New approach to FFP

 
New approach to FFP

Investors now a days are caught in a conflict between what their parents and elders practiced and what they should themselves to now.
Traditionally anything to do with the capital market was frowned upon by the elders and was called Satta . If they were not in the government job they had their EPF and they could plan easily with 12% bank interest for their FDs. Their life revolved around saving as much as possible by cutting down the expenses and keeping the savings as high as practicable. Biggest expense used to be daughter's wedding and building a house, both of which used to happen closer to retirement.
Now our young Seafarer who goes out to sea at the age of 18 or 19, when he starts earning he gets torn between the advice that he gets from his parents and what he sees around him on media and television. Whether to choose between a well trodden path of savings in the bank or investing in mutual funds and stocks which some of his colleagues also follow on board.
This is a question that almost 90% of the youngsters ask me.
Answer to the question lies somewhere in between both of them - that is the conservativeness of the parents and the modern Outlook of Equity investments.
The economy in the yesteryears before 1991 lay in savings and keeping the money locked either in the safe or in the bank. That was the biggest reason for our low growth rate. The governments attitude was reflected in its citizens also.
The government used to control who will eat what ,who will produce what and in what quantities. Things went even to the extent of what anyone will wear.
There were 3 brands of scooters with 5 year waiting list and 2 brand of cars. Income tax rate was as high as 95% .
Slowly everything changed as the income tax rate was reduced to 50% and below and later the economy was opened up in 1991 and the licence Raj was almost abolished.
This liberalization did not only remove the shackles from the producers manufacturers and importers but also from the minds of the people who slowly started opening their coffers.
Slowly our economy became the economy of consumption. Consumption boosted the earnings of the companies and also their profits. The new companies were encouraged to access the public for money via IPOs. Thus people got access to a new source of capital enhancement.
In 1993 the country got exposed to a new method of investment which could involve even the smallest earner who had the capacity to invest at least ₹5000 at one go and later as low as ₹500 per month.
What we are seeing is almost 25 years of capital market development made possible for the lowest of earning population.
So where does the old thinking fit into this?
The answer to this is- in the wisdom of savings that our forefathers taught us.
The wisdom of the old and conservativeness applied with the technique of today is the answer to the modern approach.
No longer can we afford to save as much as possible and expect to get high returns because this is a economy of consumption.
Nonetheless we must save like our elders taught us. Because of you don't have the habit of saving how will you invest it.
 If we will not spend on all the sectors that exist, the companies will not profit or move forward  and we will not get the  returns on MF and stocks. So it has to be a wise mix of spending and consumption.
We must remember this that in the mutual fund returns that we get from the capital market it is the contribution of the lowest of earners and even the non earners like beggars and destitutes. Everyone buys goods and services and pays GST on it. Company creates profit and passes it on to us.
If everyone in the country decided to only save then we will be back to pre 1991 condition. Everyone decides to mostly invest and not consume that will also lead to imbalance.
So this brings us around to conclusion that economy would only start moving and remain in the fast lane as long as those who have a large amount of dispensable income to consume and also invest.
This automatically brings us around to the topic of discussion that we should conjoin the old philosophy and wisdom of saving and a modern outlook of balance of investing and consumption.
Home must be built,paints , electrical gadgets must be bought, cars and new clothes must be bought more often .
Dinner outs must be had and also Zomato services must be used, holidays must be spent in hotels and of course unhealthy lifestyle must be pursued so that Pharma companies and hospitals remain in business.
So help you God.

Regarding Financial Planner or Professional Guidance

 Regarding Financial Planner or Professional Guidance


Few days ago I had suggested to the group members to opt for a professional review of their portfolio and continuity of investment journey.
The reason  was largely personal and as follows:
1. When a member joins the group and he is fresh- guidance is provided to him to start his journey in a methodical and minimal disruption to his lifestyle.
There are also cases where people have been investing in traditional avenues of real estate and fixed deposits.
Both  the classes of people do not entirely give up their approach and adopt our method of equity investment in a nominal way or as a token. The way their mind works is -"let me start of in a small way and later increase my investment."
But they never truly take up the equity mutual fund way entirely or substantially which can make a difference.
2. Some of the people do take up in the right amount and proportion of 35% or more of their annual income.
But at any critical moment like the past pandemic and lockdown or even a call or rise in the market they stop their systematics.
3. There is another smaller group which does continue their investment but do not give a feedback on the progress or performance of their portfolio.
Now I believe that for all the above category of people it is important to be connected to someone who can give them a continuous and consistent feedback and also suggest any changes.
I have observed that the worst portfolios are of those people who are otherwise close to me or well known to me. Which brings me around to the conclusion that they do not take me seriously.
Right now I am in the middle of a wedding in Vadodara and two very important things took place.

First, I met a person who had just survived a life threat earlier this year. I had gone to meet him and in that moment he realised that he wanted me to look at his portfolio which was being handled by foreign bank based in India. I had summoned his wealth manager and given him a earful and restructured his portfolio to a slightly more aggressively tone.
I was pleasantly surprised that his portfolio has increased by about 25% in 9 months- which was better than my own.
Now apart from my own, this is one portfolio that I could see in detail and compare it with what it was earlier.

Second episode which was even more important - I met an Australian fintech person who manages the software for Australian pension system.
He elaborated to me in great detail how various options are given to the pensioners there. He reviewed the small endeavour that I have made and has approved of the method and assured me that it will take care of everyone who follows this path diligently.
As I have learnt that in the Australian equivalent of NPS , a contributor can himself manage his own Corpus instead of the fund managers( as an option).
So we are precisely doing this on our own.
Further than this I would suggest that please do form clubs in your city where you can meet at fixed intervals of 2 months or more and discuss among yourself what is the right and wrong that you are doing in your portfolio.
The ground rules of consistent and perennial or regular investing should remain intact.
In fact in the past 7/8 years many a times I have underlined the importance of organising yourself city wise and having regular meetings like we have in Dehradun.
Furthermore we can have regular webinars to discuss our personal finances in which you can join with the audio only.

Hope this awakens the sleeping ones.