tag:blogger.com,1999:blog-33934238824142003452024-03-14T11:57:19.892+05:30... ... ... ... Financial Views of Naren ... ... ... ... ...Awareness of financial issues, especially on the personal front is minimal even among highly educated professionals, including quite a few "Finance Professionals". This blog is intended to be of some value addition to anyone who cares about his/her personal finance. The focus will be on the Indian situation, though the principles will be applicable the world over..... (Please read the disclaimer at the bottom of this page without fail)Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.comBlogger254125tag:blogger.com,1999:blog-3393423882414200345.post-76874144233733742792014-09-24T11:35:00.001+05:302014-09-24T11:35:10.563+05:30Welcome to the real world: Get mislead!<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: #7030a0; font-family: "Lucida Calligraphy"; mso-bidi-font-family: Arial;">Lies, Damned Lies, Statistics & Media Reports <o:p></o:p></span></h2>
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<span style="font-size: large;"><span style="font-family: "Arial","sans-serif";">Take a look at this
amazing graph that I</span><span lang="EN-GB" style="font-family: "Arial","sans-serif"; mso-ansi-language: EN-GB;"> culled</span><span style="font-family: "Arial","sans-serif"; font-size: 14pt;"> <span style="font-size: large;">out from a not too
old issue of Economic Times, a newspaper that I normally like (and even
respect, as a matter of fact):</span></span></span></div>
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<span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">Needless to add, they
certainly have the usual disclaimer at the bottom. But then, how many folks
would normally bother to take a look at a disclaimer, especially when the
alternative is to just “look at the big picture” and move on!<o:p></o:p></span></span></div>
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<span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">If we choose to
listen to the logic of the above picture, here are a few thoughts that come to
my mind:<o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Kamarajar
hardly went to school, but went on to become a hugely popular and successful
Chief Minister of Tamil Nadu. <o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Hence,
don’t bother with such mundane things like attending school. You’re likely to
become a Chief Minister without all the effort that goes into passing out of a
good school.<o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Bill
Gates dropped out of college and went on to become the riches man on the
planet.<o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Just
dump college if you’re dumb enough to be there still..<o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Dhirubhai
Ambani started life as a Petrol bunk attendant. And the rest is history.<o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Quit
your job and seek a “nice little assignment” at the nearest petrol bunk.<o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Narendra
Modi started life as a Tea Stall employee.<o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Don’t
waste your time with dreams about IIT & IIM. Learn to serve tea instead.<o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">You
all know about the academic qualifications of Sachin Tendulkar. <o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Just
bunk school (or better still, quit school altogether) and start playing
Cricket!<o:p></o:p></span></span></div>
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</span><span style="font-family: "Arial","sans-serif";"><o:p><span style="font-size: large;"> </span></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">Regards,<o:p></o:p></span></span></div>
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<span style="color: #7030a0; font-family: "Monotype Corsiva"; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><span style="font-size: x-large;">N</span></span></h2>
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Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-7129117313231399512014-08-13T12:10:00.002+05:302014-08-13T12:10:35.667+05:30Being Disciplined<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: #7030a0; font-family: "Lucida Calligraphy"; mso-bidi-font-family: Arial;"><span style="font-size: x-large;">Being Disciplined<o:p></o:p></span></span></h2>
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<span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">When it comes to
personal finance, people tend to assume that they need to do a whole host of
things and consult a zillion “experts” before they can get on to their “Path to
phenomenal wealth”. They are completely off the mark and totally wrong.<o:p></o:p></span></span></div>
<div style="text-align: justify;">
<span style="font-size: large;">
</span></div>
<div style="text-align: justify;">
<span style="font-size: large;">
</span><span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">While things are not
altogether simple and absolutely easy so as to be trivialized, they are very
much within the realm of possibility and can be accomplished by virtually each
of you. </span></span></div>
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<span style="font-family: "Arial","sans-serif";"><span style="font-size: large;"></span></span> </div>
<div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">The trick is to <o:p></o:p></span></span></div>
<div style="text-align: justify;">
<span style="font-size: large;">
</span><span style="font-family: "Arial","sans-serif";"><span style="font-size: large;"></span></span></div>
<ol style="text-align: left;">
<li><div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">Start early</span></span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif";"></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">Be disciplined and</span></span></div>
</li>
<li><div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif";"></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">Stay put<o:p></o:p></span></span></div>
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</ol>
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</span></div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-size: large;"><span style="font-family: "Arial","sans-serif";">Of the above three
steps, I would personally regard the second one to be the most critical: </span><b><i><span style="color: #7030a0; font-family: "Lucida Calligraphy"; mso-bidi-font-family: Arial;">Be Disciplined!</span></i></b><span style="font-family: "Arial","sans-serif";"><o:p></o:p></span></span></div>
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</span></div>
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<span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">Here are some
easy-to-execute tips for being disciplined on the financial front:<o:p></o:p></span></span></div>
<div style="text-align: justify;">
<span style="font-size: large;">
</span></div>
<ul style="text-align: left;">
<li><div style="text-align: justify;">
<span style="font-size: large;">
</span><span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">Today, identify a time-slot when you will actually sit and start your basic planning process.<o:p></o:p></span></span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-size: large;"></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">At the outset, jot down ALL your sources of regular income<o:p></o:p></span></span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-size: large;"></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">Similarly, identify ALL your regular expenses that are completely unavoidable (Like Rent, Taxes, Electricity bills, Monthly groceries, etc.)</span></span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif";"></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">Identify a percentage of your regular income which SHALL be saved each month. In the initial years of your career, when financial commitments are typically lower, the percentage can be much higher than, say, when you’re married, have a couple of kids and a couple of loans.</span></span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif";"></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">Convert this percentage into a nice, round figure, say, to the nearest thousand or nearest hundred.</span></span></div>
</li>
<li><div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif";"></span><span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">Each month, shift this amount AUTOMATICALLY to a separate bank account which will be a “One-way bank account” – This bank account will NEVER be used for routine withdrawals for regular expenses</span></span><span style="font-family: "Arial","sans-serif";"><o:p><span style="font-size: large;"> </span></o:p></span></div>
</li>
</ul>
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<span style="font-family: "Arial","sans-serif";"><span style="font-size: large;"></span></span> </div>
<div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">What you should do
with this “One-way bank account” is the subject matter of a separate blog post,
and will be dealt with in the days and weeks ahead. </span></span></div>
<div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif";"></span> </div>
<div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif";"></span><span style="font-size: large;"><span style="font-family: "Arial","sans-serif";">For the moment, start
off with the aforementioned “baby steps” to become financially disciplined.
Those of you who are familiar with the </span><b><i><span style="color: #7030a0; font-family: "Lucida Calligraphy"; mso-bidi-font-family: Arial;">Power
of Compounding </span></i></b><span style="font-family: "Arial","sans-serif";">would
know the likely positive impact due to these “baby steps”. The rest of you may
wish to do a Google search to find out about what Einstein famously referred to
as the “Eighth wonder of the world”. Or, if you so desire, refer to my own blog
post on the Power of Compounding a few years back (<a href="http://financialviewsofmrn.blogspot.in/2010/12/using-power-of-compounding-new-year.html">Using the Power of Compounding</a>).</span></span></div>
<div style="text-align: justify;">
<span style="font-size: large;"><span style="font-family: "Arial","sans-serif";"></span></span> </div>
<div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif";"><span style="font-size: large;">Regards,<o:p></o:p></span></span></div>
<div style="text-align: justify;">
<span style="font-size: large;">
</span></div>
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<span style="font-family: "Arial","sans-serif";"><o:p><span style="font-size: large;"> </span></o:p></span></div>
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<span style="color: #7030a0; font-family: "Monotype Corsiva"; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><span style="font-size: x-large;">N</span></span></h2>
<b><i><span style="color: #7030a0; font-family: "Monotype Corsiva"; font-size: 36pt; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"></span></i></b> </div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-31317122012674745282014-08-11T14:08:00.005+05:302014-08-11T14:09:03.761+05:30Maximizing Employee's Contribution to PF - To do or Not to do?<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: #7030a0; font-family: "Lucida Calligraphy"; mso-bidi-font-family: Arial;">Maximizing Employee's Contribution to PF</span></h2>
<h2 align="center" class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: center;">
<span style="color: #7030a0; font-family: "Lucida Calligraphy"; mso-bidi-font-family: Arial;"><span style="font-size: x-large;">To do or Not to
do?<o:p></o:p></span></span></h2>
<h2 style="text-align: left;">
<span style="font-size: x-large;">
</span><span style="font-family: "Arial","sans-serif"; font-size: 14pt;"></span></h2>
<div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">A couple of days
back, a friend told me about his young IITian son’s first job. In the course of
his conversation, he mentioned that he had advised his son to go in for
“maximizing” the “Employee’s contribution to Provident Fund” so as to build an
“automatic savings corpus” right away.<o:p></o:p></span></div>
<div style="text-align: justify;">
</div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;"><o:p> </o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">I did proffer my
opinion about the same in brief – that it may not necessarily be a great idea
if the individual concerned happens to be a thrifty individual and has adequate
self-discipline, especially in matters pertaining to personal finances. During
the course of the weekend that followed, I thought further about it. And here
are a few of my thoughts:</span><span style="font-family: "Arial","sans-serif"; font-size: 14pt;"><o:p> </o:p></span></div>
<div style="text-align: justify;">
</div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">Considering the
temptation to blow up one’s “newly acquired monthly inflows”, it is indeed a
good idea to send away a part of the money “automatically” into the savings
pool before it reaches one’s hand. This is certainly true for the vast majority
of youth today. Even more so if the young kid satisfies one (or both) of the
following two conditions:<o:p></o:p></span></div>
<ul style="text-align: left;">
<li><div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">The monthly income is
just about sufficient for maintaining the chosen life-style of the concerned
individual <i>and / or</i></span><span style="font-family: "Arial","sans-serif"; font-size: 14pt;"><i>,</i></span></div>
</li>
</ul>
<div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;"><em></em></span> </div>
<ul style="text-align: left;">
<li><div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">The individual
concerned is likely to yield to the temptation of blowing up all his/her money
as soon as it lands up in the bank!<o:p></o:p></span></div>
</li>
</ul>
<div style="text-align: justify;">
</div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">From anecdotal
evidence, I would guess that at least one of the above two conditions will
apply to well over 95% of people entering the corporate world today. My mom
(and people of her generation) would be tempted to say that the figure ought to
be 99.99% </span><span style="font-family: Wingdings; font-size: 14pt; mso-ascii-font-family: Arial; mso-bidi-font-family: Arial; mso-char-type: symbol; mso-hansi-font-family: Arial; mso-symbol-font-family: Wingdings;"><span style="mso-char-type: symbol; mso-symbol-font-family: Wingdings;">J</span></span><span style="font-family: "Arial","sans-serif"; font-size: 14pt;">!<o:p></o:p></span></div>
<div style="text-align: justify;">
</div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">What about the folks
who don’t satisfy even one of the above two conditions? They will be under
immense pressure from their parents, friends, colleagues and perhaps even some
so-called financial experts to maximize the “Employee’s contribution to PF”. The
logic would broadly be as follows:<o:p></o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;"><o:p></o:p></span> </div>
<ul style="text-align: left;">
<li><div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">“You’re earning quite
a bit considering your life-style – Obviously you will be able to save this sum
without even noticing it”</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">“The power of
compounding works like magic – Before you realize, this contribution would have
grown immensely”</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">“If you don’t save
this money, you will spend it or lend it or give it or otherwise fritter it
away”<o:p></o:p></span></div>
</li>
</ul>
<div style="text-align: justify;">
</div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">At a superficial
level, the logic is quite appealing. But I’m not convinced. In fact, I would
strongly urge such an individual to ignore the logic and contribute the MINIMUM
possible amount to the “Employee’s quota” of PF Contributions. </span></div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">Here are a few
reasons:<o:p></o:p></span></div>
<ul style="text-align: left;">
<li><div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">Being
self-disciplined and financially thrifty, he will in any case save enough of
his money on his own – He doesn’t HAVE TO maximize his contribution to PF.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;"></span><span style="font-family: "Arial","sans-serif"; font-size: 14pt;">In any case, the
Provident Fund fetches a ridiculous sub-10% returns on the savings. This doesn’t
in any way cover the real inflation rate that will be applicable to an upper
middle class individual. </span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">More importantly,
considering the long-term horizon for this individual’s savings, he ought to
look at maximizing returns, rather than safety. In fact, the past track record
of the past 10, 20, 30, 40 and 50 years would confirm that returns of
systematic monthly recurring investments equity shares / equity mutual funds
have consistently and significantly outperformed any fixed income products like
Bank deposits, Provident fund, NSC, etc. Hence, risk becomes almost a
non-issue.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">The same logic would perhaps hold true for investments in real
estate as well.<o:p></o:p></span></div>
</li>
</ul>
<div style="text-align: justify;">
</div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">Hence, I re-emphasize
my initial point:<o:p></o:p></span></div>
<ul style="text-align: left;">
<li><div style="text-align: justify;">
<i><span style="color: #7030a0; font-family: "Lucida Calligraphy"; font-size: 14pt; mso-bidi-font-family: Arial;">“If you’re a disciplined individual, thrifty by nature,
you must </span></i><span style="font-family: "Arial","sans-serif"; font-size: 14pt;">MINIMISE</span><i><span style="color: #7030a0; font-family: "Lucida Calligraphy"; font-size: 14pt; mso-bidi-font-family: Arial;"> your contribution to the Provident Fund”.<o:p></o:p></span></i></div>
</li>
</ul>
<div style="text-align: justify;">
</div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">Instead, you MUST do
the following:</span></div>
<ol style="text-align: left;">
<li><div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">Shift any surplus
funds over and above your typical monthly expenditure into a highly rated
liquid mutual fund.</span></div>
</li>
<li><div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;"></span><span style="font-family: "Arial","sans-serif"; font-size: 14pt;">From the balance in
this liquid fund, build a corpus of perhaps 3-6 months of monthly expenses (not
monthly income) and park it in a carefully chosen short term debt fund.</span></div>
</li>
<li><div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">Identify your real
insurance requirements (Typically you will require a Term Insurance Plan to
cover your life, a health insurance plan and perhaps an Accident Insurance
plan) – Explore the possibility of taking adequate insurance cover for all
these requirements.</span></div>
</li>
<li><div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;"></span><span style="font-family: "Arial","sans-serif"; font-size: 14pt;">Once this “Emergency
Fund” corpus as well as your Insurance needs are both “ready and done”,
identify 3-5 high quality equity oriented mutual funds and start a Systematic
Investment Plan to invest your routine monthly surplus to these equity oriented
mutual funds.</span></div>
</li>
<li><div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;"></span><span style="font-family: "Arial","sans-serif"; font-size: 14pt;">Stay on the look out
to buy your own home </span><i><span style="color: #7030a0; font-family: "Lucida Calligraphy"; font-size: 14pt; mso-bidi-font-family: Arial;">For Living</span></i><span style="font-family: "Arial","sans-serif"; font-size: 14pt;"> – As and when you
identify a suitable property, you may wish to consider taking a suitable
housing loan and buying that property.</span></div>
</li>
<li><div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;"></span><span style="font-family: "Arial","sans-serif"; font-size: 14pt;">Watch out for the
launch of high quality Real Estate Investment Trust products (REITS). SEBI and
the FM have just approved the concept. I’m sure that reliable and trustworthy
players like HDFC, Tatas, Birlas, TVS Group, SBI, L & T, etc. will very
soon come up with their own REITS. Considering the fact that under the
proposal, long term capital gains from REITs (units which are held for over 12
months) are likely to be completely exempt from Income Tax, REITs are bound to
be hugely popular investment avenues for those who wish to park their funds in
Real Estate for investment purposes. (To put things in perspective, if you sell
a house that you have been living in for the past few years, your capital gains
will be completely taxable, whereas, a corresponding investment in REITs would
be tax-free). <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
</li>
</ol>
<div style="text-align: justify;">
</div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">In a nutshell,
remember that unlike your spendthrift friends who blow up their money, you are
disciplined and thrifty. Hence, make the most of it and kill the monster of
inflation with your hard-earned savings. Saving money is just the first step.
The next key step is to convert your savings into investments.</span></div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;"><o:p></o:p></span> </div>
<div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;"></span><br /></div>
<div style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">This, I’m sure, will
not only make you immensely wealthy over the next couple of decades, but will
also ensure that you will be able to become financially free by the time you
hit 40.<o:p></o:p></span></div>
<div style="text-align: justify;">
</div>
<div style="text-align: justify;">
</div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<i><span style="color: #7030a0; font-family: "Lucida Calligraphy"; font-size: 16pt; mso-bidi-font-family: Arial;">Don’t waste your money by maximizing your contribution to
PF!<o:p></o:p></span></i></div>
<div style="text-align: justify;">
</div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 14pt;">Regards,<o:p></o:p></span></div>
<div style="text-align: justify;">
</div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="color: #7030a0; font-family: "Monotype Corsiva"; mso-bidi-font-family: "Times New Roman";"><span style="font-size: x-large;"><em>N</em></span></span></div>
<div class="MsoPlainText" style="margin: 0in 0in 12pt; text-align: justify;">
<span style="color: #7030a0; font-family: "Monotype Corsiva"; mso-bidi-font-family: "Times New Roman";"><em><span style="font-size: x-large;"></span></em></span> </div>
</div>
Nhttp://www.blogger.com/profile/07331887734560196019noreply@blogger.com1tag:blogger.com,1999:blog-3393423882414200345.post-81893263479617963672014-02-09T13:28:00.001+05:302014-02-09T13:28:08.698+05:30Significance of the Financial Sector<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: center;">
<span style="font-family: Times, Times New Roman, serif;"><strong><em><span style="color: purple; font-size: x-large;">Why you MUST be overweight </span></em></strong><strong style="text-align: left;"><em><span style="color: purple; font-size: x-large;">in the Financial Sector while
investing ...</span></em></strong></span></h2>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Arial;"><span style="font-family: Arial; font-size: large;">Came across a rather
interesting article on how the Financial sector enjoys an undue and highly
exaggerated status, certainly disproportionate to their true contribution to
society (some would be tempted to add - "If any"):</span></span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;"><a href="http://economistsview.typepad.com/economistsview/2011/10/the-elevated-position-of-the-financial-sector.html">Elevated
position of the Financial Sector</a></span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;">The above article, which is set in a
global context, is a bit "high-funda" and more relevant for those who have a
predisposition to read such esoteric stuff. For the large majority of you, I
would recommend that you simply take a quick and brief glance just enough to get
the general drift of what the article is all about.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;">What's relevant for us is that
</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">For the same quantum of capital
deployed the financial sector generates much greater revenues vis-a-vis most
other sectors- due to leverage</span></div>
</li>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">For the same quantum of capital
deployed / revenues generated, the financial sector generates greater profits
than a good chunk of other sectors</span></div>
</li>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Ditto for the rate of growth of the
firms in the financial sector - For instance, banks which started around a
decade back like Kotak are far bigger today than similar-sized firms which
started off around the same time in other sectors.</span></div>
</li>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Due to systemic risks, more often
than not, the governments around the world will NOT allow financial sector firms
to go bust. They may allow a steel manufacturer or a real estate player or an
automaker to go under - but not banks.</span></div>
</li>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Due to all the above, the ever
increasing proifts of banks accrue to the shareholders, but the downside risks
due to issues like leverage are "sort-of" protected by the governments around
the world.</span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Hence, while investing in shares, it
may be a good idea to keep a keen eye on financial sector players and be willing
to be significantly overweight in players in the financial sector vis-a-vis the
market as a whole.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;">The gains will belong to you but not
the losses.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Caveat: The last line above will
obviously depend on your prudence, your entry levels, your fear and greed
levels. But then, that's always true while investing in shares!</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Regards,</span></div>
<div align="justify">
<br /></div>
<span style="font-family: Arial;">
</span><br />
<div align="justify">
<span style="font-family: Arial;"><span style="font-family: Arial; font-size: x-small;"></span></span></div>
<br />
<h2 style="text-align: justify;">
<span style="font-family: Times, Times New Roman, serif;"><strong><em><span style="color: purple; font-size: x-large;">N</span></em></strong></span></h2>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-16207842670958665062013-12-26T14:04:00.000+05:302013-12-26T14:04:05.450+05:30Importance of Insurance - Part 5<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: left;">
<div style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Be safe or You'll be sorry! Part
5</span></em></strong></div>
<strong><div style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Choosing the right Life Insurance
Policy</span></em></strong></div>
</strong></h2>
<span style="font-family: Arial; font-size: x-large;"><span style="font-family: Times New Roman;"></span>
</span><br />
<div style="text-align: justify;">
<span style="font-size: large;"><br /></span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Here's the next part of my continuing coverage on
Insurance. You would have read my earlier post on Choosing the right Life
Insurance Company:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;"><span style="font-family: Times New Roman; font-size: large;"><a href="http://financialviewsofmrn.blogspot.in/2013/11/importance-of-insurance-part-4_21.html">Be
safe, or you'll be sorry - Part 4</a></span></li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">By now, you'd be clear about whether you need a
Life insurance cover, the quantum required and the company / companies from
which it is OK to buy a life insurance policy.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">In this post, I propose to talk about how to identify a suitable life insurance policy...</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Some points to note:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">As a thumb rule, I dislike combining insurance
and investment. Reason is quite simple - Lack of transparency. And in any case,
once you decide to make an investment, especially for the long term, you would
like to base your decision on factors such as returns, risk, liquidity and
flexibility of shifting to better investment options and/or fund managers from
time to time. Whereas, life insurance products should be bought primarily
(almost exclusively) on the basis of reliability of the actual assurance given
by the life insurance company to honour its commitment to cover the risk of your
life. To combine two such diverse objectives would lead to certain lack of
clarity and perfect confusion.</span></div>
</li>
<li><div style="text-align: justify;">
<span style="font-size: large;">Hence, if a life insurance policy promises to
return any quantum of money during the life time of the policy holder, be clear
in your mind that they are combining insurance and investment. Such policies
will usually come under the garb and nomenclature of money-back policies,
endowment policies, return of premium policies, Unit-Linked Insurance Policies
(ULIPs), etc.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">All such "insurance+investment" policies, in my
opinion, have the potential and high likelihood of turning out to be bad choices
for a vast majority of people. In all such policies, a part of your premium is
used for providing a risk cover. The balance part is used to make investments
and provide you the returns. And in most such policies, you don't know the
break-up of how much of your premium is going to cover the risk and how much is
being invested. The portion which is invested, if invested
in "debt products" such as bank deposits, government or quasi-government bonds,
etc., the returns you get are sub-optimal vis-a-vis what you will get from
making pretty much from the same bank deposits, bonds, etc. The reason: They
have to "manage your money" and hence they incur certain administrative costs -
Such costs are obviously deducted from the returns generated from your
investments. In case of the investment portion being deployed in equity
products, you are "stuck" for a really long time with that fund management
house. If you were to invest the same directly, you will deploy the same in
mutual funds which can be sold off if you find the fund performance inadequate
or if other better options are available.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Hence, in a nutshell, when you are covering your
life, make sure that you do just that and nothing more. Go in for a very simple,
easy to understand, "no return of money till you die" kind of life insurance
policy. They are typically categorised as "Term Insurance
Policies".</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">The concept of term insurance policy is very
direct and simple: They take your premium and provide a risk cover. During the
term of the policy, if something untoward were to happen and if the
policy-holder dies, the insured amount as per the policy is paid to the nominee.
If the policy holder were to remain alive at the end of the term of the policy,
he/she can simply be happy that he/she is still around to crib about all those
premium payments "going waste". He/she gets nothing in return. To understand
this in a proper context, it is similar to insuring your car / two-wheeler. In
case your vehicle gets involved in an accident, you can claim the amount lost
from the insurance cover subject to the policy amount. If your vehicle does not
get involved in any accident, most rational human beings don't feel sad or
disheartened by it. On the contrary!</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Now that you've hopefully decided to go in for a
"Pure Term Insurance Policy", you are free to choose virtually any term
insurance policy from those that are offered by the life insurance companies
that you have shortlisted. A good and sensible option would be to choose the
specific term insurance policy where the premium payment is the least.
Obviously, it is preferable to have a policy which provides a cover for the
maximum duration of time (ideally till the very end of your life on this
planet).</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">In this context, you must seriously consider the
relatively recent development of "Online Term Insurance Policies". These
policies often provide an insurance cover at much lower premium vis-a-vis
traditional Term Insurance Policies. This is because they are offered directly
by the insurance company and a vast majority of the process is being done online
and hence at a much lower cost. This elimination of middlemen (the insurance
broker, insurance agent, etc.) and the reduction in process costs is passed on
to you by way of a lower insurance premium.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Hence, my vote will be to go in for an
appropriate Online Term Insurance Policy. Go for it. Go for it
TODAY!</span></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Caveat:</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">All that I've stated above happens to be quite
valid - no conditions apply. However, it is imperative to remember the
following:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Once you decide that you need a life insurance
cover, it is better to have ANY LIFE INSURANCE POLICY than to have NO LIFE
INSURANCE POLICY. </span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Hence, it is actually better to have one of
those sub-optimal policies that I've described than to have NO LIFE INSURANCE
POLICY.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">The much desired Online Term Insurance Policy
that you have identified must obviously be bought. But if you are under
compulsion to buy some other policy from a friend / relative / spouse's relative
/ classmate, etc., it is actually better to buy such a policy from such a source
than NOT to have any life insurance cover. If possible, minimise the latter and
go in for a good quality term insurance policy over and above the sub-optimal
policy.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">In any case, if you already have one or more of
those sub-optimal insurance policies (the baggage of history), DO NOT
discontinue such policy / policies till at least three months AFTER you have
received the policy papers from your carefully chosen Online Term Insurance
Policy.</span></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Critical words of wisdom:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">You need to remember that the sole purpose of
making premium payments for a life insurance policy is to ensure that you do
have a life cover. You do not wish to be in a situation where after the demise
of the policy-holder, the nominee fails to get the insured amount due to some
fault while filling up the form or due to some intentional/inadvertent false
declaration while filling up the form. Hence, while taking such a life insurance
policy, make sure that you are very meticulous when it comes to filling up the
proposal form. Ideally, you MUST fill it up all by yourself. Even if an agent
were to fill it up, you must ensure that every single item in the form is filled
up accurately and truthfully. </span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Especially, you must be very particular about
the spellings of your name and that of your nominee. There must be NO MISTAKE in
such basic details such as postal address, contact numbers, email addresses,
nominee details, details of the chosen policy (including sub-options that may be
applicable), Date of birth, etc.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">And, having a medical check-up done by the
insurance company's team of doctors is actually an ideal situation. Once that's
done, they will not be in a position to reject a claim later claiming that the
policy-holder did not declare his/her true medical
condition.</span></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">In my next few posts, I plan to write about health
insurance policies.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Watch this space!</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
</div>
<div style="text-align: justify;">
</div>
<br />
<div style="text-align: justify;">
<span style="font-size: large;">Regards,</span></div>
<span style="font-size: large;">
</span><br />
<div style="text-align: justify;">
<br /></div>
<h2 style="text-align: left;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-70242336321470017072013-11-21T18:45:00.000+05:302013-11-21T18:45:10.840+05:30Importance of Insurance - Part 4<div dir="ltr" style="text-align: left;" trbidi="on">
<div align="center">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Be safe or You'll be sorry! Part
4</span></em></strong></div>
<span style="font-family: Arial;"><span style="font-family: Times New Roman;"></span>
</span><br />
<div align="center">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: large;">Choosing the right Life Insurance
Company</span></em></strong></div>
<span style="font-size: x-large;"><br /></span>
<div align="justify">
<span style="font-size: large;">Here's the next part of my continuing coverage on
Insurance. You would have read my earlier post on the quantum for which an
individual should obtain a life cover:</span></div>
<div align="justify">
<br /></div>
<ul>
<li><span style="font-family: Times New Roman; font-size: large;"><a href="http://financialviewsofmrn.blogspot.in/2013/11/importance-of-insurance-part-3.html">Be
safe, or you'll be sorry - Part 3</a></span></li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">In this post, I propose to talk about how to identify a suitable life insurance company.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">How do you choose a life insurance company from
which you can buy a life insurance policy? Some points to note:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">The industry has evolved over the years. Despite
MoneyLife (magazine, website) and others who claim that our regulators are
toothless tigers, IRDA has evolved into a regulator on which I'll personally
have quite a lot of confidence and trust.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Based on the IRDA norms, virtually every single
player in the insurance industry has to take care of issues like capital
adequacy, sustainability of the policy, basic levels of customer satisfaction,
etc. There's always scope for improvement, but then, things are broadly "so
okay" now that you can go ahead and rely on any life insurance company - All of
them are "reasonably" reliable and trustworthy.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Having mentioned the above, it is possible that
you might be personally uncomfortable with Company X or Management Y - with or
without any reason whatsoever. By all means, drop those companies from your list
of "suitable life insurance companies" - After all, unlike a few years ago,
today you have the luxury of CHOICE - There are quite a few active life
insurance companies even if you decide that you don't wish to buy a policy from
half a dozen companies.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Next, look at GEOGRAPHY. It is possible that a
couple of specific life insurance companies may be relatively inactive
or perhaps even be absent in your city / town / village. While it may still be
OK to take a policy from such a life insurance company, it is likely to be that
much more difficult to handle issues related to claims processing - Certainly in
comparison with another life insurance company which has an active presence in
your place of residence.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Now, you have a bunch of companies which
continue to survive in your shortlist of life insurance companies from which you
can consider buying a life insurance policy.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Thanks to the first point above, you can
virtually choose ANY of the above life insurance companies that continue to be
part of your shortlist. </span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">In my next post, I propose to write about the
actual process that you need to follow to try and identify that particular
policy that will be suitable for your specific needs.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Watch this space!</span></div>
<div align="justify">
<br /></div>
<div align="justify">
</div>
<div align="justify">
</div>
<br />
<span style="font-size: large;">
</span><br />
<div align="justify">
<span style="font-size: large;">Regards,</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<h2 style="text-align: left;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-12441453241472137182013-11-12T11:00:00.000+05:302013-11-12T11:00:01.614+05:30Importance of Insurance - Part 3<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Be safe or You'll be sorry! Part
3</span></em></strong></h2>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Here's the next part of my continuing coverage on
Insurance. You would have read my earlier post on whether you need Life
Insurance in the first place:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;"><span style="font-family: Times New Roman; font-size: large;"><a href="http://financialviewsofmrn.blogspot.in/2013/11/importance-of-insurance-part-2.html">Be
safe, or you'll be sorry - Part 2</a></span></li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">In this post, I propose to talk about how to identify the quantum of amount for which an individual should
obtain a life cover.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">At the outset, let's be clear on what should NOT
be the amount of coverage that you require:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">It should not be the amount recommended /
suggested by your friend, parent, spouse, child, financial advisor, blog author,
insurance agent, bank manager.</span></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Clearly, each of the above will have his/her own
reasons to suggest varying amounts as "just the right quantum" for you. While
some may have your genuine needs in mind, others may have ulterior motives.
However, it is unlikely that any of them will have a clear and holistic idea
about your current situation and hence, you can't depend on their
suggestions.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">You need to keep in mind various factors while
determining the amount for which you should buy a life insurance policy. Some of
these would include:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Your personal profile - age, academic /
professional qualifications, job profile, current income, future
prospects</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">The number of financial dependents, their ages
and the period for which they are likely to remain financially dependent on
you</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Your current wealth level</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Your desire to "care for" those who are
financially dependent on you (this factor is often ignored
by most people including competent financial advisers due to their emphasis on
being "politically correct" - As you're aware, I give a
damn!)</span></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Each one of the above will influence the amount
for which you need to obtain life insurance cover.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">The actual amount will obviously vary from person
to person. And the only person who can identify it is the person whom you meet
every day when you look into the mirror. But it would help to keep in mind the
broad (and simple) rules of thumb:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">The more the number of financial dependents whom
you care for, the higher you need to buy life insurance</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">The better your academic / professional
qualifications, the higher your future potential is likely to be. Obviously,
when you die, the financial loss would be that much greater. Obviously, you need
to think of a higher life insurance amount</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Ditto for higher income / wealth levels, the
stability of your job, etc.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">The younger you are, the longer you're likely to
live, earn and prosper. This warrants a higher sum assured for your
life.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">The number of years for which your dependents
will need to survive after your death before they get a meaningful alternative
source of sustaining themselves</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Your ability to afford to pay the premium
REGULARLY for servicing the policy that you take based on the amount arrived at
after taking into account all the above factors</span></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Obviously, you can't have a "one-size-fits-all"
formula to calculate the ideal amount for which an individual needs to buy
insurance. Every individual needs to identify the amount required on his/her
own.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">You calculate the amount required by you - By the
time you've identified the amount required, I hope that my next post would be
ready to help you further in the process to be followed to identify the
appropriate life insurance policy for you.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Watch this space!</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
</div>
<div style="text-align: justify;">
</div>
<br />
<div style="text-align: justify;">
<span style="font-size: large;">Regards,</span></div>
<div style="text-align: justify;">
<br /></div>
<h2 style="text-align: left;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
<div align="justify">
</div>
<span style="font-family: Arial;"><span style="font-family: Times New Roman;"></span>
<span style="font-size: medium;"></span>
<strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong>
</span><br />
<div>
<hr color="#0000ff" />
</div>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-86182548301942528812013-11-10T16:58:00.000+05:302013-11-11T12:28:57.462+05:30Importance of Insurance - Part 2<div dir="ltr" style="text-align: left;" trbidi="on">
<div>
<span style="font-family: Arial;"><span style="font-family: Times New Roman;"></span>
</span>
<h2 style="text-align: center;">
<span style="font-family: Arial;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Be safe or You'll be sorry! Part
2</span></em></strong></span></h2>
<span style="font-family: Arial;">
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">You would have read my earlier post on </span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;"><span style="font-family: Times New Roman; font-size: large;"><a href="http://financialviewsofmrn.blogspot.in/2013/11/importance-of-insurance-part-1.html"><strong><em>Be
Safe - Or, You'll be sorry - Part 1</em></strong></a></span></li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">In this post, I propose to talk about insuring the
most important risk that any human being faces - His / her life. Life insurance happens to be the most popular but gravely misunderstood
insurance product.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">A Life insurance policy essentially promises to
cover the risk of life and during the tenure of the policy, if the policyholder
were to die, the nominee / beneficiary who has been named in the policy would be
paid the sum assured. (I'm consciously using the word "die" instead of using the
usual euphemism which says "if anything untoward were to happen to the
policyholder" - After all, I believe in calling a spade a spade!)</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">In its simplest form, let's assume the
following:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Ms. X has insured her life for a sum of Rs.
25,00,000/=. </span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">She's nominated her son Mr. Y as the nominee and
beneficiary as per the terms of the policy</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">(Unfortunately like all of us including you and
me, she also has to die some time or the other). Ms. X dies a couple of years
after taking the policy while the policy is very much continuing to remain
valid.</span></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">In the above example, after the death of Ms. X,
Mr. Y will get a sum of Rs. 25,00,000/= from the insurance company, subject to
the usual terms and conditions of the insurance policy being complied with to
the satisfaction of the insurance company in terms of proper documentation
of:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">The validity of the insurance
policy</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">The death of Ms. X</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Identification of Mr. Y as the nominee &
beneficiary as per the policy.</span></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">There are, as I've mentioned in my earlier post, a
whole range of life insurance products that are available. A vast majority of
those products would be completely unsuitable to you. Hence, you must learn to
identify the basis on which you will choose a life insurance product that's
relevant for you.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Here are some cues for the process:</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">First, do you need a Life Insurance policy? Well,
most of the readers of this blog will require a life insurance policy. Some
exceptions:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">If you have no financial dependents, who is
going to get the amount of sum assured after you die? Obviously, it doesn't make
sense to have any life insurance policy.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">If you're stinking rich like a Bill Gates or
Warren Buffett or Azim Premji or Mukesh Ambani, you need to seriously evaluate
if your dependents or near and dear ones are likely to be financially at a
disadvantage due to your death. An additional million or two dollars may not
make any difference to the wealthy heir of such a rich person. If you are truly
wealthy, in my opinion, you (and your dependents) do not need a life insurance
policy unless there are very strong reasons for the same.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">If you're NOT earning any income or are earning
a negligible income, your legal heirs are unlikely to be at any significant
financial disadvantage due to your death. Again, a life insurance policy is of
no use for you.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">If your legal heirs are "well-settled" and are
financially completely independent, they won't be impacted adversely due to your
death - at least financially. Again, in such an instance, you don't need any
life insurance coverage.</span></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">I'm sure that based on the above, you'll have a
better idea as to whether you require Life Insurance cover.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">In my next post, I hope to talk about how to
identify the quantum of amount for which an individual should obtain a life
cover.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Watch this space!</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
</div>
<div style="text-align: justify;">
</div>
<span style="font-size: large;">
</span><br />
<div style="text-align: justify;">
<span style="font-size: large;">Regards,</span></div>
<div style="text-align: justify;">
<br /></div>
<h2 style="text-align: justify;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
<div align="justify">
</div>
<strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong>
<hr color="#0000ff" />
</span></div>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-305091419803965622013-11-09T14:53:00.002+05:302013-11-09T14:53:34.006+05:30Importance of Insurance - Part 1<div dir="ltr" style="text-align: left;" trbidi="on">
<div>
<span style="font-family: Arial;"><span style="font-family: Times New Roman;"></span>
<h2 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Be safe or You'll be sorry! Part
1</span></em></strong></h2>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">It is a long time since I wrote anything about the
importance of Insurance. </span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">For those of you who are financially literate, the
information in this (and perhaps the next few posts) would be a repetition of
known stuff. For you, I'd just say: I hope that you have already acted on your
knowledge. Review your existing policies and recent developments in the past
couple of years by way of new products in the markets. And, if appropriate, go
in for mid-course corrections.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">For the rest of you, I hope that my thoughts on
insurance would come in handy to make a beginning. And in case you've already
made a beginning, do a meaningful review.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Having covered the prelims, here's the main
course:</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Insurance is nothing but a method by which you can
make up (or at least mitigate) any financial loss that may arise due to a risk
that you have insured against. Among other things, some of the stuff that you
can think of insure would include:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Your life (and that of various members of your
family)</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Your home (and perhaps various valuables that
are kept therein)</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Your vehicles (Car, Bike, etc.)</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Your health (so that hospitalisation expenses do
not come as a shock)</span></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">First, I'm sure that there are a whole lot of
other things that can be insured - don't bother - Right now, make a beginning
with the basics. </span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Secondly, like in most other financial products
(whether it is mutual funds or shares or credit cards), there's a plethora of
insurance policies that are available in the market, provided by a host of
insurance companies. More than enough to completely confuse you. In fact, even
the supposedly financially savvy and financially literate individuals are often
prone to choose (or continue with) a policy that may not be suitable to them or
have become unsuitable to them since the time they initially went in for the
policy.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Some action steps for you before you are ready to
actually start evaluating and choosing insurance policies that are suitable for
you:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Identify a list of various types of financial
risks that you (and your family) are likely to face in the foreseeable
future.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Among the above, shortlist those financial risks
that you are ready, willing and capable of bearing on your own. For these
"things", you DO NOT require any insurance policy unless it is mandatory
according to law.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Now, the financial risks that remain are the
ones for which you would ideally like to consider buying appropriate insurance
policies.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Do a bit of preliminary reading to identify the
different types of policies that are available in the market place to cover
those risks. A good starting point would be to identify the web sites of major
insurance companies and financial service providers.</span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Till you are reasonably clear about what you
want (and, better still, till you have read enough and acquired adequate
knowledge about what's suitable for your specific needs, DO NOT CONTACT ANY
INSURANCE AGENT. </span></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">In my next few posts, I hope to write about
covering different types of risks.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Watch this space!</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
</div>
<div style="text-align: justify;">
</div>
<span style="font-size: large;">
</span><br />
<div style="text-align: justify;">
<span style="font-size: large;">Regards,</span></div>
<div style="text-align: justify;">
<br /></div>
<h2 style="text-align: justify;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
<div align="justify">
</div>
<strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong>
<hr color="#0000ff" />
</span></div>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-90617321337451545802013-11-06T11:20:00.001+05:302013-11-06T11:20:37.345+05:30Greed for Safety!<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Paradoxical Oxymoron: Greed for
Safety</span></em></strong></h2>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">Just came across a brief but insightful interview
with Seth Masters of Bernstein Global Wealth Management:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;"><a href="http://www.bloomberg.com/news/2013-04-09/the-scary-risks-of-safety-bubble-up.html">Scary
Risks of Safety Bubble</a> </span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Traditionally, people have been accused of losing
their money due to their greed. When I read the above interview, I was able to
recall a rather interesting trend that I've consistently observed among the
famous Indian Middle Class, which gets accentuated after every scam / bubble
(ranging from Harshad Mehta scam to Dot-com bust to Ketan Parikh scam to East
Asian currency crisis to the US Sub-prime Mortgage crisis to the Euromess to the
Chinese slowdown to the NSEL Scam):</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">In the name of running after safety, the middle
class Indians tend to focus too much on the risks associated with equity shares
and too little with a rather critical risk.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Interestingly, this risk aversion that prevents
the middle class Indians from investing in equity shares is at its highest when
the indices are at their lowest valuations due to one scam or burst bubble or
whatever. Hence, they tend to completely stay away from investing in shares when
the BSE Sensex is at 9000-10000 in 2008, but much more willing to get tempted to
invest in equity shares when the share prices have gone up consistently for 3-4
years, as it happened between 2003 and 2007. But then, this post is not about
the foolish behaviour of investors when it comes to investing in shares.
</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Instead, I'd like to highlight the foolish
behaviour of the very same investors in an entirely different arena - their
<span style="color: purple; font-family: Monotype Corsiva;"><strong><em>Greed for
Safety!</em></strong></span></span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Many middle class Indians tend to look for SAFETY
and LIQUIDITY when it comes to investing their "hard-earned money". This often
means that they look to focus almost exclusively on bank fixed
deposits.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Let's look what kind of risks gets ignored in this
process:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Risk of Inflation - The government publishes an
inflation figure - unfortunately, that happens to be the "wholesale inflation",
which is of no consequence to you and me. What matters to us is the inflation at
the retail level. In the past few years, the retail inflation index would have
been going up easily at a rate upwards of 10% per annum. The actual figures,
equally unfortunately, are unknown to me. What's worse, however, is that the
inflation applicable to an individual hosehold is often likely to be driven by
their ACTUAL standard of living and not based on the AVERAGE standard of living
of the whole Indian population.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Translated in layman's terms, what does this
imply? Take a look:</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">A "normal" middle class city-dwelling urban Indian
has a much higher ACTUAL standard of living compared to the AVERAGE standard of
living of the whole Indian population</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">The typical monthly rent / housing loan EMI is
often at least thrice higher than the national average</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">The typical monthly grocery basket consists of a
whole range of things which are NOT bought at all by the "Average
Indian"</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">The typical school fees, medical bills, dining
out, entertainment expenses, fruits and vegetable expenses, fuel expenses, etc. of a REAL
middle class Indian is much higher than that of the AVERAGE INDIAN.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Naturally, the typical retail inflation for the
Middle Class Indian is likely to be much higher than what would be the "Average"
retail inflation figure.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
</ul>
</li>
<li>
<div align="justify">
<span style="font-size: large;">If the Average retail inflation is upwards of 10%
per annum, on a very conservative estimate, the ACTUAL retail inflation for the
middle class Indian is likely to be upwards of at least 12.5-13% per
annum.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Considering the fact that typical non-equity
investment options of middle class Indians are often restricted to Bank Fixed Deposits, the present rate of return (pre-tax) happens to
be around 8-10% per annum. This is woefully inadequate even to cover the
inflation figure applicable to you and me, and certainly not enough to
generate any meaningful real returns. </span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">My simple question: If you're so GREEDY about
ensuring the SAFETY of your investments, you're ignoring the RISK OF INFLATION.
Can you afford it?</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">I think not.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Start thinking of alternatives. And
quickly!</span></div>
<div align="justify">
<br /></div>
<div align="justify">
</div>
<div align="justify">
</div>
<br />
<div align="justify">
<span style="font-size: large;">Regards,</span></div>
<div align="justify">
<br /></div>
<span style="font-family: Arial; font-size: large;"><span style="font-family: Times New Roman;"></span>
</span><br />
<h2 style="text-align: left;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-28104891831391538382013-09-17T14:06:00.001+05:302013-09-17T14:06:19.715+05:30Rural Opportunity<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: center;">
</h2>
<h2>
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Rural India - The emerging boom</span></em></strong></h2>
<br />
<div align="justify">
<span style="font-family: Arial;"><span style="font-family: Arial; font-size: large;">I was listening to Aditya
Puri of HDFC Bank a couple of days back on Bloomberg. One of the things he
mentioned was the rural emphasis for his bank. The points he elaborated were
broadly:</span></span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">1300-1400 branches opened in the past 3
years, most of them in rural areas. (I can corroborate the same with anecdotal
experience that I've observed in interior AP & TN.)</span></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">A vast majority of the accounts being opened
in these new branches have a much greater focus on deposits than on loans -
<strong>Presently.</strong></span></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;"><strong><br /></strong></span></div>
</li>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">With banking comes greater financial
awareness, and soon the trend of taking loans, credit cards and consuming other
financial products will explode in rural India. </span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Natural corollary of the above (my
interpretation):</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Consumption is likely to explode to
unimaginable levels in the next 5-10 years in rural India.</span></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">FMCG companies, consumer durables, service
providers like banks, hospitals, educational institutions, restaurants, etc. are
likely to see an entire new market in rural India in the next few
years.</span></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">With increasing rural prosperity will come a
demand for better quality infrastructure - both physical and social</span></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">This will result in enormous growth in
diverse sectors like roads, farm equipment, power generation, healthcare,
insurance, automobiles, shopping malls, entertainment, education, commodities,
housing, telecom, etc.</span></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Multiplier effect on GDP is going to be
immense. Imagine a scenario where the whole of Rural India (or at least a vast
portion of it) becomes like Kerala. With the difference being that it is going
to be driven by domestic prosperity instead of Gulf money. The result is likely
to be a huge growth in GDP numbers.</span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;">All the above, would, without any doubt,
result in a virtuous cycle which will:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Increase per capita income</span></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Reduce pressures on our major metros by
creating employment opportunities closer to the native place of every
villager</span></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Massive real estate boom</span></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Enormous increase in the market
capitalisation of listed companies with a focus on the rural
markets</span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;"><span style="font-family: Arial;">My only question is: </span><span style="color: purple; font-family: Monotype Corsiva;"><strong><em>Who is going to benefit
from all of this?</em></strong></span></span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Unfortunately, my hunch is that the rich
promoters of all these companies and the foreign investors who are investing
heavily in our markets will take the major share of the emerging
cake.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Very sadly, we Indians do not invest
sufficiently in equity markets. As per publicly available information, just 3%
of the savings of the entire Indian population goes into investing in the equity
markets - both directly and through mutual funds. What's even worse is that in
the nineties (prior to the Harshad Mehta scam), the figure had reached almost
13% of the savings.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;">We must correct this situation. Obviously the
government has a major role to play in ensuring this anomaly is rectified at the
earliest by encouraging people to enter the equity markets. However, this cannot
be left only to the government. Financial service providers - especially banks -
must develop an attitude to motivate their customers to enter the equity
markets. The must, for instance, facilitate passive index-fund investing through
attractively designed SIP offerings. This will certainly result in a win-win
situation for all concerned.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Arial; font-size: large;">Will our bankers raise to the
occasion?</span></div>
<div align="justify">
</div>
<div align="justify">
</div>
<br />
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Regards,</span></div>
<div align="justify">
<br /></div>
<span style="font-size: medium;">
</span>
<span style="font-size: medium;"></span>
<br />
<h2 style="text-align: left;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
<br /></div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com1tag:blogger.com,1999:blog-3393423882414200345.post-55367400042312736182013-09-04T18:40:00.003+05:302013-09-04T18:40:39.949+05:30Welcome, Raghuram Rajan!<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Raghuram Rajan takes over as RBI
Governor</span></em></strong></h2>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Raghuram Rajan has just taken charge as the latest
RBI Governor.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">As he's mentioned in his first press conference,
he's taking over at a rather challenging time.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">He's made a whole lot of "right noises" and
"action-oriented announcements" addressing areas pertaining to:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">New Bank Licences (Committee headed by Bimal
Jalan, ex-RBI Governor to give recommendations)</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">NPA problem (to be analysed by group headed by
Dy Governor KV Chakraborty) - He categorically says that "Promoters don't have a
divine right to remain in charge"</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Financial Inclusion (Initiatives to be suggested
by panel headed by Nachiket Mor, a rare banker with a large human heart of Gold
who gave up a surefire successful banking career at ICICI to get involved in
social service)</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Liberalising Bank Branch Expansion</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Encouraging Foreign Banks to form subsidiaries
(rather than remain branches of their global owners) - This will certainly
enable RBI to have a better degree of control over possibilities of Systemic
Risks</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Mobilising NRI Deposits</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Transparency (Well, his first press conference
shows his intentions rather transparently!)</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Team Spirit - He's categorically made it clear
that all his announcements are NOT his own ideas but a combined result of team
work by his able team at RBI -This obviously ensures that he will start with an
advantage of his team being open to working with him rather than "against him".
Likewise, he's talked about cooperating with other agencies like the SEBI and
Government of India to hasten efforts at liberalisation of our
markets</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Using Technology (Spoke about panel to study
mobile payment mechanisms, for instance)</span></div>
</li>
</ul>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">WOW! That's a rather long list (and only a partial one based on my own memory) for a first day show! Hats off to the new RBI Boss. We're in safe hands, I must say.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Towards the end, Raghuram Rajan summed up things beautifully with these
words:</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;"><strong><em><span style="color: purple; font-family: Monotype Corsiva;">"Change is risky, but not changing is riskier!" </span></em></strong></span></div>
<div align="justify">
</div>
<div align="justify">
</div>
<br />
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">He's off to a great start. As the old adage goes,
"Well-begun is half the battle won". Now, we'll wait for actual action. We're in
for interesting times...</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Watch this space!</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Regards,</span></div>
<div align="justify">
<br /></div>
<span style="font-family: Arial; font-size: large;"><span style="font-family: Times New Roman;"></span>
</span><br />
<h2 style="text-align: left;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-59309084615287281992013-08-30T17:00:00.000+05:302013-08-30T17:00:03.206+05:30Inequity of Income and Wealth ...<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: left;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Rich get richer, Poor get poorer
& its impact on us ...</span></em></strong></h2>
<br />
<div align="justify">
<span style="font-size: large;">Some time back, I'd written a post on<span style="font-family: Arial;">:</span></span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;"><a href="http://financialviewsofmrn.blogspot.in/2013/06/changing-spending-patterns.html">Changing
Spending Patterns and what it means for Investors</a></span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">As I had emphasized right at the outset of the
above post, the optimistic side of things. In this post, I'll elaborate my
thoughts about the negative side of things.</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">There is, most certainly, an India where things
are hunky dory.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">An India where luxury products are selling like
hot cakes.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">An India where the malls are crowded, the
theatres are crowded, IPL Cricket match venues are crowded, jewellery shops are
crowded.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Every "middle-class person" is planning to go
abroad either for higher education or on a juicy assignment or wants to send
his/her children to the US / Europe for similar reasons. Preferably, never to
come back.</span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">In the midst of all this reality, there exists
another reality. That reality is NOT palatable. That reality is something that
we detest, we wish to bury under the carpet, ignore like an ostrich,
conveniently bypass in our personal lives to the extent we can.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Let me quote a few examples of the negative sides
of the stark reality of India that is as true as all the positives that we used
to be proud about:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">The infrastructure of ALL our major cities is
pathetic, to say the least. Even the major roads, the arterial roads, are often
filled up with potholes. Violation of traffic rules by EVERYONE is the norm,
leading to chaotic traffic. Encroachments ensure that pavements are either
non-existent or unavailable for pedestrians, pushing them on to the roads. All
this results in </span></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Air Pollution</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Noise pollution</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Road Rage</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">All kinds of health hazards ranging from
respiratory ailments, blood pressure, heart attacks, etc. And an ever-increasing
rate of accidents, including fatal accidents.</span></div>
</li>
</ul>
</li>
<li>
<div align="justify">
<span style="color: navy; font-size: large;"><strong>I'm yet to see any signs
of any of the above changing any time soon.</strong></span></div>
<div align="justify">
<span style="color: navy; font-size: large;"><strong><br /></strong></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">The inequity in income and wealth levels is
incredible. Irrespective of the actual figures, even if we were to go by
government statistics, not less than 35-40 crore Indians (That's 350-400
million) will be well below the official poverty line, just about making both
ends meet. Poverty is a reality in urban AND rural India.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Some of us will say that the MGNREGA scheme has
made things a bit easy. But that's for 100 days in a year. For one person in the
household. What about the rest of the year?</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Even among those who are above the poverty line
at least another 10 crores (100 million) will be in such dire financial
condition that a single medical emergency in the family or a failed crop or the
loss of a job will push them below the poverty line.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">NGOs with a focus on Poverty and school
principals actually want double the usual quantity of food stuff allocated for
midday meals for schools on Mondays - Because the kids often starve during the
weekends. And we're talking about just those kids who have not dropped out of
schools!</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Child labour is a reality. Just go to any
neighbourhood kirana store, restaurant, mechanic shop to see for
yourself.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">The percentage of the working age Indians who
are enjoying the "safety and security" of an organised sector job is
laughable.</span></div>
</li>
<li>
<div align="justify">
<div align="justify">
<span style="color: navy; font-size: large;"><strong>I'm yet to see any signs
of any of the above changing any time soon.</strong></span></div>
<div align="justify">
<span style="color: navy; font-size: large;"><strong><br /></strong></span></div>
</div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Slowdown, recession, joblessness, pink slips -
All these are words with which an increasingly large number of middle class
Indians are becoming personally familiar from first hand
experience.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Inflation, especially at the retail level, is
running well above 10% (I'm talking about the real rate of inflation that you
and I face when we go to the market and not the government figures). Just look
at the prices of tooth paste, soaps, edible oils, petrol, medicines, vegetables,
fruits, rice, wheat, eating out at restaurants, etc. And compare the prices with
what was prevailing even a year ago. You'll know what I'm talking
about.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<div align="justify">
<span style="color: navy; font-size: large;"><strong>I'm yet to see any signs
of any of the above changing any time soon.</strong></span></div>
</div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Crime and lawlessness is a constant presence.
And I'm not merely talking about rapes. And people are scared to go to courts in
a vast majority of cases, as they're sure about the duration of the eventual
trial. And often either grin and bear the consequences of a minor theft or
assault, or, worse, take law into their own hands. Both are counter-productive
for the nation. In the short term as well as the long run.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Value systems that used to prevail are gone for
good, along with the gradual demise of the joint family system and the
competitive pressures due to liberalisation. While I'm not against
liberalisation, so-called liberalisation accompanied by endemic corruption is a
sure recipe for disaster. And that's precisely where we are headed.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">An increasing number of youths are willing to
consider crime as a career option. Some take to petty crimes, others are even
open to consider joining the naxal movement. When incompetent or corrupt (or
perhaps both) cops end up arresting a few youths from the nearby slum for every
crime that is reported without necessarily backing up their actions with proper
evidence, and when they go on to torture such arrested youngsters, it becomes
easy for converting such youngsters into a vulnerable lot who will fall into the
hands of criminal elements.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Government statistics talks about entire
districts across several states which are under the de-facto control of
naxalites. Alienation of Indians in many parts such as Jammu & Kashmir and
the North East is a reality.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<div align="justify">
<span style="color: navy; font-size: large;"><strong>I'm yet to see any signs
of any of the above changing any time soon.</strong></span></div>
</div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">The demographic dividend is fast turning into a
demographic nightmare. I'm given to understand that around 17 lakhs (1.7
million) engineers pass out of our Engineering Colleges - EVERY YEAR. Out of
these, just around 2.5 to 3 lakhs (less than 15%) land up meaningful jobs in the
organised sector. The rest of them? God knows what is happening to them??? And,
to top it off, these engineering graduates are considered to be the better off
among the youth. Wonder what is the plight of those who end up giving up their
education after schooling (or drop out even earlier from schools)???
</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">I'm sure that the condition of the vast majority
of Indian youth will be sub-optimal, to say the least.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">In the midst of all this, we import virtually
everything from crude oil to electronic gadgets to gold to even Ganesha Idols!
And all our major home-grown industrialists are increasingly investing overseas.
Think of Tatas, Birlas, Ambanis, Videocon's Dhoots, etc. Obviously, they find
the grass much greener outside India. </span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">If we don't come up with policies to encourage
investments in India, obviously our youth will continue to suffer without jobs
and our industrialists will continue to go abroad. </span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">The brain drain may soon be back. If it had ever
reduced in the first place.</span></div>
</li>
<li>
<div align="justify">
<div align="justify">
<span style="color: navy; font-size: large;"><strong>I'm yet to see any signs
of any of the above changing any time
soon.</strong></span></div>
</div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Enough of the above rambling. </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">What all the above points mean is that investors
need to keep a very close watch on what's happening around them in the country,
and not just in the companies where they are investing.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">If India does not do well, the companies cannot
continue to be islands of excellence. Even if we don't have a revolution or
anarchy, it is easy to fall into a trap of severe recession leading to a
depression. Accompanied by inflation, this will be a disaster for the Indian
economy.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">We may end up having a couple of "lost decades",
the way Japan suffered.</span></div>
<div align="justify">
</div>
<div align="justify">
</div>
<div align="justify">
</div>
<br />
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">If, God forbid, India goes into a depression due
to all that we discussed above, what should the investors do?</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">My own suggestion will be along the following
lines:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Those of you who can afford (financially,
socially and mentally), either shift abroad to greener pastures. Or at least try
to diversify across geographies by allocating a part of your overall portfolio
to invest in global mutual funds, for instance.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Without bothering about what the experts and our
Finance Minister may say, allocate a portion of your portfolio to invest in Gold
(both jewellery for enjoyment and Gold ETFs). That's a hard asset, and while the
prices can be volatile, in times of recession and depression, the fall in gold
is likely to be much less and it can be encashed easily in case of
emergencies.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Invest strategically in real estate. Your own
home for living can be a convenient priority. While a second flat may appear to
be a good investment presently, if there is a massive depression in real estate,
apartment prices can fall. Especially in prime locations in the city. Just look
at the US experience subsequent to the sub-prime crisis. Instead, consider
investing in land. Agricultural land within 30-50 KM from major towns and cities
can be a good idea. While the agricultural land can generate marginal income by
way of agri-products, the proximity to towns and cities will increase the
probability of that area becoming a part of the city over the next few
years.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Develop the ability to think like a trader even
while investing for the long term in equity - Whenever you see profits, keep
taking part of the money off the table. Become an opportunistic investor who
will keep a part of one's equity portfolio in cash to utilise periodic crashes
in the market. Don't hesitate to take cash calls.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Stick to either blue chips
or high quality mutual funds</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Keep sufficient sums of money in cash or cash
equivalents (like bank deposits and liquid mutual funds) to handle
emergencies.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Make sure that you have enough insurance
coverage by way of term insurance and health insurance.</span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">More important than all the above, ensure that you
keep upgrading your skills. This and only this will ensure that you continue to
remain employable. You'll notice that even in the worst of the recessions, some
individuals in your circle of friends and relatives not only continue to retain
their jobs, but also continue to get more than their share of promotions,
increments and incentives. Their secret is continuous upgradation of their
knowledge and skills not only in their own areas of operation but also in terms
of soft skills.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">As the old adage goes, conmen and thieves can take
your money or physical wealth. They can't steal your knowledge. Keep
learning.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Most importantly,</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Enjoy life. Be happy. You only live
once.</span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Regards,</span></div>
<div align="justify">
<br /></div>
<span style="font-size: large;">
</span><br />
<h2 style="text-align: left;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
<br /></div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com1tag:blogger.com,1999:blog-3393423882414200345.post-45189152317477166352013-08-28T17:00:00.000+05:302013-08-28T17:00:03.199+05:30Do you know the implications of being a Guarantor of a Loan?<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Be a guarantor at your own peril!</span></em></strong></h2>
<h3 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: large;">Your own Credit Score may be adversely impacted...
Beware!</span></em></strong></h3>
<div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Take a quick look at the following excerpts from
Economic Times, August 26, 2013:</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">___________________________________________</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<b><em><span style="font-family: Verdana, sans-serif;">If the borrower defaults, the lender can ask the guarantor to repay
the loan. </span></em></b></div>
<div align="justify">
<b><em><span style="font-family: Verdana, sans-serif;"><br /></span></em></b></div>
<div align="justify">
<!----></div>
<div align="justify">
<span style="font-family: Verdana, sans-serif;">When a friend
or relative asks you to stand guarantee for his loan, don’t treat it as a simple
formality. The Supreme Court has ruled that the responsibilities and liabilities
of a guarantor are no different from that of the borrower. In this particular
case in the apex court, Ganga Kishun had acted as guarantor for a loan taken by
his friend, Ganga Prasad, who died before the loan was fully repaid. When the
bank tried to recover the loan by selling Kishun’s land, he challenged the move
in court. However, after a lengthy legal battle, which reached the Supreme
Court, it was held that the bank had the right to
recover the dues from the guarantor if the borrower had failed to pay.
</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-family: Verdana, sans-serif;">Apart from repaying a loan
that someone else has taken, the proceedings can negatively impact your loan
eligibility. If the borrower defaults, the banks would turn to you for its dues.
If you are unable to pay, your credit score will be impact<span id="Ar0240008">ed. Worse,
banks consider the loans for which you are acting as guarantor to assess your
repayment capacity before issuing you a fresh loan. Hence, ideally you should
act as guarantor for loans with shorter tenures so that your responsibility ends
sooner. If you are not confident about the debtor’s capacity to repay, avoid
becoming a guarantor. </span></span></div>
<div align="justify">
<span style="font-size: large;"><span><br /></span></span></div>
<div align="justify">
<span style="font-size: large;">___________________________________________</span></div>
<div>
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">Even those of us who are reasonably financially
aware and financially literate are not consciously aware about the above
aspects, especially when a close friend or relative comes along with a form
requesting you to be a "guarantor" for a loan that he/she is taking.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">Obviously, each of us ought to think a zillion times before signing on the dotted line as a "guarantor" and ask basic questions like:</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
</div>
<ol>
<li><span style="font-size: large;">Are we willing to make the commitment?</span></li>
<li><span style="font-size: large;">Is the borrower likely to be able AND willing to repay on time?</span></li>
<li><span style="font-size: large;">What will be the quid-pro-quo? (It need not be monetary!)</span></li>
<li><span style="font-size: large;">If the roles are reversed, will the other party be willing to be a guarantor?</span></li>
<li><span style="font-size: large;">What will be the consequence if we say "NO"?</span></li>
</ol>
<br />
<div align="justify">
<br /></div>
<div align="justify">
</div>
<div align="justify">
</div>
<span style="font-size: large;">
</span><br />
<div align="justify">
<span style="font-size: large;">Regards,</span></div>
<div align="justify">
<br /></div>
<h2>
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
</div>
<div>
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em><br /></em></strong></span></div>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-79950298864014708892013-08-27T17:00:00.000+05:302013-08-27T17:00:00.552+05:30So what if you are a Wharton Graduate? You can still get cheated!<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Smart,
well-educated & rich?</span></em></strong></h2>
<h3 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">You can still get cheated!</span></em></strong></h3>
<div style="text-align: justify;">
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Beware of Phishing attacks. If you're reading my
blogs, I'm sure that you're quite familiar with phishing attacks. And familiar
with scams of all kinds. Or so you think.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">However, are you indeed sure that some conman will
not cheat you?</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">And even if he can't cheat you, are you sure that
he can't cheat your spouse / parent / child?</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">I'm not so sure.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Take a look at this moneylife article:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<span style="font-family: Monotype Corsiva; font-size: large;"><a href="http://savers.moneylife.in/blog/scams/article/md-himself-victim-of-simple-phishing/456.html"><em><strong>Smart,
well-educated and rich? You can still get
cheated!</strong></em></a></span></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">The above article talks about how a Wharton
graduate (and a successful businessman operating in India) got cheated. An
eye-opener for me. I hope that all my folks (and I) make it a point to be
extra-careful while taking financial decisions.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
</div>
<div style="text-align: justify;">
</div>
<span style="font-size: large;">
</span><br />
<div style="text-align: justify;">
<span style="font-size: large;">Regards,</span></div>
<div style="text-align: justify;">
<br /></div>
<h2>
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
</div>
<div style="text-align: justify;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><br /></span></em></strong></div>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-85943396146787071502013-08-26T17:20:00.000+05:302013-08-26T17:20:00.351+05:30Organising your Finances after the Bread Winner is suddenly No More<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Do you love your folks? </span></em></strong></h2>
<h3 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: large;">Make their financial life simple
after you are gone!</span></em></strong></h3>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">All of us are sure to die. Some will do so today.
A few more will follow suit in the coming week, month or year. Others will
follow suit. In due course of time. That's a certainty.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">As Yudishtir pointed out in Mahabharat, it is
indeed surprising that a good chunk of us tend to think that the first person
singular will happen to live on forever. At least when it comes to organising
one's financial assets so as to make things easy for the survivors as and when
we kick the bucket.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">From time to time, we do come across exceptions.
Here's a wonderful story of a senior citizen who actually did a whole lot of
things to make life simpler for his heirs after he passed away.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Read on:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<a href="http://www.moneylife.in/article/how-to-manage-finances-when-the-breadwinner-suddenly-passes-away/33673.html"><span style="font-family: Monotype Corsiva; font-size: large;"><strong><em>Organising your Finances after the
Bread Winner is suddenly No More</em></strong></span></a></div>
</li>
</ul>
<div style="text-align: justify;">
</div>
<div style="text-align: justify;">
</div>
<br />
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Now that you've read the above article, do
act.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Your turn may come sooner than you would
imagine. Sorry for being blunt, but that's a fact.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Regards,</span></div>
<div style="text-align: justify;">
<br /></div>
<span style="font-family: Arial;"><span style="font-family: Times New Roman;"></span>
<span style="font-size: medium;"></span>
</span><br />
<h2 style="text-align: justify;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-88143936224527930702013-08-25T17:15:00.001+05:302013-08-25T17:16:07.844+05:30Housing for those at the bottom of the Pyramid<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Low Cost Housing</span></em></strong></h2>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">IIT Madras has apparently built a nice 2-storeyed
apartment at a TOTAL construction cost of just Rs. 650,000/=. Yes, you heard
that right. It comprises of a built up area of 1981 square feet. The structure
was built within a span of just a single month.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Most important, the experts who came up with this
building are confident that the same technology can be used to build buildings
upto 7-8 floors. And they assure us about the durability and safety
factors.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Do read on:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul style="text-align: left;">
<li>
<div style="text-align: justify;">
<a href="http://www.ndtv.com/article/south/blog-how-iit-madras-built-a-flat-for-6-5-lakhs-376763"><span style="font-family: Times, Times New Roman, serif; font-size: large;"><b><i>How IIT Madras built a 2-storeyed apartment for 6.5 lakh
rupees</i></b></span></a></div>
</li>
</ul>
<div style="text-align: justify;">
<span style="font-size: large;">
</span></div>
<div style="text-align: justify;">
</div>
<div style="text-align: left;">
</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Am sure that this can be a splendid option for low
cost housing. And can bring the real estate prices come down to earth. Will our
builders take note?</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Regards,</span></div>
<div style="text-align: justify;">
<br /></div>
<span style="font-family: Arial; font-size: large;"><span style="font-family: Times New Roman;"></span>
</span><br />
<h2 style="text-align: justify;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-38601585009280075132013-06-07T12:21:00.002+05:302013-06-07T12:21:42.685+05:30Changing Spending Patterns ...<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: left;">
</h2>
<h2 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">India getting richer, and what it means for us
...</span></em></strong></h2>
<br />
<div align="justify">
<span style="font-size: large;">I read a couple of news items on a single
day:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Swift D'zire overtakes Alto as the largest
selling car in the Indian automobile market in the month of May</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Three brands of Hindustan Unilever, including
the "Premium" brands of Dove and Ponds become 1000 crore
brands!</span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">What struck me was a clear case of
"Premiumisation", if I may coin such a word..., that's going on in
India. </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">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.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">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:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Malls and shopping complexes</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Theatres and Entertainment theme
parks</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Corporate hospitals like Apollo, Fortis,
etc.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Gyms</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Music concerts</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Airports</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Five & Three star hotels</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Jewellery shops</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Private Educational Institutions which charge a
ton of money</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Bank branches of private sector banks like HDFC
Bank, ICICI Bank, etc. (which insist on a huge minimum balance and target richer
customers)</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Shops selling electronic gadgets like mobiles,
tablets, laptops, etc.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Air-conditioned Compartments of
trains</span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">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:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">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.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">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.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">This implies that their EPS (Earnings per share)
has gone up significantly or will go up rapidly in the next few
quarters.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">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. </span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">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.</span></div>
</li>
</ul>
<div align="justify">
</div>
<div align="justify">
</div>
<div align="justify">
</div>
<br />
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">If there is a bull market ahead, my own suggestion
will be:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Review your asset allocation</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Develop a positive bias towards investing in
equity (ideally through mutual funds)</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Don't sell in a hurry</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Select either blue chips or high quality mutual
funds and invest systematically each month</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">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.</span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Enjoy life. Enjoy the returns from safe and sound
investing. Be happy.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Regards,</span></div>
<div align="justify">
<br /></div>
<h2 style="text-align: left;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
<div align="justify">
</div>
<span style="font-size: medium;">
</span><span style="font-size: medium;"></span>
<span style="font-size: medium;"></span>
<strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong><strong><em><span style="color: blue; font-family: Monotype Corsiva;"></span></em></strong>
<br />
<div>
<hr color="#0000ff" />
</div>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com3tag:blogger.com,1999:blog-3393423882414200345.post-36021356187977330322013-06-06T11:26:00.001+05:302013-06-06T11:26:58.681+05:30How to Slow Down - and still Relax ... ... ...<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: left;">
<div style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Practical Tips to Slow Down, and Relax :</span></em></strong></div>
<strong><div style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">The HOW???
Explained!</span></em></strong></div>
</strong></h2>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">You would have read my earlier blog post on the
importance of slowing down:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-family: Arial; font-size: large;"><a href="http://financialviewsofmrn.blogspot.in/2013/05/the-importance-of-slowing-down.html">Slow
down and Relax!</a></span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">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.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">In this post, I hope to share a few of my thoughts
on how to actually <strong><em><span style="color: purple; font-family: Monotype Corsiva;">Slow down and Relax</span></em></strong>!</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">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. </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Let's just take the issue of one's income to
elaborate my point. In the Indian context, I would like to classify the
<strong><em><span style="color: purple; font-family: Monotype Corsiva;">Monthly Income
Levels</span></em></strong> of people into the following broad slabs:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Zero to Rs. 10,000/= p.m.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Rs. 10,000 to Rs. 50,000/= p.m.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Rs. 50,000 to Rs. 250,000/= p.m.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Rs. 250,000 to Rs. 1,000,000/= p.m.</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Over Rs. 1,000,000/= p.m.</span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">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.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">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". </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">As long as you are within the same slab of
income/wealth combination, you will not be:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Driving a significantly superior/inferior
vehicle</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Living in a vastly different location in terms
of social infrastructure (or even a vastly different home in terms of size,
comfort levels, etc.)</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Enjoying significantly different holidays,
entertainment options, jewellery, etc.</span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Hence, unless one moves from one level to the next
lower / higher slab, there is no material change in one's quality of
life.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">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.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">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.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">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. </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">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.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">The person will now be asking Research? What is
that???</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">What's more, as and when the person realises the
situation, it will be way too late to do any mid-course correction.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">The reason? </span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<strong><em><span style="color: purple; font-family: Monotype Corsiva; font-size: large;">Money </span></em></strong></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">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.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">And now, we have a perfect example of an
intellectually great professional who is, in all probability, an unhappy human
being.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Is there a solution to this dangerous situation? I
think that there is a rather conceptually simple (but extremely difficult to
implement) solution:</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;"><strong><em><span style="color: purple; font-family: Monotype Corsiva;">Just Slow Down and Relax</span></em></strong>!</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">At every available opportunity (at least once in
3-4 months), </span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Indulge in introspection</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Ask questions</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Review your priorities</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Identify your passion</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Specifically, find out the number of hours that
you spend every day on activities you are passionate about</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">If you feel that you need to change, identify
actionable steps as to what needs to change</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Fix a time limit by which you will
change</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Identify a review date for a status
update</span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">After all, being happy is far more important than
most other things in life.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">In simple terms,</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<strong><em><span style="color: purple; font-family: Monotype Corsiva; font-size: large;">Living is more important than earning your
livelihood!</span></em></strong></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;"><strong><em><span style="color: purple; font-family: Monotype Corsiva;">Just Slow Down and Relax</span></em></strong>!</span></div>
<div align="justify">
<br /></div>
<div align="justify">
</div>
<div align="justify">
</div>
<br />
<div align="justify">
<span style="font-size: large;">Regards,</span></div>
<div align="justify">
<br /></div>
<span style="font-family: Arial;"><span style="font-family: Times New Roman;"></span>
<span style="font-size: medium;">
</span>
<span style="font-size: medium;">
</span>
<span style="font-size: medium;"></span>
</span><br />
<h2 style="text-align: left;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-40881560607639452532013-05-31T20:37:00.000+05:302013-05-31T20:37:22.045+05:30The importance of Slowing Down ... ... ...<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Slow Down, and Relax!</span></em></strong></h2>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Came across a rather interesting article in the
blog section of HBR:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<a href="http://blogs.hbr.org/cs/2013/03/stop_fast-tracking_your_career.html"><span style="font-size: large;">Slow
down, and relax!</span></a></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">This triggered a few thoughts in my mind - or,
rather, re-kindled old memories which led me to choose my life style the way I
did...</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">A lot of financial experts tend to focus
on:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Enhancing income-earning and wealth growth
prospects</span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">Maximising income and wealth on a sustained
basis - For ALL human beings</span></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Interestingly, the above thought process of
financial experts has been internalised by the vast majority of people all over
the world - cutting across race, religion, financial position, health condition,
ideological leanings, etc.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">In a way, this is a good thing as it motivates
people to improve their standard of living. However, there
is a critical downside to this sharp focus on increasing income and accumulating
wealth. No, I'm not about to launch a sermon on declining moral standards
(though that would be a valid concern as well). </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Here goes:</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">The primary purpose of earning and/or accumulating
money is to <strong><em><span style="color: purple; font-family: Monotype Corsiva;">Live</span></em></strong>. I guess that this process of
<strong><em><span style="color: purple; font-family: Monotype Corsiva;">Living</span></em></strong> would include a wide range
of activities ranging from formal education, entertainment, medical care, dining
out, socializing with friends and relatives, playing / watching different
sports, etc.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Initially, the purpose of every scientific
advancement (starting with the invention of fire, the wheel, the typewriter, the
automobile, the computer, etc.) led to a distinct improvement in the quality of
life. People were able to achieve a greater productivity with lesser efforts,
enabling them to spend more time on actual <strong><em><span style="color: purple; font-family: Monotype Corsiva;">Living</span></em></strong>. However, in the
past couple of decades, especially in the past 5-6 years, we have been observing
a disturbing trend. Increasingly, people (especially those between the age of 20
and 60) seem to be extraordinarily busy with something or the other, virtually
for 95% of the time they are awake. And mostly, they are busy with work related
matters or in activities directly or tangentially related to preparing for or
reviewing their work life.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">You know the usual "crib story": Too much
competition, unable to avoid phone calls, got to check mails, got to respond to
emergencies, need to think about my next promotion, have to retain my job, Am at
too senior a position and hence can't afford to take things easy, Am at too
junior a position to take things lightly, Have to stay updated with the latest
trends and developments in my field, Must finish reading this journal before
this weekend, etc.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">The end result: A vast majority of people are
"<strong><em><span style="color: purple; font-family: Monotype Corsiva;">Physically
Existing</span></em></strong>", but are not <strong><em><span style="color: purple; font-family: Monotype Corsiva;">Living </span></em></strong>any
longer.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Is there a solution to this dangerous situation? I
think that there is a rather conceptually simple (but extremely difficult to
implement) solution:</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;"><strong><em><span style="color: purple; font-family: Monotype Corsiva;">Just Slow Down and Relax</span></em></strong>!</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">I can hear you screaming (either openly or to
yourself) that it is easier said than done. I can almost hear you saying: "<span style="color: purple; font-family: Monotype Corsiva;"><strong><em>But
How</em></strong><span style="color: black; font-family: Arial;">"</span></span>?</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Guess that you'll have to wait for my next blog
post on the subject. In the meantime, </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;"><strong><em><span style="color: purple; font-family: Monotype Corsiva;">Just Slow Down and Relax</span></em></strong>!</span></div>
<div align="justify">
<br /></div>
<div align="justify">
</div>
<div align="justify">
</div>
<br />
<div align="justify">
<span style="font-size: large;">Regards,</span></div>
<div align="justify">
<br /></div>
<span style="font-family: Arial; font-size: large;"><span style="font-family: Times New Roman;"></span>
</span><br />
<h2 style="text-align: left;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
</div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com1tag:blogger.com,1999:blog-3393423882414200345.post-14704205597396702652013-05-25T11:46:00.000+05:302013-05-25T11:46:05.863+05:30Stick to Blue Chips<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: Arial;"><span style="font-family: Times New Roman;"></span>
</span>
<br />
<h2 style="text-align: center;">
<span style="font-family: Arial;"><strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Stick to Blue Chips</span></em></strong></span></h2>
<span style="font-family: Arial;">
</span>
<div align="justify">
<span style="font-family: Arial;"><span style="font-size: large;"><br /></span></span></div>
<span style="font-family: Arial;">
<div align="justify">
<span style="font-size: large;">If there's one thing that I've learned over the
years of investing in shares, it is something quite basic and simple:</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
</div>
<div align="justify">
<span style="font-size: large; text-align: left;">Stick to Blue Chips. And keep reviewing them regularly to ensure that they continue to be blue chips!</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">If, in the hope of grabbing that elusive multibagger, you get tempted to invest your money in an unknown company (often a penny stock), be rest assured that you're likely to be stuck with it for a long period of time. And, at the end of it, you'll be lucky if you can get your capital back.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">I had learned this lesson over the years through personal experience as well as through hearsay from experts.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">I recently came across another interesting proof that re-affirmed my faith in blue chips:</span></div>
<div align="justify">
<br /></div>
<br />
<ul style="text-align: left;">
<li>
<span style="font-size: large;">Stick to Blue Chips - </span><span style="font-size: large;"><a href="http://www.moneylife.in/article/investors-lost-rs1-lakh-crore-due-to-poor-regulation-will-there-be-a-cbi-probe/32700.html/32698.html">Investors lose over One Lakh Crores "Due to Poor
Regulation"</a></span></li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">While every word in the above article is quite
valid, the moral of the story for me has to be:</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">
</span></div>
<div align="justify">
</div>
<div style="text-align: left;">
</div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">Regards,</span></div>
<div align="justify">
<br /></div>
<h2 style="text-align: left;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
</span></div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-40690778393004218222013-04-20T11:56:00.000+05:302013-04-20T11:56:02.341+05:30Beware of Banksters<span style="font-family: Arial;"><span style="font-family: Times New Roman;"></span>
</span>
<div align="center">
<span style="font-family: Arial;"><strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Beware of Banksters</span></em></strong></span></div>
<span style="font-family: Arial;">
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: medium;">Just came across an article giving details about
the shocking behaviour of Banksters:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<a href="http://online.wsj.com/article/SB10001424127887324000704578386652879032748.html?mod=WSJ_GoogleNews"><span style="font-family: Monotype Corsiva; font-size: large;"><strong><em>Will this 79 year old man's protests
move the Government & RBI to stop mis-selling by banks? -
MoneyLife</em></strong></span></a></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: medium;">At the outset, I must reaffirm what ought to be
obvious: The incident described in the above article is a very clear case of
mis-selling, virtually bordering on cheating. </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: medium;">This is yet another sad instance of the rampant
mis-selling that is going on in the Financial Services industry. I've repeatedly
heard instances of mis-selling by banks, mutual funds, insurance companies,
share brokers, etc. And all this happens right under the noses of the
regulators!</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: medium;">However, the focus of my blog post is something
far more fundamental: What are you and I supposed to be doing in order to avoid
becoming a victim in this manner?</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: medium;">Here are a few suggestions:</span></div>
<div align="justify">
<span style="font-size: medium;"><br /></span></div>
<div align="justify">
</div>
<ul>
<li><span style="font-size: medium;">When any service provider approaches you without any request from your side, ignore / ask him/her to get lost. You must not entertain unsolicited advice.</span></li>
<li><span style="font-size: medium;">If you choose to listen, ask the person concerned to give anything he says in writing on an official letterhead, with his/her signature, name and designation affixed.</span></li>
<li><span style="font-size: medium;">Never complete a financial transaction on the day on which the service provider approaches you - Postpone it by at least a single day.</span></li>
<li><span style="font-size: medium;">Check out as to which regulatory authority "regulates" the product that is being sold.</span></li>
<li><span style="font-size: medium;">Get to know about key details such as:</span></li>
<ul>
<li><span style="font-size: medium;">Return OF Capital</span></li>
<li><span style="font-size: medium;">Return ON Capital</span></li>
<li><span style="font-size: medium;">Risk</span></li>
<li><span style="font-size: medium;">Liquidity</span></li>
<li><span style="font-size: medium;">Tax implications</span></li>
<li><span style="font-size: medium;">Nomination facilities</span></li>
<li><span style="font-size: medium;">Likely loss on trying to get out of the investment at a time of your choice</span></li>
</ul>
</ul>
</span><ul style="font-family: Arial; text-align: justify;">
<li><span style="font-size: medium;">A rather useful query will be to find out if the guy making the sales pitch has bought the same product (or at least ask him to give references of a couple of other customers of your profile who have bought the product).</span> </li>
</ul>
<span style="font-family: Arial;"><div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: medium;">Thankfully, the original story has a happy ending
- For all the hue and cry that ML Sharma came up with, after all, he did end up
getting his money back:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<a href="http://moneylife.in/article/mangelal-sharma-gets-his-rs7lakh-back-ndash-another-moneylife-victory/32252.html"><span style="font-family: Monotype Corsiva; font-size: large;"><strong><em>ML Sharma gets back his
money!</em></strong></span></a></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: medium;"></span>
</div>
<div align="justify">
<span style="font-size: medium;"></span></div>
<span style="font-size: medium;"></span><br />
<div align="justify">
<span style="font-size: medium;">That leads us to a couple of nice tips to recover money once you have goofed up:</span></div>
<div align="justify">
<span style="font-size: medium;"><br /></span></div>
<div align="justify">
</div>
<ul>
<li><span style="font-size: medium;">Approach all possible authorities - officially, in writing, with all relevant documents</span></li>
<li><span style="font-size: medium;">Use social media and generate publicity</span></li>
<li><span style="font-size: medium;">Generate publicity by directly going over to the place where the customers of the service providers are likely to congregate</span></li>
<li><span style="font-size: medium;">Approach the media with full details.</span></li>
<li><span style="font-size: medium;">Keep up the fight.</span></li>
</ul>
<br />
<div align="justify">
<span style="font-size: medium;"><br /></span></div>
<div align="justify">
<span style="font-size: medium;">Regards,</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: blue; font-family: Monotype Corsiva;"><strong><em>N</em></strong></span></div>
</span>Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-51770945840373874002013-03-30T12:53:00.002+05:302013-03-30T12:53:43.737+05:30Inflation-Indexed Universal Pension - Dumb Idea<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<h2 style="text-align: center;">
<strong><em><span style="color: navy; font-family: Monotype Corsiva; font-size: x-large;">Inflation-Indexed Universal Pension - Dumb
Idea</span></em></strong></h2>
<br />
<span style="font-size: large;"><br /></span>
<br />
<div align="justify">
</div>
<div align="justify">
<span style="font-size: large;">Jairam Ramesh advocates inflation-indexed
Universal Pension for all - Read on:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<a href="http://www.thehindu.com/news/national/consensus-on-universal-pensions-linked-to-inflation-index-jairam/article4485549.ece"><span style="font-size: large;">Inflation-Indexed
Universal Pension - Dumb Idea</span></a></div>
</li>
</ul>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">At a superficial level, this may sound like a
rather appealing idea in a society with zilch social security, especially in a
society with a gradual breaking down of the
"once-upon-a-time-famous-joint-family-system".</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">I disagree, and I disagree strongly. Just look
under the skin and you'll realise that it is a dumb idea that helps nobody (not
even the politicans who may expect to win elections with such an idea). Here are
my reasons:</span></div>
<div align="justify">
<br /></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">First, where's the money? Considering our
present fiscal deficit figures, we can't afford to take up an elaborate
inflation-indexed universal pension scheme (hereafter referred to as the IIUP in
the rest of this blog post). If we launch such an IIUP, we'll directly sow the
seeds of hyper inflation</span></div>
</li>
</ul>
<div align="justify">
<span style="font-size: large;"> </span></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Do we plan a "tokenist" IIUP - That will be
worse than the disease, because an insufficient sum will, on the one hand, be
insufficient, and on the other hand, will whet the appetite adequately to
provoke other political parties (in a predictably populist fashion) to enhance
the IIUP in the guise of making it more meaningful.</span></div>
</li>
</ul>
<div align="justify">
<span style="font-size: large;"> </span></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Having an old-age pension for destitutes,
physically / mentally challenged individuals, sick persons and the like may be
considered, subject to availability of resources. Even here, a voucher system
enabling them to obtain essential goods and services would be better than a
pension, simply because cash is fungible, and can both be misused (say, for
alcohol, for instance) or misappropriated (say, by the local panchayat
president, or, more likely, their own kith and
kin).</span></div>
</li>
</ul>
<div align="justify">
<span style="font-size: large;"> </span></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">IIUP will have two critical moral hazards.
First, it will make the citizens to lose the urge to plan and save for
retirement. Second, it will motivate them to either become lazy or to become
spendthrifts during their earning years, knowing fully well that the state would
take care of them in their old age. </span></div>
</li>
</ul>
<div align="justify">
<span style="font-size: large;"> </span></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Today, it is possible that the number of senior
citizens is at a "manageable level". Even this is a moot point. However, in a
few decades, the present day baby boomers will grow old, and, like many of the
European nations and the US, India too will face a problem of too many old
mouths to feed and too few young hands to work. How will the government be able
to honour its IIUP commitments then? What's the point in creating an IIUP now
and converting the same into a ticking time bomb which will explode in the faces
of our future generations?</span></div>
</li>
</ul>
<div align="justify">
<span style="font-size: large;"> </span></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">Interestingly, it may not even be such a great
idea politically - even for the short term. After all, if the Congress Party can
promise IIUP, nothing prevents either the BJP or the regional parties to come up
with even more fiscally imprudent and outrageous promises. And God forbid, if a
party that promises IIUP gets elected, they'll have to face the wrath of the
people either way - If they don't implement IIUP, for reneging on their
promises. If they don't, for causing hyper-inflation. Both of which will ensure
that they lose the confidence of the very same people to win whose votes schemes
such as IIUP are thought of in the first
place!</span></div>
</li>
</ul>
<div align="justify">
<span style="font-size: large;"> </span></div>
<div align="justify">
<span style="font-size: large;">Hence, it is best if the idea of IIUP is simply
dropped - while they still can! If any politican has any doubts, I would suggest
that they ask any past or present Petroleum minister as to the problems they
face due to subsidies given on Kerosene and LPG cylinders!</span></div>
<span style="font-size: large;">
</span><div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: large;">Regards,</span></div>
<div align="justify">
<br /></div>
<h2 style="text-align: left;">
<span style="color: navy; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
<br />
<br />
<br /></div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-34268303943809013432013-03-20T13:29:00.000+05:302013-03-20T13:29:05.744+05:30Who watches the watchdog?<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<h2 style="text-align: center;">
<strong><em><span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;">Who watches the watchdog?</span></em></strong></h2>
<br />
<div style="text-align: justify;">
<span style="font-size: large;"><br /></span></div>
<br />
<div style="text-align: justify;">
<span style="font-size: large;">Just read a news item which essentially
says:</span></div>
<div style="text-align: justify;">
<br /></div>
<blockquote dir="ltr" style="margin-right: 0px;">
<div style="text-align: justify;">
<a href="http://www.moneylife.in/article/raghav-bahl-of-cnbc-sameer-manchanda-den-networks-others-pay-up-rs493-crore-as-settlement-fee/31588.html#.UUIX_nnezvg.twitter"><strong><em><span style="font-family: Monotype Corsiva; font-size: large;">Den Networks pays a huge fine to SEBI for
settling alleged violations - WITHOUT ADMITTING or DENYING
GUILT</span></em></strong></a></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Den Networks, along with 24 other entities,
including its chairman and managing director (CMD), Sameer Manchanda and Raghav
Bahl, founder and managing director of Network18, has paid Rs4.93 crore to
settle a case of alleged violations with market regulator Securities and
Exchange Board of India (SEBI). Thus, it appears that these entities have taken
advantage of SEBI’s consent order mechanism by collectively paying a huge fine
in order to escape possible punishment, public shame and possible debarment from
the securities market.</span></div>
</blockquote>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">This is neither the first (nor, unfortunately, the
last time) that an organisation is going in for a "settlement" by simplying
paying money without admitting or denying guilt.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Interesting observations include:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">No admission / denial of guilt</span></div>
<div style="text-align: justify;">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">No declaration as to the specific nature of
violations</span></div>
<div style="text-align: justify;">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">No indication as to the kind of and extent of
evidence that was available to prove the alleged violations</span></div>
<div style="text-align: justify;">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">No publicity in the media</span></div>
<div style="text-align: justify;">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;">Involvement of Rajiv Bahl, Founder &
Managing Director of Network 18, which, if I'm not mistaken runs a couple of
news channels including a business news channel in the alleged violations (He
has also paid some fine for his role in the alleged violations)</span></div>
<div style="text-align: justify;">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div style="text-align: justify;">
<span style="font-size: large;"><span style="color: navy; font-family: Monotype Corsiva;"><strong><em>ALL media houses scream from the roof tops
when a politician or a "corporate honcho" indulges in any major or minor
financial fraud / scam. And rightly so. But there appears to be an absolute
SILENCE when it comes to these kind of matters when their own "brother/sister
media persons" are involved</em></strong></span>.</span></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">By now you'll be wondering as to what this post is
doing in a financial blog. You would probably think that it belongs to my
"Multiple shades of grey" blog. My reasoning is quite simple:</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">If the media houses are as transparent in their
dealings and as "honest & straightforward", you can very well imagine the
extent to which you can rely on any information that comes from such media
houses.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Please don't get me wrong. I'm not, for a moment,
suggesting that one particular media house is not dependable - I'm sure that all
of them are entirely capable of "doing such things" - only the degree is likely
to vary from one organisation to the other.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">On the contrary, what I'm suggesting is that you
should be quite wary of anything that you read / hear / watch (including my blog
posts). You should take things with a pinch of salt. You should continue to
remain cynical. You should watch your steps and watch your back. </span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Most importantly, before parting with your money
in making any investment, you should think a hundred times about what Warren
Buffett is known to repeatedly emphasize:</span></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li>
<div style="text-align: justify;">
<strong><em><span style="color: navy; font-family: Monotype Corsiva; font-size: large;">Return OF Capital is always more important than Return
ON Capital!</span></em></strong></div>
</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-size: large;">Stay wary. Keep reviewing your investments. Stay
invested.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
</div>
<div style="text-align: justify;">
</div>
<span style="font-size: large;">
</span><br />
<div style="text-align: justify;">
<span style="font-size: large;">Regards,</span></div>
<div style="text-align: justify;">
<br /></div>
<h2 style="text-align: left;">
<span style="color: blue; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
<br />
<br /></div>
Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0tag:blogger.com,1999:blog-3393423882414200345.post-7843623277625466492013-03-06T20:03:00.002+05:302013-03-06T20:03:52.961+05:30Usurers abduct minor girl in pursuit of interest dues<br />
<h2 style="text-align: center;">
<strong><em><span style="color: navy; font-family: Monotype Corsiva; font-size: x-large;">Usurers abduct minor girl in pursuit of interest
dues</span></em></strong></h2>
<br />
<span style="font-size: large;"><br /></span>
<br />
<div align="justify">
<span style="font-size: large;">There has been a great deal of talk about
Financial Inclusion. I'd like you to take a look at this news item from the
Hindu which truly shocked me:</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;"><a href="http://www.thehindu.com/todays-paper/tp-national/tp-tamilnadu/in-pursuit-of-interest-dues-usurers-abduct-dalit-girl/article4398973.ece">Usurers abduct minor girl in pursuit of interest
dues</a></span></div>
<div align="justify">
<br /></div>
</li>
</ul>
<div align="justify">
<span style="font-size: large;">The gist of the above article:</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<ul dir="ltr" style="margin-right: 0px;">
<li>
<div align="justify">
<span style="font-size: large;">Apparently, a poor guy had taken a loan of Rs.
20,000/= (Rupees twenty thousand only) from a local neighbourhood money
lender.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">And he was paying INTEREST of Rs. 1,000/=
(Rupees one thousand only) PER MONTH.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">And he had been paying this interest for several
YEARS.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">After a few years he was unable to pay a few
instalments of interest.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">And the money lender abducted the borrower's
daughter under the understanding that she will be released on repayment of
dues!</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
</ul>
<div align="justify">
<span style="font-size: large;">What is shocking is that the entire article in THE
HINDU appears to focus almost exclusively on the fact that the girl has been
abducted.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">It is indeed not merely shocking but also illegal
that the minor girl has been held hostage (even assuming that she has not been
ill-treated or assaulted by the money lender).</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">However, it is extremely important to focus on the
root cause:</span></div>
<ul>
<li>
<div align="justify">
<span style="font-size: large;">It was not merely poverty that forced the
borrower into the clutches of the money lender</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">It was not even the absence of Financial
Inclusion (After all, there are enough and more of public sector banks and micro
finance institutions which give loans at reasonable rates of interest to poor
people)</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
</li>
<li>
<div align="justify">
<span style="font-size: large;">The root cause of the problem is
</span><strong style="font-size: x-large;"><em><span style="color: purple; font-family: Monotype Corsiva;">Financial
Illiteracy</span></em></strong><span style="font-size: large;"> of the poor borrower.</span></div>
</li>
</ul>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">Had the borrower had the most basic of education,
especially Financial Education, he would have been able to comprehend the kind
of interest rates that he was promising to accept in lieu of a loan of Rs.
20,000/=.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">With just a bare minimum of <strong><em><span style="color: purple; font-family: Monotype Corsiva;">Financial
Literacy</span></em></strong>, he would have known the broad prevailing rates of
interest for loans. And he would not have got into this kind of trouble in the
first place.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">I'm certainly interested in suggestions on how to
take <strong><em><span style="color: purple; font-family: Monotype Corsiva;">Financial
Literacy</span></em></strong> to every corner of the country. Especially to the
rural areas.</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">Perhaps the time has come for EVERY branch of
every bank to allocate space, time and manpower to provide <strong><em><span style="color: purple; font-family: Monotype Corsiva;">Financial
Literacy</span></em></strong>. </span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">In case this is too expensive for these bankers,
the Government should FORCE them to do the needful through a combination of
carrots (Tax deductions could be a good carrot) and sticks (Link the same to
Government business - only those banks who oblige will be considered for
Government business).</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<div align="justify">
<span style="font-size: large;">Regards,</span></div>
<div align="justify">
<span style="font-size: large;"><br /></span></div>
<h2>
<span style="color: navy; font-family: Monotype Corsiva; font-size: x-large;"><strong><em>N</em></strong></span></h2>
<br />
<br />Nhttp://www.blogger.com/profile/05839139706522709411noreply@blogger.com0