REGARDING NEW POSTS AND ARTICLES BY ME

 REGARDING NEW POSTS AND ARTICLES BY ME

My interaction with my fellow Mariners takes place through various social media channels apart from the official Telegram group called FINWORLD@SEA .

Some times I have to repeat myself because lot of Mariners while on ship, exit from the group because of expensive data charges.

So in order to provide them with a singe point of reference where they can check for guidance before asking further questions , I would be posting all those posts on this blog. 

So this just to inform you that you can always come back here to check if you have missed anything.

I would avoid posting any copyright material.

In case you have a question you can reach out to me on Whatsapp (9808640497) or Telegram .

CASE STUDY FOR GOLD AS PERSONAL INVESTMENT

 

CASE STUDY FOR GOLD AS PERSONAL INVESTMENT

Much has been said about gold and case has been made often regarding investment into it and against it in equal measure.

There have been qualitative and quantitative case studies done and articles written.

Recently a friend of mine suggested some opposition to my suggestion of buying gold as a bullion for personal saving or investment. As per him it is a very unpatriotic action as it leads to a stress on the GDP. When I suggested that this was more as a suggestion for our local group of friends who are there with a common goal of investment for retirement planning he very sensibly pointed out that if each of those members suggests the same thing to further 20 people. This point of his was also very valid.

But something that we forget while planning for ourselves and our family is that personal finance is all about personal and it happens within the ambit of national laws regarding wealth   acquisition accumulation  and taxation. At no point  any citizen can or should try to circumvent those laws.

However same is not applicable for the government. It can change its laws every year during budget and even 12 times during the year or as often as it likes.

It can even change the law of making the laws to  suit itself.

For example if at the end of the month you have to pay more bills then the salary which you earn , your bank balance will show red and if you do not have any other monitory asset you can be declared  bankrupt etc. It's not that difficult with the government. It's budget is first designed to spend and then to collect the money towards those spendings.

If after 1 year it is found and as it is found every year that they have not collected enough money for those expenditures they can take that money from RBI LIC different PSU companies or even from the nationalized banks as dividend. It can further raise your taxes ,duties ,tolls surcharges. And if even then it cannot make up for the losses... Then it can print more currency. It can also sell off its gold holdings with the RBI. And all this will be within the law.

Not so much for you. You not only have to take care of your own expenses but also those of the government. Somehow you cannot print your notes either !!!

With all these events there can be some extraordinary events like economic liberalization and devaluation of the Indian currency in 1991 or the demonetisation of 2016 or the Kargil war or the Covid lock down or the present Russian war... And all these will have a direct bearing on your financial situation and and personal well being.

And you can further add to these some changes in your personal and family life disasters like death illness or accident. In none of these events will the government step in to be in sympathy with you or give you the benefit of all the taxes that you have paid so far.

With so many changes that have happened already in the past 25 to 30 years and so many which can be further not imagined for the next few years... All you have to left to backup is your saving and investments in various asset classes.

Amongst all these asset classes equity no doubt rates  number one in the wealth creation. To counter the volatility of equity one invest in Bank fixed deposits and the fixed income funds. However this asset class also suffers a big disadvantage of firstly having a low sub inflation return and a heavy taxation on top of it hence delivering a big whammy.

And though most of these asset classes keep changing their form every few years and even as the fact that none of the world's currencies are more than even 100 years old in the present form ,the only asset class which has been standard for just a few thousands of years and not changed this form and has been universally accepted is- Gold.

It is the only form of a naturally occurring commodity which is recognised and respected across the world and in every nook and cranny of the world.

Even though gold has given a fairly high return across a substantial and equivalent number of years as other asset classes of fixed type it stands much superior to them for the purpose of portability acceptance and bartered for any range of goods or services.

There was a report of the working group to study the issues related to gold imports and gold loans in February 2013  by the RBI. And even before  addressing the issue of controlling the gold imports almost 9 years ago from today the paper starts with the following...

" Any attempt to moderate the demand for gold is an arduous and complex task.

The nature of demand for gold in India is not strictly comparable with that of demand for Golden many other countries as over 1.3 billion population of India would invariably continue to create demand for gold imports due to cultural religious economic and social reasons.

AWARENESS ABOUT GOLD AS A LUCRATIVE INVESTMENT AND STORE OF WEALTH IS GROWING AND HENCE IT IS DIFFICULT TO BREAK THE LURE FOR GOLD FROM BOTH THE INVESTORS AND JEWELLERY CONSUMERS. DEMAND FOR GOLD IN INDIA IS AUTONOMOUS AND MAY NOT BE AVAILABLE FOR REDUCTION THROUGH POLICY INTERVENTION.

SEVERAL STUDIES HAVE EMPIRICALLY VALIDATED THAT GOLD CAN BE REGARDED AS A LONG RUN INFLATION HEDGE. ABSENCE OF ANY CLOSE SUBSTITUTE TO GOLD AS AN INVESTMENT ASSET WITH THE HIGH LIQUIDITY GOLD CAN OFFER IS ONE MAJOR REASON WHY GOLD HAS BECOME A MUCH PREFERRED ASSET.

This is what the 400 page report starts with. It accepts that gold can you regarding as a long run inflation ahead and there is no substitute to go doesn't investment with high liquidity. IT ALSO VERY SHEEPISHLY ADMITS THAT 1.3 BILLION INDIANS ARE RIGHT AND BETTER ECONOMISTS THAN THE ENTIRE WORLD BANK, IMF ,US AND THE DEVELOPED COUNTRIES COMBINED AND PUT TOGETHER

It is only after this study by the RBI that it started releasing licences for nbfcs offering gold loans. These gold loans proved to be good for both the investor and the lender as it provides a secured loan for the nb fc and the possibility of immediately liquidating for the gold holder.

WHY PHYSICAL GOLD IS BETTER THAN ITS CORRESPONDING PAPER FORM:

APART FROM THE GOLD ETF THERE HAVE BEEN MANY ATTEMPTS AT LURING THE PEOPLE TO BUY GOLD IN E OR ELECTRONIC FORM AND KEEP THEM SECURE WHETHER DEPOSITORY.

Once such used to be the MCX which used to offer e-silver and E gold. This gold had the option of being converted to bullion at the time of delivery if required by the customer or investor.

After few years of operation the exchange itself was shut down by the government on account of violations of some laws.

In 2015 government introduced to simultaneous plans  for monetization of gold to which did not find many takers. Second was the sovereign gold bonds which were offered with some paltry rate of interest and also tax benefit if the gold bonds were kept up to maturity. The takers to these are also in minority as compared to the buyers of physical gold. The reason of which can be attributed to either the cultural and mental makeup of possessing gold in physical form or its reluctance at trusting the government. The third reason may of course is that the transaction has to be conducted in cash or equivalent.

Various personal, National and international disasters have proven that it is only gold which could keep the people survival and  afloat 

During such Times one should not try to become an economist or patriotic nationalist. It is one's duty to make ones wealth grow through legitimate and proper means utilising the financial freedom which the government offers in terms of taxation. The gold which you possess may give you less returns but it does not carry the annual taxation of a fixed deposit or the capital gains in case you're offering the gold for equivalent good or services.

The trend of the world governments is to convert everyone's assets and monetize them not only into paper but electronic formats. I personally feel (even as a proponent of equity investor) that this over dependence on digital format of wealth can prove to be disastrous in case of a element attacking a common format or  a depository.

In simple language it means that if all your money ,mutual funds, stocks, fds ,debt funds, PPF ,NPS etc are centralised in one place then it does not take too much time to evaporate in case of natural or artificial attack on the mode of electronic holding.

In short all I suggest  is that do not try to align your own interest with those of the government, they run parallel or even divergent as far as you go as a high networth individual.

With leaving some food for thought on the proverbial table I rest my case.

ARE MY INVESTMENTS SAFE

 

ARE MY INVESTMENTS SAFE

QUERY...

Sir, I have been investing in Mutual Fund both equity n debt for last 4 yrs. However, I was looking for some parallel or secondary mode of income as backup for my MFs in case of some eventuality 15-20 yrs down the line. While searching I came across this HDFC Sanchay Plus plan. With interest rates falling year after year, I presumed IRR of 6.25-6.5% is a good deal.

How should I diversify further w/o getting lured into buying something not good?

Rajeeve Kaushik, [25-11-2021 08:56]

[In reply to XXXXX XXXXXX ]

It is very important to be aware of one's finances and also future projection. This always lays down the foundation of one's planning. The questions which you are facing also occurred to me almost 3 decades ago. However net wasn't around, options were limited, equity options were restricted despite my awareness as the capital market was opaque- 1991 liberalization had just started with adverse publicity like we hear nowadays for demonetization and ITax rates were astronomical. But bank interest rates were 12% so was ppf , NRNR deposits hadn't kicked in yet with their interest rates at up to 18% p.a.(YES 18%).

My search and research yielded a word called Mutual Funds ( which hadn't made their inroads in India before 1995), UTI's US64 was a answer which in 2000 yielded into the biggest scam despite being a government company... and... THIS IS YOUR CONCERN!!!

Your concern is actually not of returns but that of consolidation of your gains.

You feel what if something happens to the MF industry and your capital vanishes.

This is where ASSET ALLOCATION comes in. In common parlance we classify assets as Equity, Debt, Gold, Real-Estate , REIT , Art, etc . But in my view we can classify them into sub-options as well- These are PPF, NPS, Bank FDs, Direct stocks, Physical gold, Gold ETFs, E- gold as well.

While choosing options one must not only look at legality and return of options but also the cost of the plan.

The plan that you have mentioned could fall into the category Pension Plan , ULIP etc etc but anyone who gives you assured returns(in print) it cannot be more than 5-6% and sad part is that you will have to pay tax on that.

Now assuming you will need 2 lacs pm in your retirement , please calculate how much you will need to invest to get 6% return which equals 24 lacs. Then again the expenses will not be static but your income will be- which will leave you with a shortfall within 5 years. I HAVEN'T YET CALCULATED THE TAXES ON YOUR FIXED INCOME RETURNS.

So now you need a avenue from where the returns should be high even if not assured and in

keeping with inflation and also be TAX EFFICIENT.

This where your judgement will come in hand at distributing your salary between NRE FD, FCNR, Equity MFs , Debt MFs, PPF, NPS, Gold ( I don't stand with Real estate except the house that you need for residing- NOTHING ELSE).

AS for your concern about safety of your capital as you can see even the government's sanctioned currency wasn't safe. Even those who had crores in the bank and legal -couldn't get their money for sometime And I gave you the example of UTI scam in the beginning. After that UTI itself was split by the GOVT so that it couldn't be sued etc. SO vigilance is important . And the only tool toward that is Awareness and not fear.

Now SEBI is much more tighter than ever before and MF industry is the most regulated in the world.

With coming of Passive funds the idea of fluctuation of fund performance is also gone.

It took me whole lifetime to learn that the people who were rich in 60's and 70's were not those who had large real estates but whose forefathers had invested in shares in 1880's.

I have myself seen a share certificate of a company in Dehradun issued at face value of 50 paisa per share - for 10000 shares. I narrowly missed buying the paper for it's antique value since company was long closed.

When the owner of the certificate was contacted I was informed that it was sold to someone very influential for Rs.5000 a share!!! This was because the company still owned the largest land bank in Dehradun since 1800's

Now you do the math!!!

The formalization of shareholding and partnership is a gift from the west but we Indians haven't yet recognized it.

So now junk that mindset of 60's and 70's we aren't living in 12% bank interest times but our requirement is still of minimum 12% return so search for them. However during your search just remember ONE thing....

KEEP IT STRAIGHT & SIMPLE.

This group will not make you a millionaire overnight ... but it will help you keep on the path to be a MULTI MILLIONAIRE... and that is a certainty.

The group has been constructed in the great spirit of Mutual Knowledge (MK instead of MF) which should be free to take and return; something like a partnership library without membership but where you have to add a book in return for 100 that you read. It is not dependent on me or anyone person... as I and others pass away, there will many who will emerge to keep others motivated.

So now over to all of you...

A Lesson from daily life about staying in the game!!!

 A Lesson from daily life about staying in the game!!!

I'm presently in Ranthambore Wildlife Sanctuary.

We've been here for 2 days and visited the sanctuary multiple Times to site the the fabled tigers.

Despite spending 5 visits we could not sight any stripes.

This last evening we finally booked our last visit to make one more attempt and randomly opted for one zone. However again we did not sight anything and were returning quite crestfallen.

And as we exited the gate of the century sanctuary we spotted this beautiful beast casually coming out of the overgrown bushes.

It did its routine of stretching and bending and turning and walking around on the road in full view of the the vehicles who cared to wait.

After blessing us with his company for 20 odd minutes it again moved away into the dark which had come over by now.

It is same about life and it is same about the market. Just when you will finish every iota of the patience that you had and would about to quit- the market will jump and give you the most spectacular returns covering for all the years of non performance.

Only thing that you will not know is the length of the patience that is required..

It is for such Times that the elders have advised that always invest in small steps continuously and consistently till you have copious supply of funds when it supply ceases...

And you need the money... Then you start withdrawing consistently and continuously in small steps. Almighty has given your profession when any big ticket purchases in the middle can be adequately met by your salary itself.

So help you God.

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.