A helping hand from numbers leads to objective opinions and confident decisions!!!

You don’t know how well your money is doing until you have a clear picture where all your money is. That is where the role of periodically working out asset inventory comes into play. While it may appear to be a chore initially (and it is), if one perseveres, the results may be the best guide a very successful financial situation. The best part – you don’t need any fancy apps or other tools to go about it. Simple excel sheet or even a diary if you prefer writing can do the job near perfectly. I am deliberately not putting up any sample asset inventory format. That is left to each individual. The format you go by can be a simple one, with just the asset type & associated number against it. Or an advanced one where you also plug in realistic expected return. Maybe even a super advanced one (if I can say that), where you adjust the weighted average portfolio returns with expected inflation to get an idea how well your investments are keeping up with purchasing power capacity. Wh...

With the tax incentives for savings gone if one opts for new tax regime, going for NPS (National Pension Scheme) investments on voluntary basis to the tune of INR 50,000/- per annum or even higher will be out of consideration for many. Or should it be? While the tax savings during accumulation phase are gone for those who go for new tax regime, key attraction of tax benefits on withdrawal still remain. It has been sometime now that equity investments have become taxable beyond certain minimum threshold of capital gains. However, NPS still offers the opportunity of deploying sizable annual contribution in equity investments and get large part of accumulated corpus (60%) tax free after 60 years of age. This, plus the option of continuing NPS contribution till 75 years of age is what made me subscribe to NPS scheme. The flexibility offered by extending NPS subscription till advanced age of 75 while still having a chance to exit whenever you want to is excellent.   Coming to annuit...

Don’t worry, this post is not about why market timing is not possible, and should not be indulged into. In fact, I feel a bit of it should be done as it gives a feeling that one is “doing something” and is “in control”. We will agree all humans love the feeling of being “in control”. Nor it is about detailed number work on how much impact a successful market timing can have on one’s portfolio / net worth. The works have already been done already here  in detail and we will rely on it for good measure.     First – let me quote from above article on the quantum of impact perfect market timing may have on portfolios:     “The evidence, based on more than 160,000 daily returns from 15 international equity markets, is clear: Outliers have a massive impact on long-term performance. On average across all 15 markets: -         missing the best 10 days resulted in portfolios 50.8% less valuable than a passive investment...

10 year CAGR for the period 1 April 2010 – 31 March 2020: 6.19%. Covid 19 made equity market tumble and we had to contend with a lowly equity market returns. We can safely say 10 years is long enough investment horizon. Investment return of this quantum will easily qualify as worst case scenario. And it was. If we consider only point to point figure. Here’s what unique to listed equity investing: it is NOT like buying property where you lock in “one” price at a point in time. Then why look at worst case (or even best or average case) on point to point basis? My opinion – to get an idea of real worst case scenario, looking at data on 3 year moving average basis makes better sense. Let’s see what numbers say. Point to point returns of 10 year period ending: -           31 March 2018:                          ...

Risk in short term say upto a year of investment horizon – losing a large part of your capital Risk in medium term, say investment horizon of 5 years: not matching up to fixed rate return (don’t forget to adjust for taxes) you would have realized had you invested in such instruments (say bank deposits) instead of equities. Risk in long term, say a decade or more: Here’s where things get complicated. I can think of single most important risk to long term equity investing - the geography you are investing in doesn’t see decent economic growth on per capita basis or in worst case - becomes a failed state . Equity markets mostly follow economic growth in the long term and they may not deliver in such situations. The first two “risks” are difficult to predict but easy to manage . The last one, which in my opinion is the “real risk” in equity investing may actually be easy to predict as there will be good many warning signs before such situation manifests. However, management of such a...

Uncertain times are upon us. There is a shadow of war post killing of tourists in Pahalgam. So far, equity markets have not shown any signs of cracking up despite of high expectations of armed conflict with our wayward neighbour. Is it the calm before the storm as far as equity markets are concerned? It is anybody’s guess that if a protracted war does happen, economy will take a hit in near term, which in turn will impact our daily lives, including equity markets. When and how this will happen is again anybody’s guess. Should you take a relook at your equity investments in such a scenario? Nothing wrong in being a little conservative in such times. Here’s what I think can be considered:     -           Scenario I: You have designated INR 100 for equity investments and are fully invested. While you do have money in non equity investments, in case of equity market downturn, YOU WILL NOT PULL MONEY OUT OF SUCH INVESTMENTS AND DEP...

No, this blog is not about how a SIP  running for long periods (10 years?) lets one weather the market cycles and average your buying cost. Enough has been said about it and that remains. By the way, there’s no standard definition of “LONG PERIOD” as such. It’s left open to investing entity!!! This blog is more towards accumulating capital, as (HIGH) returns really matter only when they are earned on reasonable amount of capital. Even extraordinarily high returns on piddling capital (savings) don’t amount to much in absolute numbers. And it takes time to build up capital if you are doing it gradually, even after taking impact of compounding. Let the numbers come to our help. But first, we need to establish some benchmark to evaluate how long should one run a SIP, alongwith a projected rate of return. Here’s a simple benchmark for SIP duration – my investment should double at the end of SIP period for a particular rate of return. I will consider that duration as “LONG TERM”. ...