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

 

 

 

COST OF MONEY VS TIME

 COST OF MONEY VS TIME

 
Isn't that a weird headline ?
How do you attach cost to money when money provides for all costs?
How can money be cheap or expensive?
Let's modify it slightly and call it-
" Cost of accessing money"!
Does it make things better?
Still not ? Ok then let's get some scenarios.
Imagine a person starts working in a different city or country and gets his salary check every month. But he does not get time to open a bank account and deposit that cheque.
Another scenario...
A retired person has to go the bank to get his pension only to be informed that the pension has not been deposited yet by the government or his employer.
He also has to provide a once a year Life certificate.
Yet another relevant one...
You work on a ship and receive your monthly salary in USD in cash at the end of the month. You find the remittance cost by your employer to be bit high and the banks ashore do not accept cash for telegraphic transfer.
Another one...
While applying for some exams or US Visa you need to send a bank demand draft of a particular bank which is quite far from your home.
Yet another one...
While going for a business loan by a MSME or a smaller company the charges for processing are deducted.
 
 
All these are examples of accessing cost of money. These are charges which necessarily reduce the net worth for accessing for any product or service or the utility value.
We balk at 2% MDR charges by a seller on credit cards but do not think twice about 20% something that bookmyshow charges for booking a ticket.
Not only all these charges but also the time spent to access that money must be taken into account as opportunity cost.
But how does this affect us  "The Mariners" as investors, consumers and service receivers.
If you start applying first principles think about how much time, fuel and cost of vehicle your spouse or you spend at visiting the bank to withdraw some money, make a bank DD, book a ticket, pay a bill. If you start quantifying your time with money that you earn on board it will make you lose sleep.
But that is what modern financial technology combined with information technology combined with electronic communication has done to the cost of accessing money.
All the above examples were given to make you realise what the scenario was just a decade ago when for various document renewals we had to visit Mumbai.
The cost of travel, stay, lining up outside offices and banks used to take away a third of the precious leave period..
Now imagine the agencies like banks that have brought these Fintech services to you on your mobile , how are they getting paid.
By reducing the cost of mutual funds purchases by almost 150% today how are AMCs still managing to make money for you.
By now you must have got the picture and what I'm intending to drive at.
Your salary coming by every month end into your account is a service that your employer does to you.
If that facility was not provided the results could be disastrous.
Not only you would have to provide money to your family before joining ship, you wouldn't be able to invest it during your stay( this problem still exist with some Indian companies whose ships are plying mostly in foreign waters).
Yes now the cost of accessing money has shifted to a different paradigm now! Mobile and the portable computing.
All these facilities reduce the load on your leave time and provide you with ample opportunity to use it as quality time till learn and do new things and also teach your children - some new things.
This is possible as long as these devices don't become your " devices for destruction of your time ."
I personally have been very cautious and miser with my time .
I always used to quantify my every minute with the salary that I earned and later on became so paranoid that I wouldn't even waste it to make some quick money by dabbling in the stock market. As a result I was able to travel with my small family - far and wide and gain so much in experience.
The effect of this was seen on my daughter's ICSE - history exam. There used to be a question of identifying the picture that was given of a historical monument and some related questions on that.
Her class teacher complained that she is showing off by saying that she had seen the monument. I had to charm the teacher by saying that she had so enthused my daughter that now we actually travel to see these monuments.
Anyway... Back to the cost of money.
Please appreciate, accept and use the modern methods of money handling. Set up systems to efficiently use your cash flows so that you don't have any liabilities and your money can be invested by the 5th of the month.
Don't waste your time in trading or speculation about money, rather use it too acquire newer skills, read news books, get more degrees, develop new hobbies empower your family, raise your children in the true sense.
All this has been made possible because the Speed and Cost of accessing money has gone down leaving you lot of quality time to spare.
Even good roads, highways, efficient cars, cheaper flights... All these have added to reducing the cost of accessing money and services and leaving you time which if used correctly will pay you rich dividends and if missed it will leave you very poor.
Just to share with you even this article has been written on a flight from Mumbai to Dehradun today- reducing the cost of Money by utilising time you see...
 

© Rajeeve Kaushik
10Feb2023
 
 
 
 
 

How much you save as a Mariner

 Rajeeve Kaushik, [17-03-2023 08:43]
How much you save as a Mariner

No the topic is not about what you may be thinking.
I have a habit of collecting data to generally get an idea about various aspects of the society. In the peak of demonetisation I had done a survey on how much cash do Indian families require from minimum to maximum.
Later another survey of energy requirements of Indian families.
Recently I was preparing a self assessment of energy and communication expenses tik prepare for another survey. During that it struck me to to prepare the hidden expenses of mariners which they never pay for.
From my very childhood I never appreciated two things about a salaried employment.

 First was getting up at on early hour and commuting long distances for one's job.

Second was an early realisation in life that what ever one earns he or she spends the large amount of it in simply performing age keeping that job,  this can be equally applicable to a school teacher or highly paid executive.

Luckily, like you I landed in a profession where I did not have to commute daily nor was there much expense involved in performing that job.
Around 4 years ago my daughter got married and both of them landed in what is perceived as premier services in the country. While helping them settle in their jobs and set up their households I realised that their salary was nowhere close to even being sufficient for bare survival.
This further provided some input to my thought process which has triggered writing this article to help you appreciate at actually how much you are earning in real terms by working in the merchant Navy.
An article is never considered good if it is written in a tabulated way but I have no choice but to write in a mixed format.
1. Training for the job: the cost incurred for your training is at par with any private training institution, in fact now even a government funded IIT requires almost half of the cost of college education as compared in merchant Navy. So that levels the ground here .
2. Joining first time: most of the jobs required you to travel on your own where as in merchant Navy you are given a flight ticket along with Hotel accommodation at both ends and the agent taking care of your taxi expenses.
3. When a person on shore joins his job in a new city he pays for the rental accommodation the brokerage for that rental accommodation setting up the house for minimum at least including furniture even if not any kitchen expenses. Cost involved is minimum 25000 monthly + 1,50000 for other paraphernalia requirements.
4. When you are working in a city you would require a television at a cost of at least ₹25000. Monthly cable network at rupees 700.
5. Wi-Fi requirement for internet and OTT is about ₹1500.
6. Even if you do not maintain a kitchen while working on shore, and want to order by swiggy or Zomato you will have to keep minimum requirements for breakfast which will start at cost for the fridge at ₹ 30000-50,000. Otherwise where will you keep the beer.
7a. Daily breakfast at minimum rupees 150.
7b. Lunch in dinner from outside at a daily cost of about ₹600 minimum. However the meals that you get on board a certainly worth much more and cost the company at least 9 to $10 a day.
8. Daily travelling aur commuting to work may involve your own vehicle or a public transport or a cab and none will cost you less than rupees 250 a day. Let's not count the cost of a 2 or 4 wheeler.
9. The clothes required for your office require minimum upkeep but certainly ₹50,000 a year or ₹ 4200 a month.
10. Let's even out the cost of mobile phone which you would have to pay from your pocket in either of the cases.
11. Electricity for power and microwave would be at least ₹2000 a month.
12. If you manage to maintain your NRI status simply enhance your monthly salary by 35% instead of deducting anything else.

So a salary of $2500 a month actually becomes 3375 and pro rata for senior ranks.Considering above we realise how much we're saving without doing anything, so all the more reason for us to stat saving and then investing the saved amount.
Now please do not respond by mentioning the difficulties encountered while working at sea because that is not the topic of discussion. The topic of discussion is that in real terms your salary is more by the minimum amount that I have mentioned above. So you certainly have a case of investing regularly and more than your shore counter part.
Please do let me know how much you're saving.

© Rajeeve Kaushik