Do not Procrastinate- SAVE what you have less and need more- TIME.

Do not Procrastinate- SAVE what you have less and need more- TIME.

Last week I was in quite a spot late at night. 

By quite a coincidence  three young officers were all about to join their vessels within a week and were already out of their home town.
All three of them had their financial matters quite muddled up.
To quantify the problem all three of them had collectively over 1 crore rupees to invest in various avenues but no time.
All of them had been on leave and at home from  3 to 5 months.
Why they could not take such an important decision earlier, warrants an informal enquiry.
We cannot trust the matters simply on psychological uncertainty and write it away.
The reason for such dalliance comes because of the nature of the employment of marine professionals.
When they're at Sea , they are earning money but they do not see it accumulating. More importantly they do not see the money being consumed because they are not aware of actual expenses at home.
Hence any financial decision in terms of investment does not get taken when they are at Sea because they feel that the money will be needed for various things when they come home on vacation.
Similarly when they are on leave the Marine professional is not aware when he would actually be in employment and when he would start earning as a result he likes to keep a mental buffer amount ready for any contingency.
Above are other two reasons why the Marine professional starts accumulating his money in the bank and more importantly in the basic savings account where the money does not grow but rather depletes due to inflation.
This may have been a situation earlier but in the last two decades world over few trustworthy avenues have come up in form of mutual funds where one can keep his accumulated wealth from a few days to a few years.
As I have pointed out earlier to all the seafarers across the world irrespective of their nationality that they must investigate the possibility of keeping their funds in a category of mutual funds called liquid or ready to use funds.
I have investigated that in other countries too ( like India) there is a possibility of keeping their money  in these liquid funds. These type of funds give a better return than in the bank and a possibility to withdraw at a very short notice and utilize them for their needs. Beyond creating this buffer for their mental uncertainty and mental peace they must start a system by way of which a very small amount start getting invested every month into various equity or stock based mutual funds.
In the beginning this amount needs to be small in just a few dollars a week and then as they educate themselves in the field they can let this investment amount grow.
However it is imperative that the first saving or the first investment of a person is done as early as when he is a cadet , and not wait till he becomes a full fledged officer.
Investing in efficient avenues like Mutual Funds is exactly like planting a seed of a fruit tree.

 It does not matter how many seeds you plant but it is the time which will make sure that the tree grows.
This growth of a tree in financial terms is called compounding.
In order to benefit from this concept of compounding about which you may have already heard a lot on the net, in books and magazines please stop procrastinating stop postponing for tomorrow and act today.

As a slightly older and experienced person, I would suggest to younger colleagues that they start planning their leave before they actually leave the ship. Whether it is about going on a holiday, or completing documentations or going for professional courses, they must plan it with their spouses or parents (if not married) in advance . Taking all the important Financial and Non-financial decisions in the first few weeks of coming on leave will help them spend rest of the time in peace and also see that any of the jobs that they have done has actually been completed from the service Provider’s end.

Please do not Procrastinate, it is a serious lacunae that I find with the Seafarers. Most of our counterparts on land are very used to paying bills on last date, or filing  returns a day before- but since we have sufficient funds but lack of time- we must save what we have less and need more – TIME.

ON EXCHANGE TRADED FUNDS

                                              ON EXCHANGE TRADED FUNDS

With all the good things that we hear and say about ETFs , main is the liquidity. The extremely low availability and asset size of the ETFs prevents sizeable exposure to the asset class. If you would try to buy MoST Nasdaq 100, you maybe surprised that though you are ready to pay the price , there are no sellers. Similar situation may also occur when you wish to sell. So consider this aspect while deciding to invest at this point of time.

Report On Vth Seminar On Personal Finance

Report On Vth Seminar On Personal Finance

The seminar on personal finance and mutual funds held on the 9th June 2018 at Hotel Pacific was Co-hosted by SS investments , DSWA and  sponsored by Reliance Mutual Fund.

The event started with the launch of the magazine of Dehradun seafarers called Lighthouse. It was launched by Dr Ajay Saksena the principal of DAV PG College.

After the launch Dr Saksena wove a beautiful speech starting from the traders of Pre Christ era and how the  ships were attacked by pirates and how only the stronger Nations could manage to get their goods back. From there on linking Machiavelli to strong Nation theory and talking about India pre and post liberalisation he very nicely connected Political Science, History and Economics and even personal finance.

It was quite enlightening to have a Academician amongst us giving some cerebral input.

The feature presentation by the Reliance trainer was very informative though despite request he could not shed much light on the latest changes in the MF industry.
All must be reminded that due to SEBI regulations MF houses have made two types of basic changes to their funds.
Firstly they have changed the name of their funds to self explanatory type which can indicate the type of fund i.e. Large cap,Mid cap, Multi Cap or multi Asset or Debt -Equity hybrid instead of just balanced or Prudence etc.
Second important change that has been effected is that similar type of funds of an AMC have been combined together or their mandate changed.
Yours truly had collated few questions received from various Seafarers which I managed to put upto him. The reply to them will be covered in the next article.
Quite a few questions were asked by the audience which he replied to their satisfaction in most cases.
Something very outstanding about this seminar was that there was a greater share of the non seafaring community as opposed the only seafarers who used to attend the previous seminars.
It was an intentional attempt to bridge the chasm between the Marine Professionals and those who work ashore. This also helps in the shore people understanding what DSWA as an association doing for the society at large.
Quite a few of invitations were extended on the basis of the request received  from the guests ever since the last seminar. It was quite encouraging for the organisers when the wife of a very senior Master whom DSWA had given the lifetime achievement award requested to attend the function. I was personally very humbled by her enthusiasm and keenness to learn even at this age when all her financial goals have been met.
The seminar also marked attendance from 9 outstation attendees from as far as Rudrapur,Tehri, Noida and Haridwar.
Every such event requires a high level of preparation, but what the reader must understand is that all the organisers in these events are Sailing professionals. Most of them have just started their families. For them to be able to take out so much time out of their leave is indeed a great sacrifice for which they must be lauded .
In future also the attempt will be to bring out more such learning experiences for those in need, not just for those in Dehradun but those in other cities as well.
 

Vth SEMINAR ON PERSONAL FINANCE AT HOTEL PACIFIC

ONE MORE ON NPS

On a personal front I can be held guilty of taking a flip flop stand on the issue of NPS.
Initially I was a little skeptical about it or rather very skeptical. Then with the change in taxation rules about 2 years ago I had changed my stand and  advised people to open it. However the return over the past one and a half year does not really justify using NPS as investment mode and following are my reasons for it.
1. We have to compare NPS with other avenues on not only The returns but also the tax efficiency part of it.
On this count it does not hold very strongly against the pure debt funds.
In good times the pure debt funds of various maturity  have given far better returns despite the NPS expenses being on the lower side.
2. NPS allows us to invest a maximum of 50% in the equity sector and the remaining can be juggled between the private corporate bonds or the government securities. By virtue of this it can't really be compared with any mutual fund and hence most of the equity based balanced funds landed performing much better then the NPS schemes.
3. Now even after increasing the expenses tenfold this still seem to be a lot less because of which probably the fund managers are not greatly interested.
This can also be the reason of the poor performance.
4. Tier 1 is the compulsory option for starting NPS and in this your contribution remains locked till the age of 60. At which stage you have to put in 40% to buy annuity which means pension . Then at least of the remaining 60% ; 40% is tax free but 20% is taxed. This disadvantage will always remain with the NPS since all the pensions in India are taxable.
5. However now with the introduction of capital gains on equity is there is a case of comparing NPS with the mutual funds but in my opinion the outright locking of money in NPS takes away a large advantage for us ,the seafarers.
6. Tier 2 which is actually similar to tier 1 except there is no tax benefit and there is also no lockin for the funds- is not available to NRI. If this was available then possibly it could have been of some advantage against the mutual funds considering the low expenses.
7. Considering the fact that rules may keep changing for NPS and sometime they may come may become better for us, it is advisable that you open NPS account and maintain it by putting the minimum subscription because in the younger days there is no point in putting the money in inefficient avenues.
On the other hand if your spouse is working or even otherwise it is good to open her account and keep depositing whatever little you think is necessary because she will have the advantage of investing in both the tiers.
However my point of view is, not to invest too much in NPS in the initial years and watch for any  favourable change of rules.
In comparison for your wife and yourself if you are not an NRI you must open the PPF as it has more then quantifiable benefits which you will realise later on.

DIVERSIFICATION AND ASSET ALLOCATION WHAT DOES IT MEAN.

DIVERSIFICATION AND ASSET ALLOCATION WHAT DOES IT MEAN.

During my interaction with various people in the course of the financial conversation, I come across two types of people. One of those who do not wish to move out of the Bank savings account, FDs and probably post office schemes and on the other hand those who actively wish to have exposure in equities.

I agree that the latter category is in rarity on its own but if you speak with the former category few of them do convert to equity investors.

Now once this class converts to equity investors and they see profits raining they tend to go overboard and start putting most of the savings or all of the sayings in the equity through mutual funds or direct stocks.

At this moment they start seeing everything right with the equity and everything wrong with the low yield in fixed returns schemes like the banks and post offices offer.

Now which of them is correct? Obviously none of them!

One must at this point start to appreciate the concept of Financial Cauldron which I had introduced a few years ago.

This Financial Cauldron is essentially a pot which contains all your Savings and investments in all form of assets.

But why is it necessary to have everything in that pot of soup when the equity is the best returning and most tax efficient.

An equity investor who has entered the markets in last 5 or 6 or even 7 years has only seen the market going up he may have seen fluctuations and correction but he has not really seen a bear market.

The 8 to 10% fall which they have seen in the last 3 months can be sharp 20-22% or even more and can extend upto 1 or 2 years or longer.

As such  depending upon their life stage whether they are young or old , they start to lose the peace of mind and start to get worried because it is not easy to see one’s corpus go down by 25-35 and 50% in a matter of few weeks, but that may not be a remote possibility.

So what does diversification mean in context of India at least. I can speak about India because I am aware of the few options that are available in this country the readers from other countries should also explore similar ones in their own countries.

1.     Should I invest in PPF and waste the opportunity for a return of less than 8%.

My reply is yes if you as a NRI cannot invest or open a PPF account on your own you must try and open it and run it in the name of your spouse and children as far as allowed by the rules.

If you trying calculate the value of these periodical PPF deposits that you will make with the rapidly changing interest rates also you will find that in a period of 30 years the amount is fairly handsome. And more than Handsome when you consider that the proceeds are entirely tax free if removed and used for consumption.

Whatever other financial analyst may say about PPF but as seafarers it is rather necessary that you invest your higher salaries partially into PPF because after 15-20 or even 30 years you could withdraw amount from this PPF account for your consumption. And if need be you can remove from there and put it in your other Investments.

As I always say that post retirement one must try to keep their monthly income tax efficient or zero tax as far as possible.

2. Should I invest in Sukanya scheme in my daughter's name.

The answer is a resounding yes. And it is a yes precisely for the point that I have mentioned above. With the higher earning that you do it is rather insignificant amount that you will put into this excellent plan which works and slightly better than even PPF and may be helpful to your daughter when she goes to college.

3. Why exactly I am I opting for these low yield avenues.

My reply to this is- the dynamic and ever changing policies of the government.

As you may have seen during these past decade how various governments change the rules during the budget making some schemes taxable and making others tax free at any given time. Or even increasing the load of investing in particular schemes.

For that matter even the rules for PPF changed so fast that it is difficult to keep up with them.

In the scenario it is important that in keeping with the laws of the day you look into a particular scheme and let it run till it is advised by the government that it cannot be continued for a particular class of savers.

So what should my Financial Cauldron be like...

Bank savings account in NRI/ NRO - Yes

Bank NRE FDs yes

FCNR deposits- YES

PPF – YES

Sukanya scheme-YES

Equity Mutual Funds-YES

Debt Mutual Funds-YES

Gold in Demat form-Yes, slightly

Gold in bullion form- YES up to 5%

Real Estate ,Land- YES for your own house and maybe just one piece for investment purpose in case you wish to change the house tomorrow.

A good nice big expensive car sorry that's not an investment. That is why I have kept it out of the box.

Up to what extent should I invest in the above avenues?

For the small savings there is a cap but for the other ones there is none.

At the end of the day I can safely say that you must allocate your Assets and balance them very vigilantly so that over extended period of time of 5 to 7 years or even 10 years you get a overall return of 10% on the complete portfolio and when I see complete it means all the above things when put in your Financial Cauldron.

There is one thing that I have left out and that is the Senior citizen Saving Scheme and the Prime Minister VAYA VANDANA Yojana.

These are necessarily for your parents and the question arises that should you be investing in them.

Now for obvious reasons I cannot advise you to invest in them and it depends entirely on your domestic condition and relationships between different people.

But yes as per law you can gift any amount to your linear ascendant or descendant blood relations.

I'm considering these schemes as they carry a slightly above market interest rate that is about 1.5%.

The maximum cap for investment into these two schemes is 7.5 lacs in single name and 15 lacs jointly.

You may invest in these schemes if your parents do not have the retirement Corpus of their own.

This will make them slightly more secure and give you lot of satisfaction too.

But the take home lesson from the above is to maintain an asset allocation of Equity to debt that you are comfortable with. In the debt you can count everything except the real estate.  After that keep re-balancing the allocation ratio as you keep earning or as the assets start giving attractive returns or the market nosedives down. The Asset Allocation Ratio must be considered very sacred and adhered to. If this is done – you will be able to override any market condition.