Changing Spending Patterns ...

India getting richer, and what it means for us ...

I read a couple of news items on a single day:

• Swift D'zire overtakes Alto as the largest selling car in the Indian automobile market in the month of May
• Three brands of Hindustan Unilever, including the "Premium" brands of Dove and Ponds become 1000 crore brands!

What struck me was a clear case of "Premiumisation", if I may coin such a word..., that's going on in India. 

Obviously, more and more people are willing and keen to buy costlier brands and enjoy the good things in life. And are able to do so. This implies that despite the apparent gloom and doom scenario that we see in the newspapers both at a global level and in India, the ground reality in India is different. A rather large number of people are able to buy what was once upon a time considered either luxury items or conspicuous consumption.

When we go out anywhere, we'll see anecdotal evidence of the above trend. In the past couple of years, I've seen huge crowds at a wide variety of places, the only common thread being that all these places involve spending significant sums of money:

• Malls and shopping complexes
• Theatres and Entertainment theme parks
• Corporate hospitals like Apollo, Fortis, etc.
• Gyms
• Music concerts
• Airports
• Five & Three star hotels
• Jewellery shops
• Private Educational Institutions which charge a ton of money
• Bank branches of private sector banks like HDFC Bank, ICICI Bank, etc. (which insist on a huge minimum balance and target richer customers)
• Shops selling electronic gadgets like mobiles, tablets, laptops, etc.
• Air-conditioned Compartments of trains

Well, at one plane, all the above is actually great news for Indians. On the other hand, it can have a potentially disastrous implication for India as well. In this post, I'll focus on the positive side:

• With all that money being spent, it is obvious that the economy is recovering and recovering fast. This is irrespective of what the doomsayers may claim at the top of their voices.
• Corporates who are providing all those goods and services are expanding rapidly and will not do so unless they are either profitable or hope to become profitable very soon. My own hunch is that they are ALL hugely profitable and will continue to see an enormous growth in their profitability figures.
• This implies that their EPS (Earnings per share) has gone up significantly or will go up rapidly in the next few quarters.
• The corollary is that the Sensex of 20000 and Nifty of 6000 in 2013 implies a much lower valuation compared to the same Sensex and Nifty levels in 2008.
• Having had a de-facto bear market for the past few years, even in terms of the principle of reversion to mean, we're poised to take off in a big way. While the timing in uncertain as to whether it will happen in 2013 or 2014, an emerging bull market in the next several quarters is almost axiomatic.

If there is a bull market ahead, my own suggestion will be:

• Review your asset allocation
• Develop a positive bias towards investing in equity (ideally through mutual funds)
• Don't sell in a hurry
• Select either blue chips or high quality mutual funds and invest systematically each month
• Watch out for scamsters who will be eagerly waiting to lure you in their traps. Avoid penny stocks. Watch out for corporate developments (especially negative ones). Review your portfolio at least once in 6 months but never daily or weekly.

Enjoy life. Enjoy the returns from safe and sound investing. Be happy.

Regards,

N

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How to Slow Down - and still Relax ... ... ...

Practical Tips to Slow Down, and Relax :

The HOW??? Explained!

You would have read my earlier blog post on the importance of slowing down:

• Slow down and Relax!

While a few of you would perhaps have "sort-of-agreed" that the pace of life has become unacceptable, almost all of you would have wondered as to "How?" The problem may be well-recognised, but most of us have tended to think that there is no practical solution.

In this post, I hope to share a few of my thoughts on how to actually Slow down and Relax!

First and foremost, while income/wealth maximisation may appear to be a laudable goal, I would insist that we need to re-define the goal slightly.

Let's just take the issue of one's income to elaborate my point. In the Indian context, I would like to classify the Monthly Income Levels of people into the following broad slabs:

• Zero to Rs. 10,000/= p.m.
• Rs. 10,000 to Rs. 50,000/= p.m.
• Rs. 50,000 to Rs. 250,000/= p.m.
• Rs. 250,000 to Rs. 1,000,000/= p.m.
• Over Rs. 1,000,000/= p.m.

Your perception of the above slabs may vary to a certain extent, based on your context. However, my point is that unless a person moves from one slab to the next higher/lower slab, his/her quality of life, standard of living, pressures faced, etc. remain more or less of the same order.

Hence, a person whose income increases from, say, Rs. 100,000/= p.m. to Rs. 120,000/= p.m. will find that her income has shot up by a considerable 20%. While this would appear to be quite significant at a superficial level, the level of satisfaction, the standard of living, etc. will remain what it used to be thus far. At best, you'll get a kick for a few days/weeks. Beyond that period, you'll get used to the new equilibrium and that will become your new "normal". 

As long as you are within the same slab of income/wealth combination, you will not be:

• Driving a significantly superior/inferior vehicle
• Living in a vastly different location in terms of social infrastructure (or even a vastly different home in terms of size, comfort levels, etc.)
• Enjoying significantly different holidays, entertainment options, jewellery, etc.

Hence, unless one moves from one level to the next lower / higher slab, there is no material change in one's quality of life.

At the beginning of one's career, one may not be too sure of which slab one wishes to seek out and achieve. However, after a couple of years into your career, you'll be in a position to broadly estimate the efforts required as well as the competence required to stand  a realistic chance of reaching different levels of income.

Based on your efforts at introspection (along with a consultation with your immediate family), you ought to identify the income/wealth slabs that you wish to achieve, say, by the age of 30, 40, 50 and 60. Obviously, people are likely to be interested in moving to the next higher slab and not to the next lower slab.

All your efforts should have a structured and sharp focus on achieving the above goal. This would ensure that you do not put in "wasted efforts". Of course, you need to remember that if you wish to move from level "A" to "B" over the medium/long term, you need to put in the necessary planning and efforts in that direction.

Far too often, we end up putting in efforts without having a clue as to whether we really desire the fruits of our efforts. For instance, an aeronautical engineer who is passionate about research may, by sheer dint of performance, keep getting promotions after joining an organisation like, say, Hindustan Aeronauticals. At some stage, he'll find himself/herself heading a section or department or division. Sooner than he realises, the person will find that the time spent on meetings, administrative tasks, etc. is far greater than the time spent on actual research. If the quality of performance continues to be good, as years roll by, the person will find himself in general management, perhaps heading 3-4 different functions / divisions.

The person will now be asking Research? What is that???

What's more, as and when the person realises the situation, it will be way too late to do any mid-course correction.

The reason?

• Money 

Any effort to get back to an assignment involving hard core research activities would now involve sacrificing the pay packet. And the mental construct (as well as societal pressure) would not easily allow that.

And now, we have a perfect example of an intellectually great professional who is, in all probability, an unhappy human being.

Is there a solution to this dangerous situation? I think that there is a rather conceptually simple (but extremely difficult to implement) solution:

Just Slow Down and Relax!

At every available opportunity (at least once in 3-4 months),

• Indulge in introspection
• Ask questions
• Review your priorities
• Identify your passion
• Specifically, find out the number of hours that you spend every day on activities you are passionate about
• If you feel that you need to change, identify actionable steps as to what needs to change
• Fix a time limit by which you will change
• Identify a review date for a status update

After all, being happy is far more important than most other things in life.

In simple terms,

Living is more important than earning your livelihood!

Just Slow Down and Relax!

Regards,

N