Changes for 2023

Changes for 2023

Yesterday I was listening to an interview between Pranay Roy and Ruchir Sharma.
Ruchi Sharma makes certain forecasts for the following year on NDTV and more often than not the forecast are quite in line. His forecasts range from the world macro economics situation to even the most micro one's.
Two of the main forecast out of 10 which he has made for 2023 have taken up my interest and it is my duty to inform all of you.
First and not so important as second one is the emergence of Japan back as a developed nation with their profit margins rising almost twice in a decade.
The second and most important which concerns all of us is the forecast of the US market going down.
According to him the u.S market follows a pattern of decade. Which means for one decade the economy will grow  and another decade it will remain down. He forecasts the US economy to go down for a decade at least, starting 2022.
If we include another of his forecast which says that the virtual industry economy will lag behind the old and traditional economy (meaning the IT and the metaverse will lag behind the traditional business of manufacturing etc.) then it is obvious that in future the US economy will follow the same pattern as of 2022 which means going down.
Rightly so the market cap of US is at all time high of 60% instead of 45 to 50% which it has been for the past century. So following the law of Reversal to the mean, we could expect us economy to continuously move less aggressively than before.
In the light of this statement we must re analyse our investment in International Funds which are largely in the US market by default. However we should not take any action in a hurry or panic.
Members on this group have been investing into International Funds largely in 2 funds i.e. Nasdaq which is the index for mostly technology stocks and snp 500 which covers the top 500 non tech stocks of the USA economy.
I have observed a certain uptick in these funds in the last 3 months, but whether this is short term or a reversal of trend I cannot say because I am not qualified to read the macro or micro situation of US.
All I can suggest to members who are retired and cannot see their Fund value going down from what it is may just stop further investment and if they feel they can gradually redeem their holding.
The youngsters who have just started investing can either ignore the American market for the time being and start investing later or outlay a minimum amount to the American sector. In any case we were always cautious to say that restrict your exposure to International Funds to a maximum of 10%.
Those who have keener interest may look out for the talks on this topic and interviews with commentators on American economy( not stock brokers).
I personally have been entering and exiting the US funds regularly because of various reasons. However going forward I will be investing in the US market in small amounts even if it is for 10 years  of non performance and beyond.
What other members can do is track other foreign funds which have a strong Asian focus.
But as I have been already saying that exposure to International fund maybe considered by only those members who have already accumulated a large amount of Corpus and have started understanding the way of working of the equity market.
Till then funds like Parag Parikh Flexi cap and SBI focused equity are sufficient to keep your small exposure to foreign equity.
I am sharing the link for the above interview between Dr  Prannoy Roy and Ruchir Sharma separately.

© Rajeeve Kaushik

New approach to FFP

 
New approach to FFP

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

Regarding Financial Planner or Professional Guidance

 Regarding Financial Planner or Professional Guidance


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

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

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

Hope this awakens the sleeping ones.

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.