Investing Large Sums in Mutual Funds

Investing Large Sums in Mutual Funds

Quite a few times I am asked by our Mariners about investing money in lump sum.

Sometime this arises from the desperation of FOMO or fear of missing out in the markets, and sometimes simply because a person has not been investing in the past, and has reached an age when he realized that he should have started earlier.

In both cases, I try my best to wean this person away and to satisfy his desperation.

I tried to tell them that at Best if they want they can increase the amount of their SIP or Stp (systematics as I call them ).

Only once in a while, I come across people who have come into large sums of money by selling real estate or by virtue of inheritance after the parents have passed away .

what our Mariner does not really understand is that the sums that they contribute as systematics is more than what other people would be investing as bulk . e.g. your single SIP of 25,000-50K May actually be the bulk investment of a person earning ashore

So it is the definition which changes in the context.

Still, to answer the question whether one should invest in bulk if one has the money or should one follow the SIP I will suggest following hybrid route:

1. When will you come into large sum of money which is more than your 1-2 month’s salary please treat it as a modest sum, and continue with your SIP. At best you can make 3 to 6 bulk purchases of not more than 5% of your amount at hand..
2. If you have acquired an amount which is more than your above salary and you wish to make some bulk purchases, then do so in their existing funds only, if they are doing well and do not try to increase the number of funds.
3. For the purpose of bulk purchases, try to not make a single investment of more than 10% of the available funds with you. Try to continue with your existing Systematic or increase them if you like.
4. If You are fortunate and you find that while continuing with the above ,the market has taken a correction downwards, then invest up to 10% of your total corpus for first 5% fall in the market. if you still have appetite for risk, then invest 15% for the next 5% and 20% for the next 5% fall.
5. The above is a formula which I adopted in 2020 when the market melted ,as most of you know. this allowed me to make my investments in a hybrid mix of Stp, SIP and bulk from the month of February to September 2020. However, I did not stop the systematics before this amount actually depleted and my fixed income portion came down to my pre-reset 25%.
6. There are a lot of calculations by financial advisors, floating in the market about investing more in bulk when the market goes up and Vice versa. But I am not tempted to follow any of them. Our investing journey should be long and our test is in retaining that investment for as long as possible while maintaining our asset allocation..

I hope this will satisfy you and your future queries, and you will be not tempted to time the market and continue with systematics.

Financial Crimes and Punishment

When a thief or a dacoit steals from a person there is a law against it to protect the common man because it is recognized as a crime.

Similarly, if someone hurts any person or kills him whether by accident or intent .

Then, again, there are different punishments, depending upon the condition, because it is obviously recognized as a crime.

But if a person is defrauded by any other person, or a group of people or an organization, and because of which he becomes unstable mentally and commits suicide, or with an accident, because of his mental state, there can be no punishment for the perpetrators, because it is not recognized as a crime.

This was my stand all the way, and I have said so openly as my strong protest against mis selling.

An old person in his 70s being sold ulips with a premium going into lakhs of rupees every year is a similar crime beyond imagination and explanation.

When you walk into a bank to simply open the bank account or fix the deposit and you are persuaded to buy insurance policy that you do not need or investing into some plan which is not regulated or septic or you do not need any such plan is actually Financial Crime being committed The punishment of which has not been spelt out so far because it is not considered a crime.

All those smart people at the bank, wearing creased uniforms or coming into your homes having your coffee and consuming your precious time and nothing less than those the quiet or financial fraudsters who run Ponzi schemes.

Therefore, is not only your responsibility to protect yourself from any such plans , which is too good to be true, but also protect your family members relatives, and colleagues by at least warning them about such incident that happened before.

The financial system in India has streamlined a lot, even though the penalty for various demeanors have not yet been spelt out .

Any such scheme, which appears too good to be true most probably it is .

It is not only the schemes which we are commonly faced with, but also the financial fraud being done everywhere nowadays-are something that we need to be wary off .

You just need to be off guard once and the damage could be something that you cannot forget in the lifetime and might affect your mental health.

Therefore, do not be in a hurry when any such plan is offered to you, because any such plans are always accompanied with the feeling of urgency by the seller telling you that this offer might be over .

Not just monetary schemes, but selling of real estate,  loan against Gold, and many other things fall into this category of economic offense, which so far has not been defined properly in the country, and even if it gets defined unscrupulous elements will always find something new to keep their system lubricated .

Importance of Debt Funds

Importance of Debt Funds

As I have often said, debt funds are an integral part of one’s portfolio and the fixed income genre of asset allocation . However, lately I have stopped playing stress on it for  few reasons:

The new taxation introduced on debt funds from first April, 2023 has taken away the tax advantage, because now you do not get any indexation benefit, and even for long-term capital gains the gains are taxed at the slab rate, without any deduction that comes with the income .

Secondly, most of the officers are heavy weight on NRE, FD, which in the light of above taxation issue is actually beneficial as long as you are nonresidents. but as soon as you give up the NRI status the interest on NREFD becomes taxable. Under such conditions once again, dead funds will become relevant.

Once a person has reached a critical amount in the NREFD one must actually start looking at debt funds to park the long term money for the purpose of asset allocation.

The way to manage the asset allocation ratio, which I usually prefer to keep for myself at 75 equity, and 25 in fixed income and debt funds. It works both ways and used to work better before capital gains on equity was introduced..

Irrespective of the condition of the market, whenever One found that one’s allocation to equity has gone up by 2 or 3% then one could shift excess funds into the debt category of the same AMC. Conversely, when the debt allocation had increased one could shift to equity. Even at the cost of incurring capital gains. This keeps One safe, especially in one’s retirement or non-working times, and it gives an immense peace of mind.

Specially, during the retirement time, when once corpus is adequate shifting from equity funds to the savings account is also considered a wise step.

Usually what happens is that a person gets influenced by external inputs, and mentally starts pegging the market at high or low, depending upon his own short-term and long-term memory ( will write an article on this) whereas in retirement, one should specially look at once short term and long-term expenses, because that is what he has accumulated his wealth for.

Retirement must be used wisely for a person’s Peace of mind, and one must not worry too much about the management of his funds because he should’ve already set up the systems in place.

His discussion about the market or investments, must be only for academic level, simply for social discussions.

The amount that one is expected to accumulate will actually be so high that they would hardly be any possibility of shifting from one phone to another of the same category for better returns

This is because after paying the capital gains on one fund, when would probably not have much margin left in anticipation of making profit in the other fund.

Therefore, it is imperative, that we not only build up a respectable corpus before thinking about retirement, but also set up the systems and inform our spouse about the system that would be practiced during that life.

It must be remembered that doing nothing about investment is also one of the most important things to do.

A new Acronym

Sometimes it is important to use a small acronym, or a term to explain, was condensed a large term or idea for the purpose of brevity…

Just now, I have coined an acronym for the cash that people keep in hand to invest if the market goes down.

In Investment parlance, it is called, keeping your gunpowder dry to fight the markets .

So hence on we will call it as DGP for our convenience.

DGP  or Dry Gun Powder :

A term in investment , acronym formed by @RajeeveKaushik used for spare cash kept by investor to deploy in case of market downturn in addition to his regular systematic investments.

PRAY FOR DIFFICULT MARKET CONDITIONS

 PRAY FOR DIFFICULT MARKET CONDITIONS

Most of the people who started investing in the end of 2019 or even ine 2020 have made handsome returns.
This has nothing to do with their genius but everything to do with their determination and being a good investor. A good investor comes into picture only when the times are tough ,the market is down the environment is gloomy and everyone says the end is near as was the case in March 2020.
A lot of people who were very aware and in touch with the market sold out wholesale. I am very much aware of almost 75 crores INR being pulled out by people who were supposedly closed to me but did not consult me even once.
Instead they were around 47 very new investors who attended the 24th March Webinar and together we decided to put in more money gradually.
There were people who said that they are pulling out because they know that the market will fall further and then they will get a opportunity to invest at a lower level... They're still waiting.
Such opportunities in the market do not come everyday or every year and maybe just once in a decade and if you fail to act on it - it is lost for ever.

Similar sentiment is equal to in the famous Shakespeare play Julius Caesar where Brutus says....
There is a tide in the affairs of men,
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.

Very interestingly what does "act" refer to here?
It may be different in different context but here in the field of investment it may mean...
a) Not doing anything and letting your investments just be there and watch their value fall.
b) It may also mean watching your investment value fall but stopping further investment which should not really happen.
c) It may further mean (for a matured investor) watching their investment value fall and adding more money to it with every fall.

Allowing your investments to fall because of general market condition or socio- political reasons and watch them dispassionately is not only an important part of investment journey but also an important part of your personality which shows that you're maturing and any difficulty in life will not deter you.

So all those who have shared their successes with me yesterday and also in the past need to be congratulated for their astuteness and their self belief and I hope they continue their journey with the same zeal.
They will discover in the times to come that not only there portfolio has grown to unimaginable levels but also their personality and character has become more settled and matured.
They will always be honest citizens going by the law of the land that they live in also helping others whom they don't even know personally.
Remember that, to consume is human, to give away is divine.

HOW SHOULD A MARINER PLAN EXPENSES SAVINGS & INVESTMENTS

What is a good way of SWP… Assuming i just signed off and will spend 8 lakh rupees in next 4 months of holidays..? I dont want to keep this 8 lakhs in my bank?

  HOW SHOULD A MARINER PLAN EXPENSES SAVINGS & INVESTMENTS  

 

 Suppose you start earning your  salary of $100 for 6 months a year ( means $50 a month). as agreed before you start investing 17.5 a month in equity mutual funds as a mark of respect to the income tax that you are not paying. From the remaining takeout double the monthly expenditure ( say $20) and either put it in your wife's saving account or your nre savings. After the month is over or even during it let the remaining amount from this get invested in mutual funds, ppf , ssy in your wife's name. Remaining 12.5$ a month will go either to your nre FD. Make variable  FDs of small amounts like $5  for periods like 12 months ,13 months, 14,15 months etc. ( You can multiply this$100 with whatever number of times your monthly salary is). After 2-3 years your every salary will only go for investment and NRE FD for future expenses. After 3 years of continuous FD building your interest roll over will be able to take care of expenses.  Since there is a difference in talking in percentage terms and actual sum , I'm sure you will be able to adjust your salary to this cyclical self sustaining outlay. There is a caution here... Moment you plan to become a resident for whatever reason start putting money away in Debt MFs also. As a resident the FD will become tax inefficient age debt funds will be able to generate the compounding effect better. Because of the deffered nature of capital gains on your Debt funds over  interest on FDs,  the advantage will actually become amplified. The way debt funds gain advantage is... Liquid funds give better returns than FDs upto 6 months Ultra short term debt funds give better returns than FD upto 1 year duration  Short term DFs give better returns than Fd of 18-24 months duration..  Gilt funds give better returns than FD of 5 year or more duration.  I personally have a varied structure of debt funds invested in upto 23% of the Corpus value. They're difficult to select and same debt funds may not perform best under all conditions. But they're better because all of it was invested earlier than 01-04-2023 when the new tax laws came into existence. So choose wisely from the gamut. Send me a personal query since each one of this has a different situation.

For the RE- tired

 Xxxx Jain:
Please advice if someone have done a comparison between Senior citizens saving scheme vs debt funds. I m looking to make a lumpsump contribution at this stage and need to find which debt instrument is better in terms of returns. Thanks

Rajeeve Kaushik:

With the phasing out of guaranteed pension and FD interest at historical lows( as compared to 2 decades ago the retirees have come into dilemmas. Despite lot of options available they are unable to find the difference between most of them and decide.
When someone is looking for comparison between scss and debt funds then it is obviously for the senior citizen who has retired.
The person is moderately to high risk averse and will not like to take chances with his retirement nest which is quite fair to expect.
It is the mind set which will control the choices.
For the purpose and taking taxation into account I would suggest that retired person himself takes the call as to he will like a fluctuating return or a fixed return.
Few other factors have to be taken into account here..
1. Is the person drawing pension or not.
2. Capital gains from debt funds will not be able to be adjusted against the deductions.
3. Scss gives returns higher than a normal FD and quite in line with the debt funds.

 4. Finally and more importantly it is the risk taking ability of the person that will decide the option.

RIGHT WAY TO INVESTING IN MFs

Hello Sir Xxxx Xxxx here , I am sailing as second officer   I am reluctant to ask this question on group as the topic regarding channel to invest in SIP are discussed very frequently and I am not able to understand some of the basic  aspects .  So my question starts here   Sir i have been investing in SIP through my KOTAK BANK app from my NRE account .( P.S : this was done long before I joined the Group )  I am looking forward to increase the amount gradually   I have downloaded myCAMS app and it shows all my mutul fund SIP in that app and all other options for investment  .(P.S : I have not done any KYC for myCams app , only the basic pancard and email ID has been used to log in)   Now my questions are as follows  1) what needs to be done with SIP which are being managed through kotak bank app  2) IS MYCAMS is  same platform as Camsonline which you suggest for Investment ??   Your Advice will be very helpful for me to understand the very basic of investment .   Thank you .

Reply

1. For further augmentation any SIP needs to be stopped and another one of higher amount started.
OR
An additional SIP can be started in your Kotak fund from either Kotak app/ website or Cams app/ website.
2. Yes mycams is an app of Cams and camsonline.com is the Cams website.
3. Cams and Kfintech are RTA- Registrar and Transfer agents of the entire Mutual fund industry.
That means they take care of the entire transactions,paperwork and accounts of the mutual funds.

Also wish to inform you that:
1. MFU or mutual fund utility was a joint effort started by amc's themselves around 15 years ago.
2. MFCentral similar joint effort between the RTAs. Ki

Mariners and Marriage

 Xxxxxxxx 3/O:
Sir I had a personal query..I am 3rd off in Anglo from XXXXXXX Jharkhand..only son of my parent..Now its time to get married so parents are seeing girl..they are getting some good rista but in these cases girl is working in IT company and staying in pune Gurgaon...
Now the fact is that I want to stay with my parents in XXXXXpur..My father has also build a good home for our family in  XXXXXpur and with God grace we are well settled in XXXXXXpur having small business..I am planning to switch to land in few years with good investment in my business..an I also want to marry a smart girl who can manage my home and take care of my parents on my behalf..when I am at sea but most of options which we are getting the girl is settled in other state..I will also be wrong to tell a girl to leave job and stay with us..please advice me what to do 🙏

Rajeeve Kaushik:
Things haven't changed much in last 32 years, the more they change, the more they remain the same.
I faced quite a same challenge that many years ago.
Of course in those days the ladies were not working as much but everybody was quite open about the fact that I will not stay with your parents when you are sailing.
Plus of late I am witnessing lot of failed marriages of youngsters in which case they are happening within a few months or 1 or 2 years.
So many years ago what I did was instead of going by my father's matrimonial I wrote my own matrimonial indicating clearly my profession and requirement of a girl from a family which values fine arts, music and creative talents.
But I also mentioned that the girl should be self employed or a professional like CA doctor etc.
By good Karma I got exactly the family that I was looking out for and a wife whom none can match.
Family Background matters a lot.
Because the same traits are carried forward to child.
I can see that now in my daughter how she is raising her own child.

So my suggestion is to ask your parents to take it easy.
Look for a girl from not only same milieu, but similar area .
I would suggest you sit down and write your own matrimonial.

You must keep a few things in mind.
Even though you are 27 you are still a third officer and at a stage when you cannot really carry your wife on board even if the company allows.
You will be spending substantial time in your exams so foreign travels also ruled out.
The ladies working in the IT sector today would be earning your comparable salaries so there is no incentive for her to marry you.
What you do in future should not govern your decisions today.
So be Patient and let things happen .
Warn your parents about complications of today's marriages.

Confession of the Day

 Confession of the day:
Though I try to advise only what I have learnt from my experience and  what I have gained from age what I'm currently doing...
But a lot of things are also from the mistakes that I have made...
made over quarter century that I am able to present in just two or three sentences...
If I write a book on these mistakes again then all of you will get confused as the explanations would be detailed and convoluted.
So the next best thing which I do is try to give you the advice in short 2-3 sentences.
These are the net take aways from not only my life and investing experience but also that of thousands of other mariners and shore based investors. These are also the broad conclusions from few of the stalwarts from whom I learnt.
Like Mark Twain said "There is nothing like original idea..." everything has been already thought of and created.
You can also call them your  chocolates for Orals.

© Rajeeve Kaushik

No mean achievement- this!!

 This month has been very special for me.
7 members have informed me about reaching their OCR mile stone.
Even more important is that none of their portfolios actually requires them to do anything further except maybe increase the amount of investment.
All of you who have achieved the entry into this basic one crore or OCR club , will now Marvel at the speed at which you will achieve Two Crore  and from there to 3 Cr.
The most important thing is that with your portfolio at whatever level it is ,you're safe and have covered all risks viz: Inflation, wrong Insurance, life risk, health risk and by filing your ITRs you're on the right side of the Income Tax Department.
Income tax will be the biggest risk for unaware Seafarers in future especially the old variety of my age who are ignoring IT at their own peril.
When I see more and more people enhancing their portfolio value, I feel more happy and satisfied as if it is my personal gain. Because with over 1000 people already past this mark and over two hundred already achieved their retirement value - it is my dream for every Seafarer to achieve financial stability coming to fruition.
However this is not just my mission, it also has to be yours as a "pay it forward ".
You must resolve that none of your shipmates in future will be ignorant towards the elements of Financial planning or Personal Finance.
You also have to be active and aware netizens and be aware of all changes that happen in the rules, regulations and economy of the country and globe.
It will pay you rich dividends.
Who knows some of you might be Warren Buffetts of tomorrow

God speed all of you.🙏

Quantum of Investment for Mariners

 XXXXX:

How much sip is sufficient for Chief Officer please guide

Rajeeve Kaushik:

For every rank I suggest everyone must invest at least 35% of one's earnings. As a chief officer you will not be taking breaks for any exams and most probably you would have already completed your family so now the expenses will be more predictable for you.

So I would suggest minimum 35% and maximum whatever your wife and you are comfortable with.

The investment should always be made by equal SIP or stp round the year without missing anytime.

Investment should be on permanent basis till your required goals are achieved and you should not start selling just because the market has gone down.

Today the market has gone all time high so certainly in the next 2 or 3 months it will go down at such moments one should utilise the opportunity to make bulk purchases.

Your ability to hold on to your national losses during market downtowns and also the ability to utilise that adverse time to make more Investments or even watch everything happening steadfastly, will also bring about a great change in your character and your life.

Monetary loss is something that we are mortally scared of so when you will see that without your doing anything your portfolio is losing and also gaining you will become very equanimous. 

So more than you -your family and friends will observe that now nothing perturbs you or disturbs you and your able to take important decisions in life quite easily.

SKIN IN THE GAME

 Very often I am questioned about the method of selecting funds to recommend.
Sometimes the questions are very specific at why am I suggesting different type of funds when all of us in the same profession and with a similar goal of retirement.
Sometimes I am also questioned about using a distributor for purchasing mutual funds.
These are very relevant and important questions and I must answer all of them with utmost sincerity.
Recently I was gifted two books of Taleb, one being with the same name as the title of this article.
So the methodology that I follow is very simple.
I mostly suggest the funds which either I am holding or I have held in the past but sold for consumption .
At the time of adding to the group ,I enquire about your rank,age and city of residence.
These parameters help me identify your financial status almost accurately and then when you contact me I'm able to judge your commitment to your goals. This I'm able to suggest a group of funds for your purpose.
Those of you who ask me simply the name of funds for a particular category ,I give you a list of 3-4 funds that you can choose from.
Since I have  access to a  pool of HNI investors outside of the mariners group I am able to question regarding the service offered by various fund houses which also matters apart from simply The returns.
I mentioned about the book because I have used the title.
A very important thing that I read in the book which actually got smile to my face is that one must only talk about what is there in one's portfolio and not give the opinion about that security.
So the strategies that I talk about are the ones that I follow myself and more importantly which have worked for me.
Now the most important question about using distributors.
It's a common knowledge that direct mode saves about 1% in commissions ( expense ratio). But that's only for Equity funds. For debt funds it's less than 0.2% sometimes even less.
What I have observed is that a fresh investor gets puzzled between the choices and modes of simple investing , and if he's from a small town then those facilities are also rare. Because of this lot of time gets wasted in Kickstarting the investment journey.
So my suggestion is to get hold of a distributor near your house if you don't have a AMC office and invest any amount in a debt fund in the AMC where you want to start your equity investment.
This will help you complete your KYC. After that you can start your equity investment on your own via online method DIRECTLY with the AMC.
In time you will graduate to Cams/ Kfintech and will start investing thru them via their app MFCentral.
Idea is that you don't waste time.
Time is of utmost importance in life and especially in investing and for Mariners it is even more valuable. If you have to buy that time somehow -  you should.

ALLOCATION TO MARKET CAPS

 IMPORTANT:
To get your allocation between Large cap,mid and small cap right, you don't have to be very specific in investing in the respective funds in that ratio.
Most of the funds ( including Flexicap funds) have a higher allocation to large cap stocks, except of course mid and small cap funds.
So even if you invest your investment surplus equally across various FLEXI cap fund and mid cap/ small cap fund the allocation  will automatically get taken care of.

HEALTH & ECONOMY

 

 

 HEALTH & ECONOMY

 

 When the Citizens of a country are performing a economic activity out of their education, skill and experience they are termed as Human Capital.
The value of their physical and mental output results in the GDP of a country.
Poor health of a person does not only cause physical discomfort and economic loss to him but also results in the GDP loss to the country.
This is on account of his not working, spending on medical treatment and also the secondary loss by the care givers, relatives etc.
This was best demonstrated by the historical pandemic of 2020 and later.
The expenditure even if made good by the insurance is still a big gaping hole in the GDP or national wealth  and a permanent loss in material terms and not notional.
A health conscious Indian could also suffer due to poor air quality and in 2019 this resulted in a loss of $30 Bn on account of deaths and respiration related diseases.
India being the diabetic capital of the world still does not have adequate data of the loss to the Individual and the country but surely is a recurring expenditure for the individual which could be minimum Rs.3000 person.
Since diabetes has secondary effect on health in Cardiovascular and neurological systems it can be considered to be the most expensive drain on the nation's health and wealth.
Mental health issues which as per my surveys are as high as 20% of the population accounted for over 1Bn$ in 2019.  
It was perhaps the high outgo towards medical visits and treatments for the hapless Mariner which brought about the MLC 2010 code, and may have been counterproductive for the Marine worker. However the short write up does explain the actual loss to the individual and the organisational ecosystem.
© Rajeeve Kaushik

Mariners - Safety and Asset allocation

 

                                 Mariners - Safety and Asset allocation

   

 Prelude: How fast time passes - is a cliche'.. Well not quite. It's been 2 months since I posted here. It's not that I haven't written. In fact I have written over 50,000 words but have not been able to assimilate thm in one place for people to read.

This article was written exactly 25 months ago but was probably lost to digital storage.

Whenever I have written anything in the field of finance or psychology it has been mostly for seafarers and that has been aptly demonstrated in the Titles of articles, books, and groups that I have formed.

The reason for my focus is mainly because to understand the psychology, requirements, challenges of a Seafarer- I don’t have to exert or research. From morning to evening – whether I was at sea or  now on land- I was constantly observing them and observing the commonalities and also the differences between them.

As I have mentioned quite a few times before at various forums the first thing that struck me was somewhat ignorance at planning for future, and this I observed in my seniors more than the juniors. In fact, the crew was always smarter and with their penchant to spend less and less they had actually impressive businesses going for them. Except for a handful the Officers were without exception into – you guessed it- REAL ESTATE or Property as they called it. I do not remember a single person who told me that he had sold a property and used it for consumption. But…anyway we’re going off track here.

What I actually wish to delve upon is the topic of retirement. This is a word that can create great anguish in a shore-based person- depending what position he is working in. The higher the position – greater is the insecurity. This insecurity is not so much about the financial part as most of them have impressive pensions and provident funds and gratuities and superannuation funds and bonuses and the works. For them it is more about them losing the importance and social relevance once they’re off the “seat”.

Not so much about our adroit Mariner!!!

Even at 58 he considers himself fit enough to go for another few years. Mostly he has the same attitude to money and it’s planning as he had on the first day at sea. Social relevance is not important to him because he hasn’t really cared about the society so far and considered his family to be his universe. So he is free from all those complexes that his neighbor Chaubey ji – who is a Chief Manager in a PSU bank harbors. Is he??? Or Is he???

A mariner in the sense of his life long association with uncertainty and impermanence of his job always has this adhoc-ism in his life. Because of this factor he cannot actually bring himself to think of something of lasting value in his present or future. This is aptly clear from the numerous queries that we come across from people regarding how much would be sufficient for their retirement?

AND that is exactly the question that we intend to take up in this article.

HOW MUCH IS ENOUGH? And HOW are we going to ensure that we have it.

Finally the Mariner has realised that without Equity he has no chance of collecting enough money to fulfill the requirements of his dependents and his own. This realization is itself a big change in the mindset of thousands of Mariners- who so far never thought beyond the bank deposits and Real estate. To further ease his journey and adopt this equity into his planning, we found the new world of Mutual Funds where he could have his money managed by paying a minuscule fee . Mutual funds eased his burden and diversified his risk in two ways. By investing into a large number of companies and by taking away the decision of timing that investment. The SIPs and STPs objectified his decision of continuous investment which never happened before as his brain was always making him keep extra amount of cash in the bank waiting for some high-ticket expenses or an emergency. The STP allowed him to have his cake and eat it too – when required.

During this time, he also learned that since equity is risky he needs to keep some large percentage separately in Fixed Income or Debt funds. Fair enough it was necessary to keep something for contingency and risk!!!

Again, bringing back Neuroeconomics into picture- was this risk quantified? No, it was not quantified- simply a percentage of Asset allocation was adhered to.

Percentage? Why in percentage?

Is the duration of the risk to equity, known? Was it known that if the Stock market went down by half – how long will it stay there.

Was the quantum of risk known? i.e., was it known How much would he lose if the market went down at all.

In the Indian context, recorded history of stock market is about 40 years old. So can we on the basis of such a data actually draw any inference.

None of these questions can be answered affirmatively. So what can be attempted to is to discuss the asset allocation between Debt and Equity. Why? Because our GOAL should be only one- as a mariner-that our corpus should always outlast us!

I have recently received messages of concern that should they not go with conservative Hybrid funds which are considered safer or should they not have more than 50% in Debt in the final years of retirement.

I consider this is a very unwise step.

In my opinion the asset allocation of Debt: Equity as 70:30 or 75:25 as recommended by Financial Advisors is quite detrimental and goes against the whole life philosophy. The asset allocation ratio has been formed with random figures without any thought to the actual Corpus.

Why does a person have to settle for a ratio?

 For safety!

Are the debt options safe?

Aren't the debt options subject to risk of continuously depleting interest rates.

One doesn't spend in terms of ratio but absolute numbers and sums of rupees.

Should a person having a Corpus of 2Cr and 4 Cr have same allocation to debt.

Again, should a person having 4 Cr and 10 Cr have same allocation .

I personally feel it all depends upon a person's lifestyle and family needs and dependents at the time of retirement. But it all boils down to reserve expenses for the number of months required.

Towards that I feel... Having more than 40-48 months of expenses is a waste to keep in debt avenues.

By short history of mutual funds in India, people have lost more in Debt than Equity funds.

Debt is an Avenue which is more translucent, if not opaque.

So how much you should have in debt...

For up to a Corpus of up to 1cr in retirement...90-100% ( If 1 cr is all that you have!)

For 2Cr- 90%

For 3Cr-75%

For 4cr-60%

For 5cr - 40%

For more than that 30- 20%

This corpus should never deplete!!! That should be your only goal.

 If you don't want to use this suggestion...

Just ask your spouse and think together for yourself.

I feel unless the couple sits down together no financial plan will ever work.

Once you have read the above, you must sit down and think about your respective situation. Consider your age, marital status, check out your expenses for last 5 years , the goals to be achieved in before retirement.

 

 

 

 

 

 

 

 

 

 

 

Few days ago I had sent a call for review of franklin Templeton schemes .

Just before this call I had redeemed my entire holding of Franklin India US opportunities fund.

The date of transaction was 12^th  April. However , the funds did not come in the bank within T + 3 period as expected.

When I wrote back to the company after a week only then were they credited it to my account yesterday late evening.

I could have understood this delay and have normally moved ahead as I have in the past few instances with other AMCs. But what I wish to narrate to all of you is a disturbing incident regarding Internet transaction.

On the pretext of wrong password my account was locked and any attempt to reset the password was sending me back to a email address/ mobile number that I used 16 years ago . There was no connection with the present Folio which I had redeemed.

The idea of this post is to inform you about the pitfalls of internet transaction and importance of keeping your user id and password current.

I will suggest to all of you to following steps so that you do not face any surprises at the time of your  redemption in case of necessity of funds.

 

1.      Check your email from AMC from time to time .

2.      Make test redemption of Rs.1000 now and then to be sure of the procedure and the time it takes for various class of funds to reflect in your bank.

3.      Write down the user id and password of all your accounts in a notebook and keep the book safe.

4.      Check your portfolio manager (wherever you maintain) with the  SOA sent by the AMCs from time to time.

5.      Don’t delete transaction messages and emails from your phone and pc.

6.      Keep important messages and details on the cloud. Better to keep them in the same cloud as your IT and Bank documents.

7.      Preferably keep one mobile and number dedicated to finances and do not load any app except of bank, stock trading account if you invest in stocks and AMCs.

8.      Retain at least one annual SOA of bank, MFs on paper and keep it safe.

9.      Complain to AMC of any non compliance freely, never hesitate.

I have been taking all the above steps already and hence am in a better position to face the amc.

In my view Franklin is on a shaky ground.

Regards

Rajeeve Kaushik