I am a huge fan of the Mastercard advertisements, "There are some things money can't buy, for everything else there is Mastercard". The latest one is my favorite, the reunion of four friends at a five start hotel. To the tune of 'Purani Jeans" a middle aged executive takes a flight(travelling first class) and buys gifts for his friends, all the while reminiscing about their youthful days when the four of them tried to fit on a single scooter. They have dinner at a five star, and fight over who pays the bill, just like they used to, so many years earlier. Only this time they are fighting to pay. And tbhey resolve it, as they used to before, with a coin toss..
Wow. Dreams do come true. This is a financial fairy tale, hope we all get a piece of this feeling in our lives.
Sunday, October 26, 2008
Investing in equity
A lot of people including myself, have lost money in the recent down turn of the equity markets. Some are indifferent, some are looking for buying opportunities, but most people are in trouble.
A very small percentage of India is invested in the stock market. It's a really good thing that government backed retirement investments ( read PF, PPF) are not invested in equity. Yet there is so much talk of middle class India's wealth being wiped out. There is even talk that the government should step in to protect small investers!! (And how is that supposed to happen?)
It's really sad that many of the middle class people who have to endure losses they can ill afford are in this soup because of their own greed. It sounds a harsh thing to say, but this is true. Why should anyone sell off their gold, their house, or take a loan (yes, I know people who have) to invest in equity? Why should anyone put money that they need in the coming three years (and this is the absolute minimum) in stocks? Naturally that was a recipe for disaster.
My two cents on the cardinal rules for investing in equity:
1. Invest money that you do not need in the next 5-7 years. Only invest if the time horizon is greater than that, as this will give you time to weather the highs and lows.
2. Assess your risk tolerance. Invest according to that. Make adjustments as you grow older, your income and goals change. Most importantly, and this is where people miss out, make adjustments if one asset class outperforms the other. Let's assume you have arrived at 50% equity and 50% fixed returns for your asset allocation. And that your investment in equity appreciates by 100% (it happens during boom times if your stock pick is spot on). Then you should take some money out of stocks and put it into fixed returns. How much? That depends on your risk appetite and time horizon.
3. Diversify. Invest in asset classes like debt, equity, gold, real estate. Within equity, build a varied portfolio across industrial sectors. Never have a portfolio where the stock of a single company (however blue chip) dominates. Also, very importantly, do not let company stock be a major component of your portfolio. Your income is anyway dependent on the performance of the same company :-). If you receive some of this stock as part of your employee benefits, hold on to it until the minimum mandatory period, and then sell off the percentage of it that is not in tune with your portfolio.
4. Invest in equity only if you are comfortable doing so. Not because everyone else at your workplace, or social circle is doing it. This is not a race, this is about each one making their money to work for them. After all, money is a good slave, but a bad master.
A very small percentage of India is invested in the stock market. It's a really good thing that government backed retirement investments ( read PF, PPF) are not invested in equity. Yet there is so much talk of middle class India's wealth being wiped out. There is even talk that the government should step in to protect small investers!! (And how is that supposed to happen?)
It's really sad that many of the middle class people who have to endure losses they can ill afford are in this soup because of their own greed. It sounds a harsh thing to say, but this is true. Why should anyone sell off their gold, their house, or take a loan (yes, I know people who have) to invest in equity? Why should anyone put money that they need in the coming three years (and this is the absolute minimum) in stocks? Naturally that was a recipe for disaster.
My two cents on the cardinal rules for investing in equity:
1. Invest money that you do not need in the next 5-7 years. Only invest if the time horizon is greater than that, as this will give you time to weather the highs and lows.
2. Assess your risk tolerance. Invest according to that. Make adjustments as you grow older, your income and goals change. Most importantly, and this is where people miss out, make adjustments if one asset class outperforms the other. Let's assume you have arrived at 50% equity and 50% fixed returns for your asset allocation. And that your investment in equity appreciates by 100% (it happens during boom times if your stock pick is spot on). Then you should take some money out of stocks and put it into fixed returns. How much? That depends on your risk appetite and time horizon.
3. Diversify. Invest in asset classes like debt, equity, gold, real estate. Within equity, build a varied portfolio across industrial sectors. Never have a portfolio where the stock of a single company (however blue chip) dominates. Also, very importantly, do not let company stock be a major component of your portfolio. Your income is anyway dependent on the performance of the same company :-). If you receive some of this stock as part of your employee benefits, hold on to it until the minimum mandatory period, and then sell off the percentage of it that is not in tune with your portfolio.
4. Invest in equity only if you are comfortable doing so. Not because everyone else at your workplace, or social circle is doing it. This is not a race, this is about each one making their money to work for them. After all, money is a good slave, but a bad master.
Diwali...the festival of lights
Goddess Lakshmi seems very angry with the entire world. So much wealth has been lost in the equity markets, companies are in the red, people are afraid of losing their jobs, inflation at a decade-old high. All of this means a very subdued Diwali.
It's a time for quiet reflection, and introspection. Do we really need all the stuff we own? Are we truly diversified in our investments? Have we assessed our risk appetites correctly?Are we spending to make ourselves happy, or to display a certain image?
As we clean up our homes today, it's time to declutter our thoughts. It's time for a new beginning.
It's a time for quiet reflection, and introspection. Do we really need all the stuff we own? Are we truly diversified in our investments? Have we assessed our risk appetites correctly?Are we spending to make ourselves happy, or to display a certain image?
As we clean up our homes today, it's time to declutter our thoughts. It's time for a new beginning.
Wednesday, April 16, 2008
The great Indian Wedding
In India, marriages are traditionally between two families rather than two individuals. Whatever may be the economic level of the family, weddings are large family events. Parents usually spend a significant proportion of their assets on the marriage of their children. Because of the prevalent social norms in India, most people spend way more on a daughter’s wedding than on a son’s.
Several friends of mine who have gotten married in the recent past have had to spend all their savings on their weddings because if they had’nt, their parents would have emptied out their retirement kitties. It is very common for a young couple, and their parents (specially of the bride) to take loans to fund the extravaganza.
It all seems such a waste to me. Sure a wedding is a very important event, but after all it’s just a party. Surely nobody needs to go bankrupt in order to have a fulfilling marriage. How can one start one’s married life (or for that matter any new stage in life) on such a wrong foot? And besides most weddings are a social formality, for both the hosts and the guests. It’s actually just a handful of people who are really happy for you, and those people care too much for you to cause you or your family to go bankrupt. The rich can afford to have grand weddings, because they are not sacrificing their financial security. But it’s the middle class who hurt their finances the most by taking loans.
Several friends think that I have such a cold calculated view because I have not experienced the wedding fever myself. And that I will be very different if I am the one getting married. Sure there is some truth in that statement, because human nature is unpredictable. But I hope I won’t fall into that category. In any case, if a guy wants to empty a significant part of his and my savings for a party, then he won’t be the right person for me!!!
Several friends of mine who have gotten married in the recent past have had to spend all their savings on their weddings because if they had’nt, their parents would have emptied out their retirement kitties. It is very common for a young couple, and their parents (specially of the bride) to take loans to fund the extravaganza.
It all seems such a waste to me. Sure a wedding is a very important event, but after all it’s just a party. Surely nobody needs to go bankrupt in order to have a fulfilling marriage. How can one start one’s married life (or for that matter any new stage in life) on such a wrong foot? And besides most weddings are a social formality, for both the hosts and the guests. It’s actually just a handful of people who are really happy for you, and those people care too much for you to cause you or your family to go bankrupt. The rich can afford to have grand weddings, because they are not sacrificing their financial security. But it’s the middle class who hurt their finances the most by taking loans.
Several friends think that I have such a cold calculated view because I have not experienced the wedding fever myself. And that I will be very different if I am the one getting married. Sure there is some truth in that statement, because human nature is unpredictable. But I hope I won’t fall into that category. In any case, if a guy wants to empty a significant part of his and my savings for a party, then he won’t be the right person for me!!!
Tuesday, April 15, 2008
Delhi trip
This is a long overdue post about my recent visit to Delhi. I spent 2 years there as a student, almost another year as a software professional in nearby Gurgaon before moving to Bangalore 3 years ago. This visit was to relive the old days, specially since my best friend is wrapping up her days in grad school in Delhi.
The city is beautiful as always, the expansive roads, the flowers of the late spring which I was lucky to see. Delhi is getting ready for the Commonwealth Games in 2010, so there's a lot of work going on. Everyone I met in Delhi was excited about the prospect of Delhi becoming a world class capital. I plan to visit again in 2010.
There were two major things I did in Delhi (apart from being able to spend quality time with my friend) and those were shopping and living in a student hostel. I totally enjoyed the shopping part, I bought several salwar-kameez for myself, and some for friends. I stayed on budget though. I had planned a total of 20K for this trip, including airfare (9K plus 0.5 K for transport to and from airports). I also took my friend and her lab people out to dinner which came to 2.5 K (including tip). It was definitely extravagant but every time I have visited her (which was a lot some years back) my friend has done it everytime. I also bought gifts for friends which were due anyway and would have cost me a lot more in Bangalore. I was totally tempted to burst my budget and get some more stuff for myself, but I did'nt. :-)
Delhi is such a shopping haven, specially when you compare it to Bangalore. The variety, the enthusiastic salespeople (who won't mind if you ask them to show you 50 pieces and then you walk out without buying. Try doing that in Bangalore!!), the colourful atmosphere on the streets. On the other hand, the fact that my friend and me had to wind up our shopping so that we could be back before dark. That too when there were two of us. She was surprised when I told her that in Bangalore I would be comfortable being out shopping alone till 8 as well.
The other aspect was living in the students' hostel. My friend commented that I had become sensitive and she was right. I just could'nt believe that I had stayed in the same hostel 4 years back, and loved the time I spent here. The water shortage, having to carry all the stuff to the common bathrooms, lack of cleanliness, etc. really put me off. Not that the apartment I live in is posh by any standards, but it's clean, rather I keep it clean and I don't share it with a whole bunch of people who are least interested in keeping it clean. I guess that is what happens after getting used to the real world again. I really ca'nt see myself living in a hostel now.
It was a refreshing break. I was happy to be there, happy to be back.
The city is beautiful as always, the expansive roads, the flowers of the late spring which I was lucky to see. Delhi is getting ready for the Commonwealth Games in 2010, so there's a lot of work going on. Everyone I met in Delhi was excited about the prospect of Delhi becoming a world class capital. I plan to visit again in 2010.
There were two major things I did in Delhi (apart from being able to spend quality time with my friend) and those were shopping and living in a student hostel. I totally enjoyed the shopping part, I bought several salwar-kameez for myself, and some for friends. I stayed on budget though. I had planned a total of 20K for this trip, including airfare (9K plus 0.5 K for transport to and from airports). I also took my friend and her lab people out to dinner which came to 2.5 K (including tip). It was definitely extravagant but every time I have visited her (which was a lot some years back) my friend has done it everytime. I also bought gifts for friends which were due anyway and would have cost me a lot more in Bangalore. I was totally tempted to burst my budget and get some more stuff for myself, but I did'nt. :-)
Delhi is such a shopping haven, specially when you compare it to Bangalore. The variety, the enthusiastic salespeople (who won't mind if you ask them to show you 50 pieces and then you walk out without buying. Try doing that in Bangalore!!), the colourful atmosphere on the streets. On the other hand, the fact that my friend and me had to wind up our shopping so that we could be back before dark. That too when there were two of us. She was surprised when I told her that in Bangalore I would be comfortable being out shopping alone till 8 as well.
The other aspect was living in the students' hostel. My friend commented that I had become sensitive and she was right. I just could'nt believe that I had stayed in the same hostel 4 years back, and loved the time I spent here. The water shortage, having to carry all the stuff to the common bathrooms, lack of cleanliness, etc. really put me off. Not that the apartment I live in is posh by any standards, but it's clean, rather I keep it clean and I don't share it with a whole bunch of people who are least interested in keeping it clean. I guess that is what happens after getting used to the real world again. I really ca'nt see myself living in a hostel now.
It was a refreshing break. I was happy to be there, happy to be back.
Monday, April 14, 2008
Upcoming family wedding
This weekend I am headed home to Goa to attend my cousin's wedding. Like all Indian weddings, this will be a huge event and almost my entire family will be there.
I had to buy a new outfit for the wedding. Luckily I had a formal black skirt (which I can fit into, thanks to my recent weight loss), so I just needed to buy a top. I purchased it for 1.5K. Again I am lucky that I did'nt need to buy shoes or a purse. I need to go to have my hair and makeup done, so that will come to another 500 rupees. I just hope that my parents approve of the outfit I have decided on, else there will be an additional cost of buying a new one at the last moment.
The biggest cost will be the air fare (5K), plus conveyance to and from the airports (another 1.8 K) So that's a total of 8.8 K to attend this wedding. I am not buying a gift, my parents will be taking one. I am not sure whether I should get a separate gift, I probably should because I am independent and my cousin sent me a card separately. But that will be another 1K, because my parents will not like me to give a 'cheap' gift. And I am not inclined to spend more on this wedding anyway. In any case, this is the last of my older cousins who is getting married, next time I will have to get a separate gift!!
One of the things that I am looking forward to is for all my cousins to see me, now that I lost 10 kgs since they saw me last. Many of them kept telling me that I had put on weight (as if they had'nt!!! I can't imagine saying something like this to anybody's face). Now I can have the last laugh. :-) The one thing that I am just dreading is that everyone is going to be like 'it's your turn next' and things like that. I think the best strategy will be to ask them an equally nosy question. :-) I can feel devil's horns sprouting on my head.
I had to buy a new outfit for the wedding. Luckily I had a formal black skirt (which I can fit into, thanks to my recent weight loss), so I just needed to buy a top. I purchased it for 1.5K. Again I am lucky that I did'nt need to buy shoes or a purse. I need to go to have my hair and makeup done, so that will come to another 500 rupees. I just hope that my parents approve of the outfit I have decided on, else there will be an additional cost of buying a new one at the last moment.
The biggest cost will be the air fare (5K), plus conveyance to and from the airports (another 1.8 K) So that's a total of 8.8 K to attend this wedding. I am not buying a gift, my parents will be taking one. I am not sure whether I should get a separate gift, I probably should because I am independent and my cousin sent me a card separately. But that will be another 1K, because my parents will not like me to give a 'cheap' gift. And I am not inclined to spend more on this wedding anyway. In any case, this is the last of my older cousins who is getting married, next time I will have to get a separate gift!!
One of the things that I am looking forward to is for all my cousins to see me, now that I lost 10 kgs since they saw me last. Many of them kept telling me that I had put on weight (as if they had'nt!!! I can't imagine saying something like this to anybody's face). Now I can have the last laugh. :-) The one thing that I am just dreading is that everyone is going to be like 'it's your turn next' and things like that. I think the best strategy will be to ask them an equally nosy question. :-) I can feel devil's horns sprouting on my head.
Inflation at 7.5%
The current inflation in India is a staggerring 7.5%!!!!!. Given that the rate of interest on all fixed return instruments is 8% (pre tax), and the stock markets in the red, it looks so very dismal.
Personally (and I am so lucky for this), the only way I am affected by this is that my investments are effectively not growing at all. Also I am more inclined to buy a house now, since home loans are hovering at 10.5%. But most people have been so adversely affected, the rising food costs are throwing already stretched household budgets into a breaking point.
I am no economist, and have no idea what has caused all this. But surely things can be better managed. On one side, India is growing and some of us are seeing a substantial increase in quality of life. (I always believe that had I been born 10 years earlier, I would have no option but to study for the GRE and go to the US, the predominant engineering jobs available here being in PSUs). But on the other hand, food prices are such a huge concern and affect the vast majority.
Subscribe to:
Posts (Atom)
