EQUITY MARKETS AND YOUR CONCERNS FOR YOUR INVESTMENTS !!!!!

My relation, well wisher and friend who is an agent of a well known mutual fund, bankers and brokers house. Beginning of this month I was asked by him if I was interested to take a short term view on stocks in my portfolio and hedge them by using features and options. He offered to recommend suitable means to ensure that I don’t suffer any loss on my portfolio. He was having good intentions and was probably like many others, including me ,was expecting a market correction soon. He wanted me to let him know my short term view on the stocks held by me in my portfolio.  

I politely declined his offer saying that I am a long term investor and my investments are based on that basis and I don’t want to spend/ waste time researching and developing a short term view on the companies in my portfolio.

With this back ground I was expecting a correction a little more than normal as the rise also had been more than normal ,but continued to be unaffected by such fluctuations as these don’t affect me or my portfolio in the long run. I still keep track of such changes mainly to review and consider making changes to my strategy and process. I like to remain current and updated with changes taking place and adapt to them.

Change is the only constant in life and so it is with equity markets, many are surprised at the sudden drop and recovery of the markets and index in a matter of few minutes yesterday on 21 Sept 2018.Such moves on the markets and increased volatility which can not be made use of by most human beings creates wrong perceptions in the minds of my target audience and students. Getting over such perceptions I want them to realize the need to benefit from my educating them to achieve their financial freedom and ultimately my achieving the purpose of creating better financial awareness and inclusion for larger humanity.

I will attempt to identify first why it happens and then its effects on modest long term investors and how to overcome it and still benefit from investing in equity

Reasons why such sudden fluctuations on the equity markets happen are :

1. Auto trading using technologies like Artificial Intelligence, Block chain , machine learning leading to programmed trading by big players like hedge funds, banks and brokers.

2. Human greed to make a fast buck by short term trading in equity markets and fear of losing money, which no one likes, so attempting to keep such losses to minimum

3. Media propaganda by vested interests like mutual funds, brokers and banks as well as political interests.

How does it affect commoners ?

1. Further strengthens their fear of equity markets as some thing complex, difficult to learn and understand and akin to gambling.Many enter the markets at higher levels and leave with losses due to fear and panic.

2. Luring more commoners to mutual funds which are assumed to be manged ethically by more knowledgeable(?) mangers. Risk is taken by the investors but they loose control over their investments and these fund managers are free to play around with the money as long as they take care to be on the right side of their bosses and some may even take opportunistic benefits to line their own pockets.

3. One then is bound to wonder why people don’t see through this and desert the equity markets as mutual fund investors or traders ? This does happen to a sizeable number of people but given the large population of India new sacrificial goats enter the market and these vested interests continue to thrive.

What does the media and so called experts say in such times:

This lot which was recommending investing in the shares of companies at a higher level now becomes silent and media talks of recommending in general buying by long term investors in shares of companies with strong fundamentals and avoid specifics. They are ably supported by charts and data and whole lot of technical data which is bound to confuse most common folks.

Another expert says “Further correction/ consolidation is likely in the short term but long term is still bullish”. This amuses me this is true of the equity markets in general and well run companies in particular for ever and we need no so called expert to tell us this gospel truth.

My message to those who want to escape from this and come out winners:

Equity markets provide an excellent opportunity to invest and grow your hard earned savings with reasonable and low risk.You can have your own control on your investments and limit losses if you develop the right attitude and are patient. Finding the right balance between greed and need to grow your investments is possible and you can learn it too.

It is the market “Dharma” to go up and down in the short term but in the long term it is possible to make use of the same market to grow your savings over long term.

“Calmer you are less disturbed your nerves more shall you love and better will your work be” Swami Vivekananda

Do you have it in you to learn ? if yes most welcome to enroll on my web site www.moneymonk.me. Its not free as anything offered free is not valued is my belief but you offer what you feel as “Guru Dakshana”, surplus goes to charity.

I am surprised that while many make a start very few manage avoiding procrastination and sustain to benefit from my offerings.   

    

INVESTING IN REAL ESTATE

Many a times I am asked if one should invest in real estate/ house or invest in mutual funds or equity and rent a house while waiting for investments to grow to buy the first house. Many people have a lot of confusion which is well understood too.

First house small or big is a necessity to live in life long so it is not considered as an asset or investment as far as your personal financial planning is concerned. Comparing it with equity or any other investment is thus not correct.Waiting for the equity or mutual funds investments to grow enough to buy a house is also not recommended for valid reasons,please see my earlier blog on First House for more clarity.

So your equity investments or asset allocation (which I am yet to discuss on my blog) really starts only after the first house has been purchased.

If you have recently migrated to another country then it is advisable that you plan for your first house in the relocated country not considering the house in home country and later take a call on keeping as an asset the house in home country or selling it .  

Investing in real estate beyond first house is best viewed as a portfolio enhancer, an investment that complements stocks and bonds as a decision based on your asset allocation,used as part of a larger investment plan, it can add stability to your income.

Before you decide to invest in real estate the following points need to be kept in mind :

1. Real estate investment can require a significant amount of capital, even beyond the price of the purchase. Ask yourself if you can afford to keep your investment if the market turns bad.

2. Since real estate is a tangible property, it will require maintenance and upkeep. While this is normally covered by rent paid by tenants, there may be times when there are no tenants to occupy the property, meaning that the costs will fall to the owner.

3. Learn about real estate investing. In order to invest in real estate successfully, you should research the subject thoroughly and be well-versed in how the market functions. There are multiple ways to invest in real estate, and you will need to evaluate your goals and finances to decide which option is best for you.

4. Real estate is "an interest in land" (and anything permanently attached to land). This means that the real estate market is essentially about buying and selling land and buildings. There are two types of "interest" at work in real estate: ownership and leasehold. "Ownership interest" is taking full control of and responsibility for land and buildings, and "leasehold interest" is the granting of certain rights to a tenant in exchange for rent payment.

The most common form of real estate investing is purchasing ownership interest in a property and then earning money from rent paid by tenants.

5. Identify your tolerance for risk. There are two main markets when dealing in real estate. These are the private and public markets. Any investing is risky to some extent, but each market has its own level of risk.Please do not consider keeping fixed deposits with builders as an option for investment, as many have lost their hard earned money lured by a slightly higher interest rates offered by these builders and considering it as an investment.  

6. Private real estate involves the purchase of an ownership interest in "real" (as opposed to "personal") property. You or a property manager would then operate that property and you would earn money on rent paid by tenants. This is a very direct way of investing in real estate because you, as the owner, are responsible for the property.

7.Public real estate involves purchasing shares of a publicly traded real estate company. Because you only own shares in the company, you are not responsible for the real estate. This is a less direct approach to investing.

History of Real estate in India

Post independence real estate has given phenomenal returns in India, much at the cost of common people and larger national interests often supported by politicians and ruling political parties to create a parallel economy of black money. Nation, development and common people have paid an enormous cost before the efforts by way of RERA legislation which is slowly getting implemented and showing long term positive results. Rise in returns from real estate is not likely to be so phenomenal as in the past but need for housing for increasing population will continue.

This needs to be noted and well considered when thinking of real estate as an investment today.

For those who need long term sustained personalized support and education on personal financial management visit and enroll on my web site :

www.moneymonk.me 

PPF -PUBLIC PROVIDENT FUND

Public Provident Fund is a very useful and attractive tool for long term personal financial planning. Its simple,easy and fairly well defined except for a few areas of confusion which also I plan to address in this blog.

The rules of it are public and easily available with Google for example www.allbankingsolutions.com/.../Public-Provident-Fund-PPF...

or with the banks so will high light only key aspects and advantages:

1. PPF Account can be opened in any public sector bank and some private sector banks too, BY Indian Residents and by parents on behalf of their minor children.

2. Not for NRIs or OCIs.

3. Flexibility in deposits to keep the account live.

4. Withdrawal in Emergency possible but not advisable.

5. Tax benefits but good even without tax benefits in many cases.

6. Good rate of interest

7. Long term scheme of 15 years.

8. Limited scope for early withdrawals   

9. Can be extended as per your need beyond 15 years, with making contributions or without it.

10. For some senior citizens it can be extended without contribution and it continues to get interest which is not taxable and benefit of compounding on balance amount continues and you can withdraw with out any penalty once in a year.So it is unique unfixed deposit yet getting interest better than fixed deposits.

11. Indian resident Parents can open accounts for minors

Advantages

1. Long term helps in regular savings and discipline

2. Compound interest scheme

3. Very useful for saving for minor children for their higher education or to create a corpus of their own capital for business when they become adults

4. Tax benefits and can deposit 1.5 Lakh per year

5. Good even if not taking tax benefits

6. Can not be attached by any court and guaranteed by Govt of India so very secure.

7. Initial deposit, interest earned as well as on withdrawal it is exempt from all taxes.

Areas of confusion 

1. Why NRIs are not allowed to open the account and have to stop contributing on becoming NRI is not logical, the scheme should be for all Indian passport holders and not only residents.Same is also the case with Senior Citizens Deposit scheme.

2. Minor Children accounts by parents who are NRIs , can they open accounts and continue depositing till becoming adults? Banks should ask and not open such accounts if not eligible.

I feel this policy is not correct and clarification is required as soon as possible. NRI is a temporary status and in many cases these NRIs do not get any similar benefits in foreign countries they are working and home country needs to provide this avenue to them.

What happens to a person who opens his account , becomes an NRI and again becomes a resident Indian ??

What is the policy for minor children accounts opened by their parents when they become NRIs ?

Clarity on such cases as to further contribution, interest eligibility and action if parents again become resident Indians is required.

Those holding Indian passports in my opinion must be allowed to open such accounts for themselves as well as family members including minor children and policy clarified on what happens to their accounts once they give up citizenship and passports and become OCI.

CONCERNS OF YOUR AGE AND RELEVANCE OF PERSONAL FINANCIAL MANAGEMENT !!!!

I am asked by many people for different reasons if and how learning personal financial management and freedom is relevant to them at their age. Reasons given are:

1. I just started earning and don’t have much savings to invest

2. I don’t have time as I am too busy at my job.

3. I have my bank/adviser/broker advising me already so why disturb the comfort zone.

4. I feel equity investments are too risky or too complicated to learn, monitor and manage.

5. Can I learn it at my age?

6. I have retired or I am about to retire so what use it for now?

7. My wife has never been involved in Personal Financial Management of the family and how will we do it now and why?  

Let me start by dividing all the people in some age groups and delineate their concerns for ease of understanding the concerns and then see how Personal Financial Management is relevant to them all and why my approach merits consideration : 

20s: Education loan,college choice,job choice, salary, preparing for marriage,choice of a life partner,bonding and adjusting to marriage and starting family or to have a second child or not

 Your concerns are likely to be

1. How much loan to take for education and start working life with debt?

2. How long to continue education-cost benefit analysis

3. What should be my priority for fulfilling my desires? How much to spend on what and how to save ?

4. What to look for in a life partner and how to select one? Love marriage, dating or arranged marriage if not married?What age to get married?

5. How to adjust after marriage blues are over and bond the relationship for mutual happiness? Money yours, mine and ours if both earning ?

6. How to take care of parents?

7. How is saving such small amounts help me in the long term ?  

30s and 40s: Managing home loan or child future

Your concerns are likely to be:

1. First house and child’s future, what to choose?

2. When to have a child ? one or two? Bringing up children and coping with it.

3. Will this affect my retirement plans and how ?

4. Can I retire early and make time for what I am missing because of work?

5. Search for happiness and its linkage with money.

50s: Child’s higher education and retirement

Your concerns likely are:

1. Odd age issues of teen aged children and how to manage them?

2. Child’s higher education, careers choices,marriages and helping them settle down in life and own retirement , is there a conflict ? How to resolve it

3. How do I see my child taking an education loan or funding it myself ?

4. How much to spend on children weddings?

5. How to find goal congruence with wife on Personal Financial Matters like these?

6. When can we retire and what preparations to do for it?

60s and beyond : Retirement Planning and Investing Retirement Funds

Your concerns are likely to be:

1. Not given serious thought to retirement and how to go about it now ?

2. Where to stay and housing ? Down size? Move to another place?

3. How much we need to live and maintain our life style that we are used to ? Do we need to make any life style changes and how?

4. Giving health a priority and finding time to exercise and keep fit.

5. How much to be involved in the children and their lives?

6. Will my retirement savings last for our life times?Where to keep the money - equity or debt or banks ?

7. How much to spend on travelling or sight seeing or visiting near and dear ones?

8. How will one of us manage himself or herself after the other partner is no more?

9. How will children respond and behave ?

10. Making wills and whether to share them with the children?

11. How to simplify bank accounts,routine jobs and investments ?

12. How to utilize extra time at my disposal ? How to be happy when you are only two left in the house with much more time together? How to give space to each other?

13. How to repay to the society and public at large by some contribution ?

14. How to maintain good physical and mental health and plan for medical care and expenditure?

15. End of life plans at a stage when support is required physical, moral or financial and still to be by yourself or with the children?

16. What to do if children have settled down abroad ?  

SOLUTION AND RECOMMENDATIONS

Individually for different concerns you have for money matters financial advisers in bankers, brokers, mutual fund agent and so called independent professional advisers. For other mind and relationship issues you have counselors, psychologists and psychiatrists.For health issues you have the home remedies to over the counter medicines to doctors, specialist and hospitals and lucky if you have an old fashioned and outdated concept family doctor.

Personal Financial Management is one aspect of our lives which lends itself for one to one partnership and long term planning.

Continues support, sounding board or guidance from an independent and genuinely non vested interest person with life experience is the best solution.

Some of the aspects and concerns mentioned above I have covered in my blogs on Savings, banking, mutual funds, SIPs,insurance, first house etc. Some more in the pipe line are on PPF, Investments in Gold and silver, on equity indexes,how to correctly use credit cards ,how to select stocks, manage risks and grow your savings without having to worry for market moves up or down.Behavioral aspects and its understanding are very critical to personal financial management and hence have covered it in one blog as well as recommended one book covering basics of building enough wealth for a life time and above all finding happiness in life. Simple tools like budgeting and periodically reviewing these budgets with actual and taking stock of your assets and liabilities helps to be in control and confident in life.    
Now coming to the concerns raised by different people mentioned above. As you can see the list is the longest as the age increase. Like change is the only constant in matters of personal finance earlier you start the better it is, earlier you involve your life partner and do it together better it is. Earlier you develop the right attitude towards money and understand it linkages with happiness ,health and good inter personal and family relationships better it is.

What happens if you don’t start early, your concerns increase as the age increases and cause you stress and dis comfort too.You may have sporadic bouts of happiness when relatively large amount of money comes in on retirement only to regret it in many cases after unplanned spending at a later stage.Luckily its never too late start and learn in life and doing it at a later stage does no harm but only good by taking control and being more confident in life. It helps in early retirement as a choice if you start early but started even late helps you retire gracefully with respect from near and dear ones and live purposeful life and say bye when time comes with no remorse or regrets. Raising standard of life is easy but lowering it forced by inadequate finances is painful and not easily digestible as age increase.

A great personality and successful businessman like Mr. Singhania of “Raymonds” is heard facing tough old age life for making the mistake and willing all his wealth to his son prematurely.

Better late than never and age is no bar to learning If you feel you can start learning to manage your money matters better by learning from me and living happily visit and enroll on : www.moneymonk.me