UP or SUPER TOP UP policy of , say,  INR 90 lakhs.

The second one is to cover any unforseen exigencies and is generally much cheaper than 1st one.

Other key points to note when taking Medical Insurance

a) Buy a Comprehensive Medical policy

b) ENSURE No Room Limit (This is critical as your claim is based on that)

c) No Sub limit on various disease (The ins. cpy puts a max on certain claims like diabetes etc.

d) Unlimited No of restore (This is to ensure if you, by chance, get hospitalized again to cover it)

e) MOST CRITICAL Life long renew-ability (Some ins. companies after 70 years do not renew the policy and you could be stuck) 

f) Maximum 2 years for pre-existing disease (DISCLOSE ALL YOUR DISEASE FULLY-EVEN IF AGENT SAYS NO. One of the reason claim gets rejected)

g) Buy the policy at the earliest ( 30 years to 50 years maximum). The older you get fresh policy comes at a higher cost

h) Senior Citizen policy is after 60 years.

Cost for Husband Wife less than 65 is around 30-50K /year

Cost for Husband Wife > 65 is around 50 K plus

For family (till kid is 18 years) buy a floater policy

Contact ditto - a company that helps with insurance without commissions.

As Rajaji said to R.Venkatraman, ex president when he went for condolences of one of the son in law, that it  was not a great thing to live a great age, "One has to bear the sorrows of the next generation".

 

 

Catching a falling Knife

 Recently one of our friend gave us a Ceramic knife as a gift. It was unopened for long and I started using it. As I was cutting at the edge of the platform, it slipped and fell and as is usual if anything falls you try to catch it. As I did that it gave me a small cut and fell down.

Reason for bringing this up is in Investment parlance, one is always in a dilemma of catching a falling knife. It means a stock is falling down steeply. Do you average the price as it goes down or do you let it fall thinking it will drop dead. Examples can be given of Yes bank, Vodafone India, Punj LLoyd, SREI finance, ILFS and the list goes on. Some recover, while some end up as DUDS.

The general investment philosophy of "catching a falling knife" is if the underlying business is good, then it can be caught, but if underlying business either due to regulation (Vodafone India) or bad luck (Punj Lloyd got caught in Iraq, Libya wars and civil insurgencies) or fraud by management (as in Yes bank) is bad - DO NOT TOUCH IT. If and only if the market has "temporarily" given it a thumbs down due to some issues (eg Nestle and Maggi) and is expected to get over it, you can then average it.

One more buying is by Pyramiding (as in opposite of Rupee cost averaging) is if business is good and started moving from an All Time High of 3-4 years, it may interest people to buy the stock.

Passion and Profession

 One of the oft repeated dialogues of modern generation is "Uncle I am following my passion" when asked, what do you plan to study after 12th or whatever school leaving exams.

In olden days Passion and Profession were two different entities. You could follow passion once you achieved Profession.

Let me put in perspective the distinction. Passion is doing what you feel like doing the best in an area of your liking. Profession is doing what gets you your daily bread and keeps the money flow to make your living comfortable. In olden days, Engineering, Medicine and finance used to be the profession that gets  you a good job and money. People followed those setting aside their passion as putting food on plate was more important than following the passion. Playing music, drawing, writing,  photography or any other artistic works involving passion was subset of the Profession. Javagal Srinath, Ashwin, Sivasri Skandaprasad and many others did Engineering (Profession) before following their Passion. My classmate the famous TN musician- Ramani Bharadwaj did his CA before becoming a top ranked musician in Tamil film Industry. It was always a backup in case the passion did not earn enough money or you got tired of it or you were not in the best of the league.

Rare were the cases where passion and profession met together.

Today, thanks to the Profession taken by earlier generation and having created a certain wealth level, it has given the freedom for the next gen to follow the passion on the back of a fall back wealth. In a way that is good, but my belief is that if you follow a passion that at some point of time does not make it a Profession (i.e money flows in- like say in IPL), the focus should move to the Profession. Passion can be a time pass, but focus on creating wealth.

This is the core of investing as without money, investing cannot be done and without investing wealth cannot be created.

 

Psychology of investment

One of the least discussed, in terms of tweets and SM platform which are flooded with recommendations and analysis of various investments, is the psychology of investment. No doubt there are various popular books that discuss these, but less talked about in Social medias.

Why is this important in our investment journey. Humans generally tend to be conservative. If they bought 10 apples, they will eat 1 or 2 and then keep it for next few days. This practice arises from the fear that they may not be able to get it later and thus enjoy over a period of time. Some economists also call this Marginal Utility.

Coming back to the psychology of investment, Investors generally tend to see what is Value At Risk. This means how much am I able to bear to lose in a worst case scenario. This acts as a security chain which prevents moving freely. 

Imagine  you are on top of huge cliff and there is a river flowing below. Would you dare jump. Some do and do it without fear, while others hesitate. This principle also follows in the investment world. A person with 50,000 Rs balance may take a giant leap and invest 49,000 Rs, while a person with 10 lakhs may consider investing 10,000 Rs. When the market jumps 100%, the 49,000 makes a total of 98,000 Rs (including investment), while the other guy makes 20,000 Rs (including investment). Thus for 1st guy VAR is 49,000, while for 2nd guy VAR is 10,000.

As I mentioned in my earlier post position (no of shares) as well as VAR are two critical factors in making money in the investment world and how good you are at it is the key.

To do the above, conviction on the shares you buy (which includes a lot of research) has to be there. It is always possible that you could also lose heavily like if market had crashed, the 1st guy will lose 49,000, while 2nd one will lose only 10,000.

One of the steps to mitigate the VAR is to build a portfolio over a period of 10-15 years. It is possible some of the items in the portfolio will be duds, but overall it will give you a good return.

Thus if you jump into the investment world, a certain risk has to be taken. Otherwise do not invest. If you expect to get 15-20% return without risk when the risk free return in govt. bonds/FD's is 6-7%, then you may as well forget about investment.

Having said above, it is also critical to save in safe investments that will at least allow you to pay rent and food, but may not get you high returns. While you save from salary building your positions, bonuses or any windfalls are key to invest more or hold cash without spending for the market to fall and take advantage.

This brings another aspect of Psychology. Holding Cash. This is a critical element in investment. When the going is really great that is some of your portfolio elements have you given you 50+% gains, you may want to cash part of it. What do you do with the cash you got. This is where smart people hold the cash. There is always the urge when you have large cash on hand to spend or invest ( without fear ) invariably without doing a research. This is where lot of people lose money and when the right opportunity comes, they find themselves without cash. Thus Holding Cash for long ( put in liquid funds or FD with a low return - 2-3%) is also a psychological factor for good investment.

Imagine someone had sufficient cash just before covid and when the market crashed or the 2008 financial crises when market crashed and bought some well known companies at a low price and keeping VAR and position in mind, he/she would be a big millionaire by now.

Thus psychology plays a big role in the way you invest apart from the fundamental/technical research that one does.

Some people invest when market crashes in a long and steady dividend paying company. This ensures a good yield of 7-8% and helps in keeping a regular income to pay for rent and food, while other funds can explore VAR.

 

 

 

Implementing a system

 One of the fundamental requirement of Implementing a system ( be it a process or a ERP system) is understanding how the operation works. Many of the consultants read some books and implement systems which are not aligned in with the operations, but are considered to be best practices.

Any system implementation requires a person (preferably from the company) to be in charge and who has a the full knowledge of the operations as well as the accounting behind it. Most experts are of a single domain (operations or finance) and merging the two requires a lot of skills in implementing.

Implementing a system requires, a) Process to be clearly identified b) understanding of what reports are needed to analyse the business c) discussing with the working staff to see what issues are there that are faced in practical terms d) leaving many blank cells in the Input format which can be later utilized to add data and finally e) Critical in those inputs formats or elsewhere are an edit or comment portion that has text field where comments are added and cannot be deleted. Only further comments with dates can be added to see a trail/history of why that was done. This is a preferable option in all the input formats to understand some unique situation that come up later and a solution is found.(Gives the support reasons why the process was changed at a later date. 

Lets take one by one - Processes.

These are to be defined clearly sitting with the operatives and their managers and seeing what is the best way to achieve the processes. Experts or  best practices can be studied and drawn up.

One pitfall that is to be avoided is that many managers and operatives come from places/companies, having worked elsewhere, and require the same set up to ease their work. This is the most trickiest and expensive portion of implementation as one has to study the out of box software (costs a standard fare) and making changes to the out of box software (very expensive for modification). The implementer has to understand and see that there is minimal disruption to the out of box software and see only whether key inputs that are not available in Out of box software is to be modified. Randomly acceding to the different category of people's requirement  will make it a very expensive and non ending situation of software implementation.

Reports

 At the end of the implementation of the system if the reports required for analysis are not available, then the system is a waste. If it is noted that required inputs were not captured for reports and no such provision exists, the implementation of system is a waster. Thus the reporting requirement is to be also tackled along with processes. This will give an indication of what inputs are to be captured which can then be incorporated in the report.

 

DISCUSSING WITH WORKING STAFF/OPERATION MANAGERS

 As mentioned earlier, working staff and operation managers come from varied background and having worked in different systems are not easy to adapt to new system easily. They are used to seeing a particular SETUP in their old company or in the current company itself and would not like to see a change in process or input. If you agree to everything what they say, then the project will be a multi year long drawn process with the company providing software and the implementer both getting tired. The Project manager has to take into account the views which impacts the processes and not fancy changes to looks on inputs forms.

 The implementer has to be stern but at the same time understanding. Just because a manager or operative has been used to seeing the date on right side and this system puts it on left is not a valid reason for modifying the system. KEY IS TO LOOK IF REQUIRED INPUT  IS CAPTURED.

Leaving Blanks in input form

One of the factors I found in the implementation is that sometimes the fields in input are set and later after say 6 months, you want to add a field, it becomes difficult as the tables in the database are set and linked and it will cost a lot of time and money and possible NO from the software provider.

It is always better at the time of implementation to add some fields that can have alpha numeric inputs, fields that can take in text comments and other boolean or any other character. This will greatly ease at a latter date if you want to capture some additional data for your input. Eg, if a customer data is captured in the data field and if a driver comes later to service the equipment, if a free field exists, his name can be added to later retrieve who come to deliver and pick up the equipment.

While implementing a large system with different business units and that has trading, construction, process industry, etc is a huge task, the above basic needs that can be kept in mind will ease the implementation process.

 

Why our graduates are unemployable

 One of the debates currently going on is the unemployment that is going on and on the other hand industrialists claiming a lack of trained graduates needed for a number of jobs.

Primarily, what has happened is the number of private engineering colleges for profit opened in the last few years and a majority of them offering IT courses. Students and Parents flocked to these courses with the ultimate aim of working in US/Europe for a good pay and possibly good life.

The Private engineering colleges, in order to make profit, took students with poor aptitude for the courses or intelligence for those courses to hand out a degree at the end of the course.

With too much supply and poor quality of students, unemployment has increased. The quality students got absorbed in  good companies in India and abroad, while those with just a paper certificate are left out doing BPO jobs or as delivery boys for Zomato or Swiggy or others.

Second issue is the lack of quality education that caters to the business needs of the country. Basic teaching of how office works - the filing, conduct of the meeting, the communication skills etc are not taught. Mere technical skills alone are not important in today's world. The ability to adapt to meet customer requirements are the keys to the current business world and not parroting bookish knowledge. In today's world knowledge is key and as much information is gathered before meeting a customer helps in strengthening your view point and countering the customer if required.

Another issue is that the students ( being children of current generation with ease of living and coming from one or two children family) opt for jobs like IT/Finance/Admin which will give them an AC office and free time to do SM/games on their mobile. Very few of the students opt for Civil/Mechanical/Electrical fields which will get them to work at site. Even if the get the degree in their field, their next option is to do an MBA to get back to office and 9-5 jobs.

 Regarding Medical field, the NEET exam is supposed to filter candidates with interest in medicine and the tough effort that has to be put in. However, many oppose the NEET and this dilutes the intake. We can understand some States opposition to NEET as it stops poor candidates from taking high paying coaching classes, but a solution can be found by discussing and allowing top 10 candidates in State Board to have direct access to medicines and by pass the NEET. This will ensure Quality of Doctors coming out.

The biggest issue is not NEET per se. It is the high fees that is charged in private Medical colleges ( costs 50 lakhs to 1 cr for a 5 year course) that detracts smart, but poor candidates from going for Medicine. The recent example of NEET having a zero percentage cutoff ( I imagine go write your name on the answer paper and you are selected) for PG courses is  precisely this. It costs appx 2.5 crs to do a two year PG course. Who will opt then for Medicine except the Richie Rich. This then gets reflected in poor service and high cost for medical treatment to recover the investment.

It is time, private college fees are capped and uniform exams conducted with exception of the exams for the top 10 or 15 candidates in the Board (state or cbse) reserved for them.

 

Investment and Food

 Investment and Eating/Food are majorly related. Like if you gulp your food when you are hungry and end up with an upset stomach, so too investment  made irrationally and fast could end up with a loss.

Thus what and how you eat is a lesson for what and how you invest. If you read and eat healthy, you remain in the pink of your health and if you invest wisely after reading a lot, you also ensure that the stocks you invest in remains healthy.

Another allegory is that if you take time to cook food and you are a good cook, the dish comes out well else it is burnt or too oily, salty, spicy etc. Similarly, if you invest doing financial analysis, technical analysis and various other methods of investing, you are likely to be a winner.

For those who do not know how to cook or cannot spend sufficient time, there is the ready made mixes available in the stores and similarly those who do not how to invest, there is the ready made mix in the form of Mutual Funds. Regularly invest and you could end up having a substantial healthy corpus end of 20-30 years.

Many of the chefs you see the videos of, use the mantra of keeping cooking simple to get the best dish. So too is investment recipe- keep it simple and your investment is done.

Some of the food that comes out well requires a lot of time- eg Thertipal (or the milk sweet). Recipe is simple - Milk + Sugar. But it is kept in a slow flame for a couple of hours to get the dish made. Investment in the form of regular SIPs could get you a substantial corpus end of 20-30 years.

Further, just like cooking some dish may come out very well, while some dish may be a total failure, investment also will have this- some may turn out duds and some may turn out to be a chicken that lays the golden egg.

Like cooking, if you have money and can afford to waste a recipe by experimenting, so too in investment if you have extra money you can take a risk of investing in a tweaked or different manner. Some by studying technical analysis (not fundamental analysis) do what is called sectoral rotation. This is like when you cook, you do not want Daal Chawal every day. You keep changing the dish daily. In investment, though not daily, you study the market and see if the flavor (momentum) is in Banking sector or Pharma or IT sector, you jump into the band wagon and make your money. 

Another aspect of the flavor of the season is  certain restaurants become popular for a short period of time and then fade away to be replaced by another. Alternatively, we have Burger king, Pizza hut, Mcdonalds which are a steady standard fare and been long. Investments in large stocks are like these steady standard fare with alpha (meaning getting a return higher than standard) coming from investment that is the flavor (momentum) of the month. Eg, in Chennai, there is a restaurant called Kaidhi (Jailed -loosely translated). The ambience is like you are in a jail and eating it. You may visit a couple of times, but will not go regularly there, but since everyone is talking about it, it will be full for a couple of seasons and then just fall of the cliff. Patti veedu (grandmother house) is another one. Thus investment in Sectoral is like these- in flavor for a few months and then just fall off. Either you should be shrewd and tracking your investment or let the Mutual fund do it for you in a flexi cap or multi asset fund.

Another aspect of this comparison between food and investing is you regularly flush your system with a laxative, asset allocation or revisiting your investments once a year is the laxative. You remove the duds and stock up on the good investment.

Having said all these, one should know that investment like food and its reaction is dependent on various factors and one cannot be accurate 100% of the time. Some may suit your taste buds, some may give you allergy, some may give you upset stomach. Like that, you take risks with investment. Even big big investors take risks to generate alpha and it may end up as a flop, but since they have so much of investment, it is taken care of others.

Dr. Velumani of Thryrocare firm said in one interview that he got 4500 crores when he went for IPO of his company and he put 1500 crores in a private equity and now its value is 150 crores. And private equity is supposed to be filled with brainy financial analysts and MBAs doing a lot of research, but still they failed. The reason is it is impossible to predict the behavioral nature of human being. A company doing 20% CAGR for last 10 years may suddenly fail, because of some change in technology eg. Companies that used to hire videos to homes suddenly found themselves out of business due to cable companies. Similarly, cable companies are now getting out of business because of streaming. Who knows what is in store in future.

This brings us to the point of Diversification. Eating same oily Samosas day in and day out, just because you like it can lead to health issues. So too investing only in one type of stock can give you a loss or pain. For Simple investors investment should be a bit diversified like some in FD, some in Gold, Some in Debt and some in equity. Equity is the most risky, but will get you a better alpha.

As I had talked about sectoral investment and some do a sectoral churning investment, for an ordinary investor sectoral churning may not be the right thing but sectoral investment as a method of diversification is a good technique.Examples of various type of sectors are listed below:

a) Banks

b) Pharma

c) IT

d) Auto

e) FMCG

f) Power

g) Medical hospitals

h)Chemical

i) Real Estate

Some follow the principle of taking top 2-3 companies in each sector and investing regularly in them to catch the ups and downs of sectoral rotation and at the same time ensure Safe and steady investments. As per various studies it is found that you could get 10-15% in Safe and steady investments and with risk taking can get you 25-30%. But this is the average and should be treated carefully. You may fall at either end of a normal curve if luck is not in your favor.

 

Dictatorship or Democracy

One of the biggest arguments going around in India is - Should we have a democratic freedom or a bit of dictatorship. In terms of discipline many will argue we should have a little bit of dictatorship. During Emergency time, there was

1) no ragging - a Jadhavpur university type incident that happened a few days back would not have happened. 

2) Autos, particularly in chennai, will come by meter and not ask extras on top of meter

3) Near the chole bhature/pani puri stall, everyone will put the dhonna (leaf cup) in the bin and not outside.

4) Trains/Buses will ply on time

and list goes on.

The only problem faced was by the political opponents and as SM was not there at that time, there was not much of hue and cry as we face today with a little bit of dictatorial style (through media and SM curbs) and with no emergency rule.

With a bit of autocratic style we have been able to accomplish a lot of stuff in terms of infrastructure (world class airports and highways), economy brought to 5th largest, stock market booming with foreign funds coming in, inflation to an extent controlled unlike in other countries, certain decisions be it art 370 or 277 taken which democratically elected govt with true democracy would have never taken in our or future life time. The biggest gain is technology through UPI and implementation of Aadhar and PAN linkages. Yes, no doubt criminals do attempt to bypass these and sometimes succeed, but lower than earlier times of rations getting diverted elsewhere in bulk.

The criminal activities can also be reduced, but unfortunately our courts and justice system takes so long that a criminal continues to be scot free, while a law abiding citizen is threatened by these criminals and has to run from pillar to post for justice. One sometimes wonders if our motto of - Let 1000 criminals be free, but 1 innocent not be punished to Let 1000 innocent be punished, but not 1 criminal be set free.

Modi has set a steep target for anyone to follow. If opposition comes and our economy goes down to 8 or 10, it will be too big a price to pay for democracy. In the name of democracy, certain sections are allowed space while not allowing for others will cause a further divisions in this country. This is a risk one has to consider. This election is going to be a watershed one and not an easy one. It is going to be a messy election

 

Terminonolgies in Finance

 It is important to keep up to date with financial Terminologies to avoid being caught off guard in any conversation. A few here and will be added

 

EBT - Earnings before Tax (same as PBT)

EBITDA - Earning before Interest, Tax, Depreciation and Amortization

BAAP - Relating to investment - Buy At Any Price

GARP - Relating to investment - Growth At Reasonable Price

PAT- Profit after Tax

COGS- Cost of Goods Sold

Operating Margin (as a %age) - (Revenue- COGS)/Revenue

EPS - Earnings per Share

P/E Ratio - Price to Earning ratio (Market Price per share/Earnings per share)

PEG Ratio- Price to Earning Growth Ratio - (P/E)/Growth in EPS. Thus if P/E is 15 and Growth in EPS is expected to be 10% then PEG Ratio is 15/10 =1.5

FCF- Free Cash Flow

 NOPAT- Net Operating Profit After Tax- Same as Profit after Tax, excluding other incomes and expenses not relating to operations.

PPE- Property Plant and Equipment

Other financial terms:

ROU- Rental payments converted to assets and liabilities

Lease liabilities- Part of above

XBRL-eXtensible Business Reporting Language. global, machine readable, std reporting. Mostly for listed companies reporting

IFRS- International Financial Reporting System - way financials are audited and presented.

REIT- Real Estate investment Trust- pooling of assets and paying you dividends out of rental asset or gain on sale of RE.

Paridigm of I don't earn enough to save

The most oft repeated words by a person who has just started on his/her career and you ask him/her to invest an amount of his/her earnings is this -" I don't earn enough money to do the savings". This is an issue as the more the money comes later, it will occupy the wants and there will not be a time when he/she can do the savings.

It is always when I earn enough I will save. But this comes back to bite when you are reaching your retirement age and you find suddenly that you haven't saved enough to lead a desired, peaceful retired life.

Thus all your planning for a peaceful retired life is shattered if you are not financially comfortable at the time of retiring. 

Financially comfortable is not only a physical term but also a psychological term.For eg, while a 1 crore Rupees in an FD may be enough to manage in physical terms (if you have a house/flat to live and not paying rent), psychologically you have the fear of running out of money and thus the psychological value will be say 5 crores. The psychological value goal is the goal that retirement people should aim at and not enough to get by.

Like someone said, it is %age of income that is saved that matters when you are young and not the %age of return.

How then should youngsters go about savings. From the 3rd Salary (assuming they want to indulge on their likes 1st two salaries), the should say a % age of salary goes to savings. They should say that this is what is my salary to spend (after deducting the savings). If this reduced salary meets the bare minimum of food,transportation and shelter then fine they should live with it and every salary they get, they should transfer the saving to a savings instrument (I have a separate blog on how to go about investing). If it does not meet the basic needs, then they can tweak the %age and reduce the savings. This will ensure a discipline which will be carried forward even when they get their bonuses and increments.

Even after getting married and with children too, this saving discipline will help in growing the wealth value and by the age of 50, you should be in the comfort zone as you have given 20-25 years in the development of this wealth. 

The above process will give a peace of mind as you approach your retirement age and not panic due to lack of savings.

 

 

One of the key questions that needs to be asked is "When do i start to plan for retirement"

My take has been, from a very young age or when you first draw your salary.

Please note it is often said, Death and taxes are permanent. I will add Retirement is also permanent.- at least for most of the people. 

 If you start your retirement planning at the age of 20-25, you have a long way to go and go through ups and downs of market as well as compounding effect. I have seen people panic at the age of 40-50 that they have goals to meet and retirement being one of them and if they live long how are they going to manage when they retire.

Either you have a son, who is a big businessman and takes care of you in your old age (not necessarily true- Vijaypat Singhania is a prime example) or you plan your retirement early to build a corpus which is sufficient and does not scare you of being without money. 

Put off events or purchases just to show who you are in the society and stick to basics. A spend of a crore in a wedding can be put to good use investing in markets which could give a return. Skeptics say if market crashes you lose everything. My argument is if market crashes, the whole world crashes and value of money is zero in those cases.Assume you have crores in cash and market crashes with no end in sight, the value of your crores is also reduced to nil as govt. crashes and nothing works. On the other hand even if market crashes, there will be others taking those places and after some years it becomes normal. It is these crashes that you take advantage of and not think this is end of world. If it is end of the world, the money everything is useless. you have 100 crores or 1 paisa it is the same as end of the world is destined according to some. 

 

To conclude on early investing, when a famous investor was asked what was his life regret. He said, I came to know about investing at the age of 11 years. Wish I had come to know when I was 2 years old. This is called time in the market. 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement thoughts

Till such time, as a few years before retirement, one imagines  a carefree life post retirement imagining a  life of - relaxing, lazying around, reading, listening to news/music, watching movies or learning some hobbies that was planned but never achieved during working life.

The reason for seeking a carefree life is due to the running around making a career soon after passing out of college and the trials and tribulations of daily life - marriage, children, work pressures, peer pressures, medical issues and the list is endless.

One generally imagines that retired life is a panacea for all the above listed issues and leading a cool after life is the dream many have.

Many financial advisers ask you to see what is the current expenditure you have and  multiply with an inflation factor to give you a bit scary expenditure you are likely to have. But I have an opinion on that. Rather than taking the current expenditure, one needs to look at the breakup of the likely expenditure post retirement.

For eg, when young you go out to movies and eat outs a lot. This will not happen when you are retired as health consciousness also kicks in. Thus if your expenditure on going out is X, it may reduce to 1/2 of it. So, that should be the basis for computing the current expenditure. Intake of food also reduces and this should be taken into computation of current expenditure.

As one gets past 50 years, the body starts to get stiff giving joint pains, back pains etc. Very critical that when you are young you start Yoga to make the body flexible. 

Financial comfort zone is an area which every retirement starts to fret a couple of years before retirement. Thus right from the first salary one should start saving to avoid this palpitation at the close of your retired life. There is a detailed blog of mine on how to go about it that you may find it useful.

Wives generally fear husband's retirement - apart from losing the income and rely on savings, the husbands become stingy (partly by fear of running out of money) and every purchase becomes a heated argument regarding its usefulness. Additionally, Wives fear interference from husbands (now that they have more time) on the nitty grittiness of daily life chores.

While the food intake in terms of lunch or dinner (some skip it) reduces, the tidbits intake increases more to compensate for the boredom than anything else.

Retirement planning should not just be restricted to financial comfort, but planned by the couple in their 40's to getting together for a common interest - music, books, etc. This common hobbies nurtured over a period of 20 years will stand in good stead when one retires as they have things in common to share post retirement.

Please note that most of those who go to Middle east in their 30-40s imagine themselves to construct and live in a huge house with facilities to live peacefully after retirement. But soon after 60 when reality strikes and retires, one notices the Duplex house is a pain to climb and maximum you need is a room and an attached toilet. Children, most often stay separately, if independent or in other cities and countries making you and wife/husband the sole occupants and vulnerable in old age.

This is one of the reason, a place like Nana-nani and other retirement homes are becoming popular.

Some westerners even setlle in places like phillipines, vietnam or thailand as the pension from US, UK etc go a long way in these places (you can buy a large house, have 2 or 3 drivers, maids, gardners etc)

 

 

Investing thoughts

INVESTING THOUGHTS 

 

How many of you want to get rich quickly? Suppose I say, invest today in this stock an amount of 1 lakh and get a return of 5 lakh next year.

I can see many hands raised. Let me tell you a fact. It is not possible to do so, unless you win a lottery or you end up losing your money to a fraud scheme.

If investment was that easy, half the male population would be in the Bahamas or such other place with couple of trophy females on either side and a drink on the hand. I don't know about female liking so I did not mention it, as I do not want to be accused of gender bias. 

Wealth creation is a long term process. Not an overnight one. Reaching from 1 lakh to 1 crore will take 10 -15 years or so, but will accelerate after that from 1 crore to 5 crores and so on, because of what is called as Compounding.

Another aspect of investing is Psychology. If X and Y feel the same about a company and the valuation, the share price will not rise as X feels that at 50 Rs it is rightly valued and Y also feels that at 50 Rs it is rightly valued. But we are all not wired that way. Each one feels different, One feels 50 Rs is a good buy, while another feels that 50 Rs is a good sell. This differential Psychology is what make the market.

Another aspect of investing Psychology is  looking at others and making the investment. If X has made 50% return, let us follow him as he knows and holds the key to investment, not realizing that X may be fooling people, or X has invested at a time when others were sleeping, or X may be selling when you are buying. Thus to be a good investor one should follow one's own philosophy.

A good investor follow -RIL - no not Reliance Industries Limited, but Research, Invest and Luck. Yes, luck plays an important part in the investors success - Take Warren Buffet and his single largest investment in Coke. It was possible that Pepsi could have demolished Coke, but didn't. Take Rakesh Jhunjuwala and his investment in Titan. It was highly possible that Tanishq the brand jewellery on which Titan was riding high could have failed as a cheap jewellery compared to the real gold jewellery. Or take the case of Ms Mehra and HDFC and her recommendation as an investment. It could have failed like a Yes bank (was run by a top Stan chart guy -Rana who was supposed to know all about banking). But they were lucky as the consumers did not think so.

As a layman investor, with not much of research access or management concall access, we just look at public domain information, which we get after some of the big investors have had the information and taken the call on the share. Thus as a lay investors we are mere followers.

Given the above, how do we go about investing. First and foremost is we spread our investment. This is called diversification. But we should not over diversify. For eg investment in an X company of 100 Rs and it went up 50% to 150 Rs will fetch you a profit of 50 Rs. But if you had invested 50,000 Rs in it, you would have got 25, 000 Rs. Thus Diversification is key but Positioning (or how much you invest) is also key. 

My thoughts on investment ( not a recommendation or advice) is you invest as a beginner in Stable companies (Growth last 5 years at15%, PE <15, ROCE at 15%, ROI at 15%-some parameters), Mature Companies (Companies making profits and giving dividends for the 10-15 years), Cyclical Companies like pharma, metals, Infra etc, and Risk Companies where you take a call for a reason and it may or may not work out. For eg currently, Yes bank, Vodafone etc.

The %age I believe you should be invested in above categories are 30%, 30%, 20% and 10%. ( You may or could have your own preference in other categories but generally the last one recommended -Risk Companies should not exceed 10%).

In each of the categories, pick up a max of 3 companies each (not more) to ensure you can take positioning advantage and at the same time risk mitigation through diversification.

Another question that arises is when should one start investing - Ideally as soon as possible (at the time of birth, if parents can invest). But on your own -when you start earning.

Another question that again arises is how much. At least 30% of your salary and 50% of your bonus. If not, because salary is low at least 10%. Most of the young people repeat this oft repeated answer- But Uncle, I can't save because my salary meets the minimum requirements and I am barely able to survive. To this my answer is simple. If you are earning 50,000 Rs /month, you know how to live. The same way if you are earning 30,000 Rs/ month, you will still continue to live. So, start with taking off 30% of your salary for saving and think that you are getting that much only. In extreme cases of low salary, you may go down to 20% or even 10% savings. But you must do that if you want to become reasonably rich 20-30 years from now. Spending, enjoying your current life is not going to keep you financially relaxed when you reach the end of your career. Don't regret in old age, what you can with a bit of sacrifice in your young age. 

One of the common arguments that one hears these days is - "Kal kisko patah", lets enjoy life today. Let me tell you this. No one knows when your expiry date will come, but with medical and general lifestyle changes, people are averaging 80 years and some 90 years unlike in olden times 65- 70 was the norm for death with a few exceptions. Thus, at 60 plus you do not want to be fighting with your wife that we overspent and should have saved when we were young. Eating and going out less may help you save money as well as your health.

Talking of health, one of the important investment is taking care of your health. Live frugally or king size, but ensure that your exercise (even weights is recommended) is one of your prime habit. As they correctly say, if Money is lost nothing is lost, but if health is lost everything is lost. No one can predict what will happen with health, & investment, but if you invest in your financial health and body health, your chances of a comfortable retired life is more of a probability. Think about it NOW and not LATER.

Coming back to investment, investment in stocks depend on What price you buy at and what quantity you buy at. These determine the extent of profit you make. Higher purchase price may give you lower profit/share, Lower quantity may give you lower overall profit.  There is no magic formula to determine these two, but these two have some fundamental requirements - On the Stock price - what is the reasonable PE, Past Growth, Potential future etc. On the Quantity, it is your self belief or conviction that this Company will grow based on the data set you have collected.

Today life is fast paced and with WFH, WA, Emails, employees are on the job 24 hours and don't have time for reading, research, watching some good investors speak etc. This is where Mutual Funds come in or if you want a more boutique investment style, a SEBI registered Fee only advisors are there to design it for you.

Mutual fund is a good place to start for beginners in investing. The advantage is somebody is doing your job of research and picking reasonably good stocks with risk factor as per the category. When I say risk category, what I mean is, Mutual Funds have a range of categories - Large, Mid, Small, Flexi, cyclical, thematic etc. So where you invest, a certain element of risk is there and that depends on you where you want to invest. Say, Small cap has one of the highest risk factors and also has one of the highly rewarding returns if it clicks. Like stocks, with categories of stable, mature, cyclical, risky, MFs also works in that same category. But the advantage of MF is that you do not choose a specific stock or stocks, but the MFs with their huge analysts choose the stocks and they choose a basket to ensure the returns are reasonable for them to get more funds into their schemes. This is called AUM or Asset Under Management.

Some people ask what is PMS. It is not what Women go through, but in investment jargon it means Portfolio Management Scheme. Currently, the minimum that is required for joining the PMS is 50 lakhs- a few years back it was 25 lakhs. You primarily give your money to these schemes run by supposedly experts who invest in different companies and also take risks by investing in Pre IPO schemes, start up companies etc. which a normal investor cannot because of the funds and access to such instrument. You can have even 200% return on it or it can collapse too. But these are for people who have financially secured themselves and can take the risk of losing 50 lakhs and not feel the pain. Given a choice, I would not recommend young investors to go for it.

One more investment philosophy I believe in is Investment should be done in a relaxing mood and not taken up with a lot on stress on returns and few downsides, some stocks/MFs not doing well. If overall your asset is increasing it is fine. Over a period of time, the law of averages will give you a good return if you consistently invest- be it upside time or downside time. Keep your investment private and do not discuss, else you will be stressed if you see someone having a better return than you and that will cause you, under stress, to irrationally invest to try to beat the other persons return. Get ideas and do your own research on basic fundamentals and leave everything to luck too. Hopefully, of the 10 business you invest, 2 or 3 may fail, but if economy grows then your other 7 or 8 business should have done well.

If end of this lecture, you come to me and say, Should I invest in this stock or MF or will this give a better return, then I think I have wasted my time. The purpose of this lecture is not to focus on specific stocks or MF, but to give a broad investment philosophy to follow. I may not be an expert on stocks/MF to ask such a question. As someone said, when some one asks to buy or sell he first asks how much money do you want to invest. If a guy says, 1 lakh, he advises, 50% you buy and 50% you hold in cash or the other way around in case of sell - 50% you sell and 50% you hold. If market moves on the right side, you can always say - I told you so. If market moves on the wrong side, you can always say - See, I saved 50% of your investment.

Please note do not give me an eg of Warren Buffet, Peter Lynch, Rakesh Jhunjhunwala, or a Vijay kedia.  How many of the success stories are there in the billions of investor community. They may be less than .1% and most of it by luck - a Titan or a coke or Amex etc. They have invested heavily and also lost heavily which an ordinary investor can't afford to. Earlier data availability of companies used to be rare, but today an Equitymaster, Moneycontrol, Screener, Trading view etc have made data availability and analysis easier. Now we have even AI to do the heavy lifting. Thus all investors have same data. End of the day nobody and I mean no body in the world can predict the future and that is why no one give a GUARANTEED RETURN.

 

 

APP IDEAS

 APP IDEAS

1) Go grocery Go

2) Travel App.

3) Mental memory app.

 Payments can be made directly to the provider to avoid any refund issues.

Go Grocery Go- This app idea basically organizes things you want to buy. Often happens you prepare a paper list and it is lost and you try to memorize what you want and forget when you reach the mall.

This app on the mobile, helps you keep track of things you want and preferably the prices. It can also provide any offers that is currently going on.

How it works

You open the app and it gives you the option of the mall you want to go a) City center b) Carre Four c) lulu etc.

First click on one of the above where you want to do the purchase

During the week you find you have run out of mustard, open the app and say you want to do city center shopping for the week end. search mustard and select the one you want. It adds to your basket and picks up the price from the site.

Over the period of the week, as and when you want something check it out and  add to the basket. If something not available and does not throw in search, click NA and it throws into unavailable basket. You can even do a search on the other sites to know its availability and price.

Thus before you go to the city center in the weekend, you know what you have to buy and what is the appx cost of the items and total spend will be known.

Shopping can thus be done quickly.

Refinements- You can for the items picked have a pop up coming if there are some offers on it. Eg. you put 1 can of Sunflower oil in the basket. During the week, it will pop up any offer on sunflower oil and so on.

Thus shopping can be a breeze, if you physically go shopping. Else you can click the basket and order online from there and get it delivered to your home.

One of the biggest advantage of blinkit shopping etc is that even if the kirana shops timing is from 10 AM to 10 PM, you are still left out of market from 10 PM at night to next day 10 AM. In blinkit etc you can order any time and get it delivered in 10 mins. But be careful about the shelf life of items. They are prone to push expired items due to rush.

If Lulu or city center sponsors then one can even put location maps inside the mall into this app and quickly reach the place to pick up rather than loitering and searching.

Travel App. A number of app exists, but what this app does is gives you various options and modes of transport for X to Y destination.

Eg. Select date of travel, no of persons and X to Y travel.

The app throws option as follows:

Train - dt of travel - 2nd class 150 Rs - Full (time 6 AM)

                               - AC 2 tier 300 Rs- WL No 

                                - AC 3 tier 200 Rs- WL no.

Flight - dt of travel - Indigo - 500 Rs (timing options -9,12 etc.

                                  Air india- 300 Rs

Bus - Dt of travel - 50 Rs (time

Car - Dt of travel - 3000 Rs (any time)

There a number of AI companies doing the hard lifting work of coding and preparing the APP. Only issue is subscription and not one time payment. Some of them are

Emergent

Base44

Mental Memory App

This app is a 3*3 grid app, which displays random 9 numbers on the grid and give appx 45 seconds to memorize and then recall them.

Single digit initially, Completing it (5 times) takes you to level 2 which gives you 2 digits and then 3 digits.

Once you memorize 3 digits, it takes you to a 2D and 3 D cubes depending on levels. Each side is 45 sec and you have to memorize all numbers.

Fun game for adults and young.

1st and 3rd app made in claude in about 1/2 hour

Real Estate

REAL ESTATE INVESTING

 

Investing in Real Estate in India is becoming painful despite the RERA act. 

Buying or selling property is fraught with documentation requirement, encumbrances, registration and still someone can file a court case and it can go on for years.

Further, particularly 2nd hand transactions, involve black money.

Add to it if property is prime, the political angle and goondaism.

In the west, the property dealer being a legal person takes care of all the documentation and there is no scope of being cheated or issues cropping up in courts that take a long long time.

Further, RE investment and sale is now  becoming tedious with the diminishing of joint family and couples  having one or two kids and staying separately away from the joint family. This means that a large house is empty and difficult to dispose off if the parents are 75-80 years old and the children do not stay in that place or stay abroad.

My advice/recommendation (not binding or marketing it-just a thought) for investment in RE is as follows:

1) If you can rent it, all the better as there are more properties available on rent than demand as in last few years people invested heavily in gated and high rise apartments in the hope of selling at huge profit which didn't/hasn't materialized.

2) Advantage of renting is if you are going to invest, say, 2 crs, the FD int @ say conservative of 6% will fetch you 12 Lakhs per year or 1 lakh per month. For that you can get a decent 2,3,4 bedroom flat for 50,000 Rs per month. This saves you 50,000 per month which you can invest and earn better.

3) Flat owners living in a different place than their ownership, prefer a decent couple who pay rent and if required, by giving 6 months reasonable period, may vacate. They are ready to lower the rent for them to avoid litigation or abusive tenants staying.

4) Rental yield is just 2-3% and while you can get better rents by giving out to group of  bachelors (girls or boys), or as AIRBNB, but many gated communities object to it. 

5) With a small family, running around during old age to sell a house or flat is tedious, particularly if kids are abroad. (Western countries just give 2 weeks off in a year and it takes at least 5-6 months staying in that property to sell a property in India, else agents take you for a ride.

6) Lot of unscrupulous builders who take the money and not complete. Eg Unitech and a whole of companies in Delhi- Noida belt. People have taken EMIs and paid the builders hoping to repay the loan by self occupation. But work is not completed and EMIs are on making a big cash flow impact.

7) Preferable to buy with a very well reputed builder or ready to move in property will at least ensure you have the property

8) Maintenance of the property is another big headache. If house, there are recurring costs, if gated community, costs keep increasing and the maintenance cost goes up. If kept locked, maintenance is still to be paid.

9) It does not mean you should not invest in RE. If you are planning to settle in one city, you can buy a flat and live in comfort and one typical Indian concern is of landlord asking you to vacate and you are not able to find another flat to live in. Living in own flat has the advantage of modifying, redoing to meet your needs. But disadvantage is slow accumulation of things that may not be needed later.

RE DESPITE RERA (OUR COURTS TAKE AN INORDINATE LONG TIME- MAYBE 20-30 YEARS TO DECIDE CASES) IS FRAUGHT WITH UNDERHAND DEALINGS (ALWAYS THROUGH AGENTS TO EASE PAYMENT UNDER TABLE) AND INNUMERABLE DOCUMENTS - SALE DEED, ENCUMBERANCE DEED, ELECTRICITY APPROVAL, RERA APPROVAL, MUNCIPALITY APPROVAL ETC, ETC WHICH A NORMAL PERSON CANNOT VERIFY.

THUS POINT 7 IS ONE OF THE BEST OPTION.

WILL -ESSENTIAL NEEDS

 

Note: There is something called a living will. It means that you want your near ones to pull the plug once it is determined you do not want your life to be sustained by tubes or being in a comma etc. This makes it easier for near and dear ones than paying a huge amount to keep you in ICU or in a vegetative state for years by the hospital.

ANOTHER SUGGESTION I HAVE IS FOR EMBASSIES OF INDIA (FOREIGN OFFICE) THAT THEY SHOULD AS PART OF LABOR CONTRACT (USEFUL PARTICULARLY FOR ILLITERATE LABORERS WORKING IN MIDDLE EAST OR ELSEWHERE) SHOULD ALSO PREPARE A WILL AND TRANSLATED AND ATTESTED BY MINISTRY OF JUSTICE IN THEIR COUNTRY OF WORK. THIS WOULD HELP IN SETTLEMENT OF THE LABORER GOING TO HIS FAMILY AND NOT BE LEFT IN THE COUNTRY OF WORK AS DOCUMENTATION IS NOT COMPLETE. THESE POOR FAMILIES DO NOT HAVE MEANS TO CHASE THE FINAL SETTLEMENTS.