Changing the Mindset

 Today a member of Finworld@Sea group suggested to others that we should keep our traditional Life insurances running..

Quote///At least with the name of lic policy and paying premium yearly save some money. Because i have seen lot of Mariners spending all money and going back to ship without saving anything.

///Unquote.

I was actually pained to read it after so much of the effort that I'm trying to put in to change this thinking.

Still I tried....

This is my response...

 All this is old thinking and behind us. That is precisely what we have been trying to change for 25 years.
Days of little bit here and little bit there and 4-5% returns are over. Now neither can you buy property like yester years and hope for it to multiply from 1cr to 200cr , nor can you get 12% returns from banks.
We move cohesively and so far over 2200 people that I'm aware of are on this path and plenty have retired safely and others are guiding their colleagues further  on their ships.

Over 11 people in this year alone have reported reaching the critical point of 1 cr , and by some strange coincidence most of them are of 2/O and 3/E rank.  The reason for this could be that the seniors do not wish/like to share their status for some reason.
So you see, it's not sufficient to halfheartedly prepare for future life, it is not possible.
The effort has to be well thought and researched and then followed aggressively  only then will you be able to get the best out of the hard work that you're putting on the ship.
Don't count the days on board in terms of the salary, think of it as the days of sacrifice and blood , sweat and tears. The days away from wife, children and parents. It represents time that will never come back.
Hence it is in our interest to be determined and ensure that our salary is treated like a seed or sapling which SHOULD grow into a big fruit tree. This tree will give fruit if we care for it for some time- till it reaches a certain height (or quantum) after that this tree will give you such sweet fruits and in such sumptuous quantities that you could have never imagined.
Instead of looking around at toxic products , we must keep reading to see how the equity scene is changing or the bank rates are moving. e.g. The rise of Index funds and ETFs, some optimism for debt funds etc.
We should read more about Personal Finance to understand the pitfalls.
In my opinion more than money it is Time , Patience and Strong determination that is required to attain Financial Independence.

ATTAINING FINANCIAL NIRVANA

 ATTAINING FINANCIAL NIRVANA

I have been asked a very logical but an innocent question that when should the investor who has been investing with the goal of retirement planning, consider that he is on his way to financial freedom.
Should it be a landmark in the Corpus, should it be some percentage gain in,form of cagr or annual return or what.
Assuming that investor has constructed a proper portfolio with equity as the stronghold and fixed income schemes to support as a buoyant measure...
There will come critical level after a few years which can be approximately 5 to 7 years that one's portfolio will mostly remain in the green round the year despite the market taking a nosedive or  staying sideways which means neutral.
This stage will happen because in the previous span of 7 years one would have invested in a systematic manner and thereby gaining the advantage of rupee cost averaging and since normally it has been seen that in a 7 year period there is one cycle of bull and bear.
Beyond this as the investor will move on he or she will find that the return on his investments are becoming  more or less equal to a his monthly take home salary.
This fact he will judge for himself and if he does not touch his investments these gains will keep increasing.
Beyond this a stage would come when the annual rise in his portfolio would be much more then the annual take home salary.
This stage of course will definitely take more than a decade to come irrespective of the amount that one puts in.
 But it will definitely be a very satisfying and even an exhilarating stage a corresponding stage of what one may call a financial Nirvana.
When a person has reached the stage where the net corpus is beyond the above mentioned critical limit and  if he withdraws from it for his family needs the sum will never diminish.
If a person has been investing consistently along with his earning from profession then there will be lot of changes that will come into his nature.
First will be the change of equanimity: in so many years he would have seen the market rise up and come down almost everyday and every week so he becomes used to it. Even at 10 to 15% fall will not disturb him .
Second change that will come into his nature is of keeping on the fixed path and becoming lethargic to look into other popular avenues of investment. This should be taken as a good sign because historically the investments which are boring are the ones which give immense Returns.
Third change that comes into the person is a calmness settles into his nature. Since he is contented financially he starts pursuing his hobbies & looking after his family and also starts the exercise of discovering himself.
Somewhere along the stage he will find it necessary to give up his profession and concentrate more on himself and the people around him.
This is the stage where he can consider himself financially independent and having attained the stage of Financial Nirvana.

What is so DIFFERENT about Financial Planning for Mariners

 

 This article could be approached  in so many ways...
Why is the life planning of Mariners different?

Why should the life planning of Mariners be different?

Why should mariners plan differently for the future?  And so on...

The reasons why none of the plans that conventional financial advisors belt out with percentage and graphics would fit our conventional mariner is because...
1. The cash flow is very different from any organised sector.
2. The process of career promotion is quite different than conventional employment, all the same it is compensated by the top most rank being achieved at early age.
3. There is no pension system or social security.
4. There is no definite healthcare system.
5. There is no adequate provision for any compensation in case of disability or death.
6. The income from one year to another could differ by as much as 35% in case the resident status changes.
7. Status of employment is most uncertain at its best and is sometimes beyond the control of the employer himself.
8. The security of his employment is dependent upon so many external agencies and legislations.

9. The most important one that I find is that when one returns home after employment there is a complete break of from the place of employment. His source of earning stops abruptly. I can't think of another profession where this happens .

In this regard I would like to mention my personal experience of receiving salary all round the year. This happened when I was working with Maersk tankers and it was basically the monthly salary split into two and being distributed and given to us all round the year. Apparently It looked that we were getting only half salary and company was benefiting as it got to keep half of a salary for another 6 months. But the way it worked was that I got to invest all round the year without break thereby taking advantage of all the ups and downs of the market. It also enabled me to take advantage of the 2008 economic meltdown. Probably if I was paid the same amount in 6 months as usually it is done in shipping and certainly my investment would not have taken place all round the year.

This is one factor which keeps playing at the back of the mind of our typical sailor and affecting his chain of investment..

10. Detachment with reality: while growing in age and rank, our mariner becomes unconnected with the rise in the cost of living, realistic issues and challenges of shore life. He starts seeing things through the glasses of his colleagues on board who themselves may be or may have become quite uninformed.

Because of all the above reasons it is impossible to follow the typical formulas of equity allotment , asset allocation to debt or any fixed income scheme which gives sub-inflation returns.
One has to become aware and adopt Financial Literacy at a early stage and get on with it as soon as one starts getting a regular salary. In actual practice there is no limit how much one should save and invest.

The earlier one starts ...he lays the most important seed for the tree of his wealth or The Wealth Tree ( from today onwards I will use the acronym TWT instead of Portfolio or Corpus ...in my posts, articles and blogs). All the future contributions to his investment will go towards providing for the fertilizer, water, upkeep of this tree. 

Initial years will require extra care for this tree... later it will start looking after itself. Soon there will come a stage when fruits will start appearing on this tree .
Still later this tree will be robust and will not require any attention and will give such tasty fruits and in great quantities.
All you need to do is be Financially literate and then focused. In this journey you may not need any advisor except your own family.
Be determined...because nothing in life will work with the formulas...neither the inflation nor the returns, neither the expenses nor your living standard .
Your living standard will be more dependent on your family and also your peer group.
The most expensive events will occur at later stages of your life and most unexpectedly. e.g. children deciding to  study abroad, some serious illness in family members, marriage of children or siblings etc.
One needs to be prepared for as much as one can and take all steps to mitigate  such risks. But how can one do all this? Simple ! By being connected with oneself and ones family and discussing things with them at all stages.
Discussing finance and all other plans and challenges on the dining table threadbare so that all family members are aware of your plans and can also be encouraged to share theirs with you.
Your spouse and children will understand the importance of astute Financial planning and will try to co-operate as much as possible in the journey.
If you wish to add something, please send your comments, I will certainly edit this article to include your feedback.
©Rajeeve Kaushik
2Sep2022

Report Card of 50 Funds that have lasted for 25 Years

 https://m.economictimes.com/mf/analysis/what-is-tax-advantage-of-investing-in-balanced-advantage-funds/articleshow/93892495.cms?utm_source=newsletter&utm_medium=email&utm_campaign=NewsDigest&utm_content=MF&utm_term=2%20%20%20%20%20&ncode=de011d7747e1706e6e95a58801b4862ccf0c9deefee08be5d3823fe9742296683efddda0c489f6361b1cf35adff8be22e6d036614ce4ceda0c1de1f9232680fe678c77b8a101a87ac03cf2d107c4cd35

Thank you CE Swapneil Tamhankar for the above link...

This is so very correct and thank you for sharing it.

Though few of the mutual fund companies have changed hands like Quant and even our dear old HDFC has been taken in over from its previous avtars.

But what is also important to note here is that most of these returns have come from the era of 2.5% entry load and the same amount as exit load.

This list of 50 funds also gives us one very important lesson...

After our wise selection of funds , if in the successive years you find that they are not really the best performing anymore like the recent under performance of Parag Parekh Flexi cap or a little older HDFC equity then you should not get disturbed.

Another lesson here is upon the longevity of AMC itself... No AMC can just close shop and run away. It has to find a buyer who will buy it's business and also pay it a premium for the brand. This has been seen so many times in these 25 years.

For the extremely long time span that you are starting to invest , a  lot of changes will happen in the economy of the country and the mutual fund industry but a diversified equity fund will be capable of handling all those changes.

As a assurance to all the members on this group and even those who have left it now after achieving their financial independence,  I wish to say this-  that mutual fund industry in India is one of the most heavily regulated one's in the world.

The regulation is so heavy that it actually makes the business very unattractive to those who are in the distribution chain.

Since continuously there are people joining this group and leaving after few years I have to keep repeating myself that please start your investment journey as soon as yesterday with a substantial outlay into it if you want some good result.

It pains me no end to see... That those who are earning over 5 lacs a month are investing 5 000 via SIP.

Not starting early and not starting with a noticeable investment amount will make you lose the opportunity as and when it arises.

And as you may have seen in the past few years this opportunity comes overnight and leaves overnight as well.

You may not have noticeable returns for one two or three years but in just one month it may cover for all those years of under performance.

So it is my experience  but your understanding -your money -your decision - your endeavor and your gains.

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 stored 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 and 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.

For Finance group ( FINWORLD@SEA ) now on Telegram

For Finance group now on Telegram

Despite all of us being familiar with finance and market requirements there is often need to to repeat oneself for the benefit of those who come later in the day.

Whenever person joins our group we try to introduce him to the basic tenets and options available for Investments. Our focus is not to be a billionaire overnight, Rather to gain experience and wealth slowly and steadily.

Our focus is not to become the know all of the finance world rather to be able to distinguish between the rights and wrong of investment so that the unscrupulous elements in the society do not try to get the better of us and fool us.

During our journey of investment our focus should be to ultimately  become independent financially and not be dependent upon the employer for the unscrupulous companies in the market over whom we have no control.

 I would like to advise all those who have joined later in the day please do not be swayed by empty promises and distant mirages.True wealth grows in an organic way in keeping with the economy of the country.

The basic rules of economics dictate this, that you cannot outperform the economy of a country consistently.

Hence I would like to ask newcomers on the group to please first read the books that I have shared above and visit my blog holisticrajeeve.blogspot.com and also the Facebook page Kaushik's FINWORLD.

Since the book was written quite a few years ago a lot has happened in the financial world which calls for upgradation of our strategy  and priorities.

In view of this I would like to to enumerate the following:

1. Please take a simple clean Vanilla and cheapest term plan early  in life.

2. Take a floater health insurance for yourself and the family irrespective of what the company covers you for. The family may mean your parents before and after your marriage also.

3. Target to keep 8-10% per year in your fcnr or nre fds. However at no stage you need to let it go beyond 50 lacs INR.

4. Open the PPF for spouse and children. Sukanya for daughter below 10.

5. Insure your house against natural causes, fire and theft.

6. Having done the above please distribute your monthly salary between 3 to 4 AMC or asset management companies which is an acronym for mutual fund companies.

Deposit this money  in liquid funds of those companies and plan a STP or systematic transfer plan into  4 or 5 equity funds.

7. Your equity funds can be suggested as follows:

- 1 index fund investing in in nifty or Sensex plan.

- one junior Nifty index fund which is also called next Nifty.

- one multicap fund which at the moment can be PPF flexicap fund or any other suitable one.

- 1 fund investing in the international market like PGIm Global opportunity or most N100 , or S&P500 or PGIM emerging markets fund etc.

- as a personal choice I would also like that you invest in one small cap fund which will be very volatile and aggressive but will give a boost to your portfolio.

Keep your investment ongoing permanently and without any break.

Do not be distracted by the market going up down or sideways. The STP  will ensure that your money is invested round the year 52 weeks.

- all the expenses should be met from the remaining money of your salary after the above investment has taken place.

- for buying or making a house do not hesitate to take a loan from a proper institution. By virtue of any calculations the outgo in form of interest will always be lower than the return on your Investments.

- if you will follow the above path it will only be a matter of time before you will achieve your goal and that is is the financial independence.

One final point I wish to reiterate ...

Very often we asked the question of how much would be sufficient for a retired life. For this I had come up with the figure which many found a little daunting. Truly enough a 30 year old may find it difficult to raise 4 cr before retirement and hence may feel discouraged.

Hence I have a separate parameter to enable everybody the flexibility of age as and when one can retire.

So as per my my experience with self and other colleagues if for three years your CAGR on your portfolio is more than annual expenditure then you can assume that you have sufficient funds to last you till you find another stream of income. However if your responsibilities and goals like children's education and marriage are over then certainly you are financially independent and can pursue what you wish in life.

Amen!!!

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 .