KEEP EVOLVING

 Though few of us try to advise on queries from members, it is based upon our experience.

It is possible that during the process and in time they discover some other observations .

They should try to share them on this group for the benefit of others because likes everything in life... Field of personal finance also keeps changing...

E.g. earlier e used to treat new deposits and accounts as sacrosanct and interest in them.

But now there are so many restrictions wrt NRE accounts that it doesn't make any sense in operating through it --so adopt NRO instead.

30 years ago NRIs were given all the liberty, but now the status is more of a leadstone than a milestone.

So adopt strategies which multiply your wealth rather than stick to that tax free status.

In modern India the word TAX is not something to be scared of so do not restrict your imagination by the fear of paying taxes of otherwise it can lead you to a proper path of adding to your wealth.

PROFESSIONALS MUST BE PROFESSIONALS

 PROFESSIONALS MUST BE PROFESSIONALS

Today a young colleagues like yourself phoned me up and asked that when I have been so eager to spread financial awareness among seafarers then why do I advice going via mutual funds and that too through a professional distributor.

What's wrong with going for direct stocks.

Already so many times I have tried to answer this as sincerely as possible, but then considering that there are always new members on the group it is important to keep repeating oneself.

To start with I am not a trained personal finance professional . Hence what I say is certainly not cast in stone and nor should it be taken as a personal compulsion. 

1.Most of my tirades on social media come from my own doing and not simply reading. So I can say with reasonable certainty that unless you start running the ships sitting at home you will need to to pay a little less attention to your finances and more to your profession.

2. In one life one can wear a lot of hats and even claim to specialize in more than one field, but this from view of today's world ,would be very misplaced because you cannot achieve perfection in your profession without spending and giving lifelong care to it.

3. For a Marine professional this is no less. We spend much more time and great part of our life  learning the theory and practical part of our job and there is never and end to that.

4. To this, if you think that we can add the analysis of individual companies or stocks of India alone then we are sadly mistaken. By pretending to do you such a specialized job we must be compromising in performing our duties on board in a large way. To this you can add so many different companies in US and other parts of the world which you will never be able to to invest in for lack of information.

5. I have often repeated that mutual funds present to us a very versatile medium to grow wealth at a very nominal cost and comfort... In a organic way of growth...

6. What is organic way?

Organic means when the growth is coherent and in keeping with the ways of the world. The term is mostly used for companies which grows by growing their businesses normally and not by acquiring other companies.

Similar parallel can be used for individuals as well.

The investor grows with the world and does not try to out run it by adopting quick rich schemes or opting for windfall gains...

This is what at least you as honest Mariners should do.

7. Tracking companies is a full time business and even the professionals are unable to do it in the conventional way. There are so many types of tools, consideration and more than everything...lot of misinformation.

Buying and selling stocks is a full time business now . Companies like Satyam, DHFL have shown that when the tide turns is impossible to predict.

So go for professional management in form Active and Passive mutual funds.

Not to forget, take help of a distributor during your leave running from pillar to post can be a frustrating business. Lot of people on this group had delayed their start of investment because of DIY .

Rajeeve Kaushik

26/ Sept/2021

HOW DOES THE ECONOMY WORK

 HOW DOES THE ECONOMY WORK

This is one of the most stupid topics that I may have ever started an article with. So many books have been written in economics and upon economics just to define what it is and yet nobody seems to have completed the job so how can I with my limited vision ever hope to make a dent on such a huge mountain which moves the world and moves the household.
All of you must have certainly heard about the story of the great depression in US in which there was a village which effectively had come to stand still and there was no economic activity going on.
However ,The story goes that gentleman visits this village and goes to the only hotel or an inn to book a room. He puts down the 100 dollar bill for two nights and books a room saying that he will return in the evening. Hotel owner at the reception says that if he does not stay he will have to pay 25% for his booking to which the visitor agrees and goes out  of the hotel.  Promptly the hotel owner rushes with his hundred dollar bill to pay the bartender next door who used to give the supplies to the hotel. Upon receiving the money after long time the bar owner rushes to the grocery store next door and pays off his debt. The grocery owner further pays the butcher and the butcher pays the village p********* or let's call the village service lady. The service lady goes back to pay the hotel owner where she had visited her clients
So within a matter of hours everyone's debt is paid off and the money is back with the hotel owner. The visitor comes in the evening and cancels his booking and walks off with $75 in his pocket.

I am sure it must have been something like what you saw in the past one and half year when not only the national but international economies had come to a standstill. So if you are young and observant  you must have  noticed the whole country  shut down overnight and not gradually like the great depression which none of us ever saw.

You have seen how starting from the lowest common denominator of the society in form of the cobbler ,chaiwallah, sabjiwala and upwards to the luxury hotels everyone lost earning source overnight.

This was a great time to observe how how each of these people contribute to our sustenance. It was a great time also to observe the movement of economy , there has been never been a time at least in the past hundred years ever since the Spanish flu when even a school boy could observe how how we all in the society are interlinked.

The idea of writing this article is to appreciate and underline the importance of sweeper , plumber, electrician, housemaid, grocer, cobbler, shoemaker shoe company, advertising company for the shoe company, the retail outlet for the shoe and the employees working in that outlet and everyone in the chain in between...
You can replace the shoe with the FMCG products, the processed food products, the clothes, the medicines, the multiplexes or anything that you like.
If any of them in the chain breaks down the product will not be reaching us and in terms of economics will not be considered to have been produced because it has not reached the consumer.

It is one thing to feel proud by changing your tap at home because maybe we have the skill by virtue of our profession... But does a cardio surgeon operate himself for heart problems or even gallbladder or cataract. It is imperative that we take help of all the professions existing in the society to make a life easier and because every penny that we spend helps to move the economy.

Prior to 1991 some economic reforms were already in the pipeline. The income tax rates had come down to 50% from the earlier 90%. But from '91 money became transparent and opportunities were given to bring the hoarded money into the open. Profit stopped being the dirty word. As a result the traditional Seth ji who used to keep his cash in the thick Steel lockers brought it into the open and started using it.
Those of my age or older will remember how many brands of chocolate we had in India then or how many types of sweets were available at the local sweet shop and how the Chetak scooter could be obtained only on foreign exchange with the waiting list of 2 years and how BSNL used to give a telephone after two years with OYT booking of rupees 10,000 in the 80's. For sanctioning two bags of cement one had to take the permission from the DSO.

Why was all this?

Because in public life there was no flow of money.

The government had mandated how much everyone could produce and what they could produce. Firstly the salaries were low so people could not afford even necessities of life and secondly their weren't sufficient things to buy.
But once the Seth ji like our typical visitor to the village pumping the fabled $100 into the economy the economy started moving. The black money which was hoarded in the vaults without any idea as to how to spend it came into the market to create demand and the product both.
Liberalization of economy and digitalization and computerization and the  media opening up to new vistas created an unprecedented scenario when majority of the population could be employed or be self employed.
With time we saw so many  financial products where an average person earning 10000 rupees could not only save but grow his money appreciably.
All these financial products may not have been good for the financial health of the investor but none the same they existed. In an Open market it is only the consumer himself who decides the product that he wants and this may be a television, a car, insurance policy or a Mutual fund.
But we must remember that apart, from investing money for ourselves it is also our duty to take the services of the people connected in those fields.
You may be good at the income tax laws but if you think you can do the job of a CA then there is something wrong with your perception because he spends equal amount of effort attaining professional excellence as a doctor.
Similar is the case of mutual fund distributor or even a insurance advisor.

We may not believe the glib talk of the showroom salesman to buy a 20 lakh car without doing own research but we do not spend even half the time at evaluating a financial product the person selling it to us. Example of this lies in the fact that we renew the  insurance of our expensive car every year but most of us may not be having coverage of our lives equal to even that of our car unless we have purchased the term insurance.

India is not a manufacturing centric Nation and most of its development has come about by virtue of the services that it offers nationally and internationally.
In that direction it is important that at every point of your life you utilize the services of professionals and pay for it because I can promise you that a good professional even if he is your next door cobbler can help you save lot of money , time and energy.

As much as you should evaluate a product also evaluate the service of the person offering it to you and the person himself. By virtue of paying his service charge you have earned the right to question his service but not without it.

There are lot of unscrupulous and also incompetent professionals out there but it should not take too much time to see through him and take your business elsewhere.
We should content and restrict our selves with the profession that we have taken and keep reskilling ourselves in that direction to greater heights both onboard or on shore should we decide to pursue a career there.

So help you God.

P.S. this article has been written in the visitors lounge while I am getting my vehicle serviced. Not only will I opt for the optional service but will tip the staff who comes in contact here with me.
This goes hand in hand with my policy for another old car where which is serviced by my friendly car garage mechanic.
So I endeavor to support both ends of the society while benefitting myself with peace of mind.

Why the Passive funds will overtake Active funds Unnoticeably

 Why the Passive funds will overtake Active funds Unnoticeably

There is a concept of efficient markets in international finance and Capital Markets.

This refers to the true and transparent valuation of all the companies and the same data being available to everyone who is interested, in real-time across the world.

In the market there are a lot of stories and rumours and perceptions regarding various policies of the government and the corporate world. In the developing economies like India due to the various Nexus between the corrupt government officials and the corporate world this information is not circulated and rather the Mis information is spread widely.

If you will notice the developed economies do not have many public sector units like India in fact their Federal Bank which is the central bank like our own RBI is also privately-owned .

This results in fewer people having access to internal happenings of a particular company and even if they have such information, the controls are so strict that no-one would consider indulging in insider trading.

In a developing economy due to absence of sufficient and deterrent penalties even if such practices are uncovered the punishment is largely like a slap on the wrist.

In developed economies like US, the relevant public vigilance body has sufficient incentive to keep snooping upon people with grave misconduct and the penalties are severely and sufficient deterrent. Best example of this is Rajat Gupta the founder of ISB Hyderabad and A very respected name in the US corporate circles and his Srilankan accomplice.

In India so far even if sach malpractices are discovered the penalty is largely monetary as was in the case of HDFC MF front desk trading.

Because of this information being available to some select people and the fund managers, they tend to leverage this information and hence the active funds which they manage, perform or try to outperform the broader market and the index funds which are dependent on it.

However things are changing and SEBI has become a toothed tiger and has started observing and handing out penalties and in the same fashion RBI is also becoming sufficiently aware.

Recently the prize for reporting (whistle blower) successful insider trading has been raised from 1 CR to 10 CR.

All these small steps will lead to the information being reported on the portals regularly as is presently being done by every company to the stock exchanges and SEBI.

PSU companies like IRCTC are reporting even the running and stopping of trains to SEBI and the exchanges.

I distinctly remember as late as 2018, the heads of most of the mutual fund companies and also Dhirendra Kumar of value research used to say that active funds will still rule the roost for a decade whereas I was very sceptical of their stand.

In 2007 when gold bees NFO was introduced, I knew that the change had arrived.

Few of the AMCs who introduced the etf and other passive funds did it in imperceptible way that few noticed the arrival.

Now you can see the steady rise not only in the AUM of index and ETFs but also the trades volume.

Passive funds did take the market by surprise after March last year but me not continue to do so in the shorter term.

And now slowly you will not only have asset funds for equity but also debt securities.

About 10% of the employees provident Fund money is channelled into SBI Nifty ETF.

Even though Nifty BeES is an older ETF, because of the above reason it's AUM is smaller but traded volume is much higher.

Strategies: even with the short history of passive funds now you have various mutations and combinations to think of e.g. whether to go for Nifty and junior Nifty separately or just invest in nifty 100.

All should you invest in nifty equal weight.

Should you invest in NV20 or in Nifty low volume.

Soon the choice will become even more.

With the clear choice of the investor to directly invest because of technology , the process will be simpler too.

So please be vigilant. Something which is simple can also lead to mistakes.

Do your own research; take in the articles that you read as information and not knowledge. Knowledge will be what you will do and achieve on your own.

Since the field is new the advisors will know as much or as less any of you.

God speed thee.

MOST IMPORTANT THING IN THIS PANDEMIC

 In 2014 I lost three of my dear friends in just one week . I was so crestfallen that I gave up my sailing career and decided to  find alternative life.
The past seven years I spent trying to make myself useful to other human beings.
The past week outdid 2014 by a miles margin.
I lost more than 12 people very close to me in just one month.
Despite my proffering unsolicited advice two friends and colleagues most of these gentlemen and ladies did not make any preparations for their departure.
I used to categorically tell them to prepare a comprehensive list of their assets and emergency information.
Needless to say they used to scoff at me and now the family is in total disarray.
So ladies and gentlemen all those who are reading this piece please sit down tonight and write about information as if you are not there.
I know it will be a depressing thought in the middle of all this Mayhem and chaos.
But it is a one time exercise which will come in handy whenever you are out for work or whatever.
Please start with writing about the passwords of your email ID and internet banking and most of those financial sites/ aggregators which you visit.
Please include the details of your bank accounts, FDs, insurances details of where the policy are kept because 99% of the people have not registered them with depositories.
I don't want to add to all this because once you sit down from write you will think of much more than what I can write.

Please do it tonight.
Also write your will.
In short that is all I can say.

Live Like a Tortoise...

 In Indian mythology ,literature and religion tortoise is used as a symbol of stability, longetivity, body and mind control.
Its ability to withdraw into to its shell at the sign of any danger has been mentioned and quoted in various places.
In fact the stress and the reference given to a tortoise is so strong that  Vishnu himself is said to have taken the Kurma Avatar.

I'm surprised that it was not chosen as the National animal despite it's amplified inspirational importance in our lives .
Today when we are faced with a  pandemic of the same proportions as it has attacked in every century for time immemorial... This is the time to to take a lesson from the creature which has the ability to survive the longest, which has the ability to stand all dangers, which has the ability to control its body and mind...
Let us be like a tortoise, slow and steady with breath ,mind and body control... Let us stay within our shells  ...
Latest stay within our means without adventuring too much till the  danger is over and we can emerge to live again...

OF YOU AND ME...

 Few Observations and lessons
The human mind and the body must never remain idle.
Last week I underwent what could be called as a culmination of a long delayed medical condition into a surgery.
Though it was what the doctors call a minor surgery but since it involved anesthesia it actually can have some serious connotations.
As soon as I knew about it before going to the hospital I made a few preparations and also during my stay in the hospital I realised some very important points that I would like to share with you. These points have nothing to do really with your financial independence or medical insurance as you may think, but they are definitely a big part of it.

First thing that I realised is that, during such times however your family may be whatever be the size and however well placed the relatives maybe only people who come helpful are your immediate friends near your house and your neighbours. Whether you are a Mariner or not, it is very important to develop good healthy circle and tolerate your neighbours even if they are not so kind in normal Times.
Having a good social circle and regular touch with friends is your blessing.
Next is the fact that do not hesitate to ask for help from your friends or neighbours.

Secondly what ever be your financial position, however big be your investment portfolio, however fantastic maybe your insurance plans, they mean nothing  if you have not familiarised your family with the procedures to be followed for getting that money.
Even if you have made the best arrangements your post survival but all that information is in your laptop or the cloud it means nothing. Ensure that all the login passwords for email accounts apps net banking are written down in a small diary and kept safely with the person who will look after you in case of an emergency.
Ensure that however young you may be  write out a will and have it attested by two witnesses who are known to your family . (As suggested by a friend of mine one of these witnesses should be a doctor.)
A simple hand written will in simple language without any ambiguity ,clearly mentioning the person or persons as your legal heir is sufficient, there is no need for it to be written on a stamp paper or be registered even though doing so it's desirable.
Thirdly ,I felt that one should make out one's survival kit having the necessary medication ,toothbrush ,spectacles, undergarments ,a spare charger, for such emergencies.a small amount of cash can also be kept with this emergency kit.
Fourthly, the diary that I mentioned above can be kept in this emergency survival kit and the first pages must have the entire information about yourself.
Fifthly: if you your spouse or family member is a diabetic ,or allergic to anything then this fact must be displayed in a small card and kept in the wallet or displayed on the emergency kit. you can have a small card printed out and laminated and stuck to the survival kit for the entire family if it helps.
Apart from these few things
you can add to this list which includes the card for cashless hospitalization or numbers that need to be informed in case the person is admitted in a different city.

Apart from this I realised the fact that I had been ignoring the medical insurance that we seek and take for ourselves is actually very minuscule.
Earlier I used to suggest super top up policies but having utilised my time in the hospital to search for better products I feel that the high sum insured products should be considered as they do not really  hike the premium.
I will wait for your feedback to update this article.