Archive for December, 2016

The 3 most important things in life and investing

Tim Feriss after interviewing about 100 of the most succesful people ranging from a 5 Star general to billionaires (have to tell here that he is one of them himself ) has written that the common thread in all of them can be found in a passage written in a novel in 1922 about a monk in ancient India ! In the novel the monk named as Siddhartha is asked by a merchant how can Siddhartha  give anything if he owns nothing, Siddhartha replies that he can give what he has which is  his learning which is summed up as

I can think, I can wait and I can fast – these three things says Tim Feriss is what sets apart successful people. Let us how this can help us as investors.

  1.  I can think – As investors we need to think for ourselves

While Spending : Every expense is just a click away and the temptation to waste money instead of saving it is very high. Advertisements used to be in ear panels in front pages, now advertisements are the front pages !, If you search online for a watch, every web page that you visit shows ad for the watch !. The attempts to lure us with zero down payments, buy-one-get-one, etc is high. So thinking for ourselves ensures we buy what we want and only what we want is important.

While investing : Many of us who take few days looking at Trip advisors ratings for a 2 day vacation stay  blindly sign cheques for lakhs, only to find later that it is not a good investment and what is more can not be even sold for next 5 or 10 years !

Both the mistakes one of over spending with out saving and other of investing without knowing says that we don’t think for ourselves, if we did so our financial life could be at least more peaceful and a source of happiness.

2. I can wait – patience which literally pays in investing !

if the first is tough, the second is even more so, patience is not seen as a virtue in today’s world but in investing patience literally pays ( around 18% pa !! if we go by last 20 odd years of returns of equity MFs).  Patience will be tested with every scary headline and the problems that the world faces. Markets as the proverb goes, climb a wall of worry. Patient investors invest and keep on investing, and are not distracted by the headlines of the day, week or month. They think in terms of years and even decades. Another mistake is waiting to invest, i have friends who seem to track markets regularly and ask such smart sounding questions like ‘ Is Trump victory good for our markets’ but have not till date invested much, so they wait for the ‘right’ time that never comes. So it is better to invest and then wait patiently than to wait patiently to invest !

3. I can fast – delaying gratification

I can fast – this is the toughest one, I do fast at times and it is not easy, going without food for 36 hours is tough but it is a system cleaner as we all know. Financially it can mean giving up something today for something better tomorrow. Delayed gratification as this is known is what separates the men from the boys.  Just a Rs 2000 outing a week can set you back by Rs 104,000 a year or a cool Rs 520,000 in just 5 years, let us say we want to spend on outings but cut it by half, once every fortnight instead of weekly, and save 52000 a year, and invest the money saved in a equity fund which gave us 12%, after 15 years, this humble Rs. 52000 per year or Rs 142 per day saved would be worth a cool Rs 19,38,000 ! The humble 2000 bucks saved every fortnight is now grown big, thanks to delayed gratification. What is more the rest of time we spend the money will be looked forward to and can be spent guilt-free. Much like the feasting that comes after the fasting !

As the year draws close,  these three things – I can think, I can wait and I can fast, could make better investors and better humans of us all. Happy Holidays.

PS : The link to the article mentioning the passage from Herman Hesse’s Siddhartha :




Comments (5)

MF Queries answered in Economic Times

1) I want to invest my PF amount of Rs 5 lakhs in a mutual fund for a 5 year period. Which mutual fund will be best for this purpose. I need a 10- 12 % return. Also I am operating Rs 5000 recurring deposit for 5 years for my post retirement period and should I switch over to SIP by closing this recurring deposit early because it is taxable. Will SIP give higher return than recurring deposit? —Mukund

A Mutual Fund can be anything from Equity, Debt (Bonds of various types), Gold or a mix of any 2 or3 of these. So it is important for an investor to understand what Mutual Fund he is looking at based on both the risk he is ready to take and the returns expected. From your input i would assume that you want equity / balanced funds since return expected is high. I would recommend diversified multi cap funds such as ICICI Dynamic that have some debt too. That said please understand that you are investing PF proceeds hence invest only amounts that you are comfortable taking some risks with, as markets by nature are volatile and give returns only to the patient investor. MF SIPs are equity investments hence come with considerable risks, they can not be compared to a safe RD/FD. I would suggest that if you dont need the money after completing the 5 year SIP and can wait for 3 years more you can consider an SIP,especially if you have other FDs or bonds etc. If not please do not put all your eggs in one basket, also note that the tax rules on equity can change in future, so investing in equity should not be solely on the basis of past high returns or its tax free status after 1 year.

2) I am 30 years old and I have 10 monthly SIPs of Rs 2000 each since last two years in BSL Top 100, Franklin India High Growth Companies, Franklin Build India, Franklin Smaller Companies, HDFC Midcap Opportunity, ICICI Focussed Bluechip, ICICI FMCG, ICICI Technology, SBI Bluechip and SBI Pharma. All these are in direct plans and growth options. My age is 30 years and I can take high risk long term for 10 years to build fund —Moizz Kara

Congrats on starting a SIP at the age of 28, hope you will be continue investing for the long term even in volatile times. There is no need to have 10 SIP’s, normally 2-3 SIP’s of a large cap, multi-cap & mid-cap fund would do. Sector funds like Pharma and Technology are generally not meant as very long term bets but more of 3-5 year bets, hence if you would like to focus on long term, have 2-3 funds so that it is easy to maintain the portfolio as well. Hope you not only continue your SIP but increase it as well based on your income till 58 and enjoy the returns.

3. I am a doctor by profession and my age is 30 years. I want to invest for accumulating a corpus of about 1.5-2 crore in next 15-20 years for children’s education and around 4 crore for my retirement in next 30-35 years. I can invest about 10-15k(max 20k) per month as SIP, which I can increase by 10% every year. Is this right way to plan? Kindly advise good funds to invest in — Sanket

Heartening to see you plan for your children’s education as well as retirement at 30, While back of the envelope calculations shows that you are on the right track, I would advise you to contact a few financial planners in your city and sit with one to go through a proper financial planning exercise to assess your current financial position, the investment amount monthly, the return required to meet the goals and then we should think of which funds to invest in.

This may take a few hours of your time but can save you lots of time and money in future. Think of it like a health check up we do once with a follow up every year to assess for changes. There are good DIY calculators online too, you can check them for basic planning and then approach a planner. As far as fund selection goes i would suggest a large cap fund such as Birla Frontline or ICICI Bluechip, Multicap funds like Franklin Prima Plus or ICICI Dynamic. All the best.


As banks lower deposit rates, investors rush to lock money in post offices, govt bonds : Economic Times quotes Credo Capital’s view

Mumbai :  Investors are rushing to lock money into post office deposits and a government bond, which are yet to cut interest rates even as banks lower deposit rates.A bank deposit now pays a maximum of 7%, while post office deposits pay 7.8% and the government bond pays 8%.

“There is a rush amongst investors to lock into longer-tenure products and where there is no announcement of rate cuts so far,” said Vikram Dalal, managing director, Synergee Capital.

For retirees and other investors living on interest income from deposits, financial advisors said, the government savings bonds, which have a tenure of six years for small investors, make sense.

“There is no reinvestment risk as you can lock in at a rate as high as 8% for 6 years. It works well for those whose income is not subject to tax or who are in the marginal tax bracket,” said Dalal. The minimum investments amount is Rs 1,000 and there is no ceiling on the upper limit.

he bonds are issued in physical form.

“The only drawback of this product is that it is illiquid since they are not traded and cannot be encashed in an emergency.However, investors can opt to take a loan on this product, says Anup Bhaiya, MD, Money Honey Financial Services.

Interest rates on bank fixed deposits fell post demonetisation. Banks like SBI, ICICI Bank, HDFC Bank, Kotak Bank have all cut fixed deposit rates by 15-25 basis points.

Post the rate cuts, a five year fixed de posit fixed de posit from State bank of India fetches 6.5%, while HDFC Bank gives 6.75%. Taking a cue from banks, finance companies too have lowered deposit rates. HDFC now offers 7.65% for a five-year deposit, while Gruh Finance is offering 7.5%.
“The banking system is flush with liquidity and there are not enough avenues to deploy money .Given this and expected rate cuts, fixed deposit rates could head even lower in the coming months,”

says Shankar S, financial planner at Credo Capital.