Confession of the Day

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

© Rajeeve Kaushik

No mean achievement- this!!

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

God speed all of you.🙏

Quantum of Investment for Mariners

 XXXXX:

How much sip is sufficient for Chief Officer please guide

Rajeeve Kaushik:

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

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

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

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

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

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

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

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

SKIN IN THE GAME

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

ALLOCATION TO MARKET CAPS

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

HEALTH & ECONOMY

 

 

 HEALTH & ECONOMY

 

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

Mariners - Safety and Asset allocation

 

                                 Mariners - Safety and Asset allocation

   

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

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

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

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

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

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

Not so much about our adroit Mariner!!!

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

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

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

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

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

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

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

Percentage? Why in percentage?

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

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

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

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

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

I consider this is a very unwise step.

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

Why does a person have to settle for a ratio?

 For safety!

Are the debt options safe?

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

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

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

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

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

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

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

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

So how much you should have in debt...

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

For 2Cr- 90%

For 3Cr-75%

For 4cr-60%

For 5cr - 40%

For more than that 30- 20%

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

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

Just ask your spouse and think together for yourself.

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

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

 

 

 

 

 

 

 

 

 

 

 

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

In my view Franklin is on a shaky ground.

Regards

Rajeeve Kaushik