Never get so busy making a living…
that you forget to make a LIFE!!!!!
Never get so busy making a living…
that you forget to make a LIFE!!!!!
If there is time to reflect, slowing down is likely to be a good idea. ~ Daniel Kahneman (Nobel laureate ~ Economics)
Lots of people are interested in purchasing a house over the past few years. Not surprising, because the land and real estate investments have had a phenomenal run over the last decade.
Recency Bias leads most to believe the the same will continue to happen in the future as well. The bias towards investing in property is so high that people are planning for their children’s education and retirement by investing in property. Their argument is that they can easily sell out for “5X” times the cost and live happily ever after. Bummer!!!!! if it were so easy then technically smart businessmen (which are there to make profits) would all in the business of investing in real estate. Why dosen’t the developer, who advertises that the land near the highway will double in 2 years, himself take a loan , pay interest costs and keep the land for himself, is a question worth pondering.
If Recent Gold price & commodity crash is any indication then the probability, of the music stopping sooner rather than late in this ever increasing real estate prices musical chair game, is getting higher by the day. Given the pressure from banks, Already the game of 20/80 has begun. Developers are eager to sell off/offload assets from their books as soon as possible. (20/80 ~ 20% now and rest on possession, Soon this will turn into 10/90 and even lower when the pressure to dispose off the property increases)
So, if you have a house and are interested in investing, it would be prudent idea to wait for some time at least the elections are over to see where the markets are heading. And do not forget to Negotiate hard. You will get discount to the tune of 25% or so.
Real Estate developers are under stress to sell the supply build up which has happened over the past few years. And, it is also payback time for the builders. They will be asked to fund the political parties in the coming election year. Squeezed from all sides, it has already turned into a buyers market today.
Do understand the various costs involved when buying a property (The image is from Time Property article which appeared on Saturday, May 18)
The taxes & costs are a whopping 10% of the purchase price. And on top of this there are the regular maintenance costs, interest costs on the loan, property taxes etc which all add up. Understand that Buying a property is a leveraged transaction. The deal has been sweet over the years due to price appreciation factor. The rentals on residential property are pathetic (2-3%). The 20% which you put down gives you a fabulous return. However if the market stagnates, or even if there is a slight dip of say, 10% – then the implications will be damaging, especially for the working salaried class.
So , focus on asset allocation, Be aware & Happy Investing ~ Get a Financial Plan ~ With clear financial goals defined, investing becomes a lot easier, as you are driven by goals and not asset price movements. (More on this later)
I came across this good article at http://www.threetypes.com/philosophy/investor-types.shtml and wanted to share. It essentially discusses the various types of Investors viz : Savers, Speculators and Specialists and then goes on to explain how becoming a Specialist, is something which generates immense wealth over lesser periods of time , but which also requires tremendous efforts on the part of the investor.
Go ahead and decide which type of investor you are and then invest accordingly. Enjoy Investing…..
Savers are those people who spend the majority of their life slowly growing their “nest egg” in order to ensure a comfortable retirement. Savers explicitly choose not to focus their time on investing or investment strategy; they either entrust others to dictate their investments (money managers or financial planners) or they simply diversify their investments across a number of different asset classes (they create “a diversified portfolio”). For those who create a diversified portfolio, their primary investing strategy is to hedge each of their investments with other “non-correlated” investments, and ultimately generate a consistent annual return in the range of 3-8% (after adjusting for inflation). Those who entrust their money to professional money managers generally get the same level of diversification, and the same 3-8% returns (minus the management fees).
Savers seek low-risk growth of their capital, and in return, are willing to accept a relatively low rate of return. While there is certainly nothing wrong with striving for consistent returns, what the Saver is doing is really no different than putting their money in a Certificate of Deposit, albeit with slightly higher returns. The bulk of Savers are investing for long-term financial security and retirement. They start saving in their 20’s and 30’s by putting money in 401(k) accounts, mutual funds, and other diversified investments, and in 30 or 40 years, they have enough to retire on.
Savers rely in a single force to grow their capital: time. Because their rate of return is generally consistent, a Saver’s primary mechanism to achieve wealth is to invest and wait. In fact, Savers often use The Rule of 72 to calculate long-term investment growth and plan their retirement. While passive investing is an almost surefire path to a comfortable retirement, it also generally means 30-50 years of work to get to that point.
Unlike Savers, Speculators choose to take control of their investments, and not rely solely on “time” to get to the point of financial independence. Speculators are happy to forgo the relatively low returns of a diversified portfolio in order to try to achieve the much higher returns of targeted investments. Instead of just spreading their money across stock funds, bonds, real estate funds, and a variety of other asset categories, Speculators are always looking for an investing edge. Perhaps they get a hot stock tip and try to cash in on the next Google. Or perhaps they hear about all the real estate investors who have made a bundle flipping houses, so they go out and buy the first run-down house they see.
Speculators recognize that they can have higher returns than Savers, and are willing to do or try anything to get those returns. They’re not scared to throw some money in an Options account and try their hand at derivatives trading; or run out and buy a bunch of inventory from a wholesaler they know and open up an eBay selling account. Speculators are always looking for the next great investment; for them, it’s all about being in the right place at the right time, and taking a chance on getting rich. If today’s investment doesn’t work out, there will always be another one tomorrow. Continue reading
Union Budget 2016 Highlights !!!!
1. Rs. 35984 crores allotted for agriculture sector.2. Rs. 17000 crores for irrigation projects.
3. Two new Organic farming scheme for 5 lakh acres.
4. Rs. 19000 crores for Gram Sadak Yojana
5. Rs. 9 Lakh Crores Agriculture Credit Target.
6. Rs. 38500 crores for MANREGA, highest ever.
7. Rs. 2.87 Lakh crores to be spent on Villages in total.
8. Rs. 9000 crores for Swach Bharat Mission.
9. Rs. 97000 Crores for Roads.
10. Total Outlay on Roads and railway Rs. 2.18 Lk Crores.
11. Rs. 2.21 Lakh Crores on Infra Projects.
12. NHAI to raise Rs. 15000 crores via NHAI Bonds.
13. More benches for SEBI Appellate tribunal.
14. Registration of Company in One Day for Start-ups.
15. Rs. 25000 crores for Banks rehabilitation.
16. 100% FDI for food processing.
17. Non planned expenditure of Rs. 14.28 Lk Crores.
18. Planned expenditure increased by 15.3% .
19. Relief Section 87A Rs. 2000 to Rs. 5000
20. Relief Sec 80GG Rs. 24000 to Rs. 60000
21. Section 44AD limits Rs. 1 crores to Rs. 2 crores. Rs. 50 Lakh for professional
22. Accelerated depreciation limited to 40%
23. New manufacturing companies will pay tax @ 25%.
24. LTCG on unlisted securities limited to 2 years.
25. 100% tax deduction for companies building houses upto 30 sq. mtrs.
26. Additional interest deduction for first house.
27. No service tax for building houses upto 60 sq mtrs.
28. 10% dividend tax for recipient over Rs. 10 lakh per annum.
29. TCS on purchase of asset over Rs. 2 Lakh in case and luxury cars.
30. VDS Scheme @ 30% + surcharge, Ist June to 30th September 2016.
31. Dispute resolution for appeal pending before Commissioner(Appeals).
32. Penalty for concealment of Income from 100-300% to 50-200%.
33. Rationalisation of TDS provisions.
34. 11 new benches for Income Tax Appellate tribunal.
35. No face to face scrutiny…..
The Stock Market is a device for transferring money from the impatient to the patient…. Warren Buffett
What better way to start new year than analyzing the past ? A Brilliant Summary of changes that is going to hit us one way or other sourced from www.fortune.com
Why every aspect of your business is about to change
Imagine an economy without friction-a new world in which labor, information, and money move easily, cheaply, and almost instantly. Psst-it’s here. Is your company ready?
Cars bursting into flames are never a good thing. So when a Tesla Model S ran over a metal object in Kent, Wash., in October 2013 and burst into flames, owners, potential customers, investors, and company executives got worried. When the same thing happened a few weeks later in Smyrna, Tenn., federal regulators opened an investigation. We all know what happens next: a massive recall, costly repairs at dealerships nationwide, and a painful financial hit to the carmaker. Yet none of that occurred. The problem was that the Model S could lower its chassis at highway speed to be more aerodynamic, and if debris hit the car’s battery pack in just the wrong way, it could catch fire. So Tesla beamed a software update to the affected cars, raising ground clearance at highway speed by one inch. The problem went away. Just four months after opening their investigation, the regulators closed it.
Using software and the mobile-phone network, Tesla avoided any need for a recall. It doesn’t have any dealerships; customers can configure and order a car online, and they can test-drive cars at company-owned showrooms. Tesla’s advanced electric technology is simpler than gas or diesel technology, so cars can be built with fewer employees and less capital. Combine those factors and here’s what happens: General Motors creates about $1.85 of market value per dollar of physical assets, while Tesla creates about $11. GM creates $240,000 of market value per employee, while Tesla creates $2.9 million. You don’t get differences like that just by being more efficient. Tesla, though in the same business as GM, is a fundamentally different idea
GM is changing, but for now it’s still a 20th-century corporation. Tesla is a 21st-century corporation, built for sweeping new realities that change the rules of success. The big theme is the arrival of the long-heralded friction-free economy, a new world in which labor, information, and money move easily, cheaply, and almost instantly. Companies are forming starkly new, more fluid relationships with customers, workers, and owners; are rethinking the role of capital (as traditionally defined), finding they can thrive while owning less and less of it; are creating value in new ways as they reinvent R&D and marketing; and are measuring their performance by new metrics because traditional gauges no longer capture what counts. Continue reading
Most investors keep looking for the magic investing mantra which can keep compounding returns. Many burn their fingers by getting into wrong companies. The first step of successful investing and to avoid investing in MisManaged Companies is to Understand Balance Sheet of a company.
A balance sheet, also known as a “statement of financial position,” reveals a company’s assets, liabilities and owners’ equity (net worth). The balance sheet, together with the income statement and cash flow statement, make up the cornerstone of any company’s financial statements. If you are a shareholder of a company, it is important that you understand how the balance sheet is structured, how to analyze it and how to read it.
Here is a great starting point from Investopedia to understand reading a balance sheet. Another article talks about the due diligence that should be followed before choosing a stock to invest is another checklist which the investors should always keep handy when doing a first cut analysis before giving a ‘pass’ and research further.
Bala writes about a wonderful article on Misallocation of capital which gives examples of why to avoid investing in companies which misallocate capital.
When you start looking at a balance sheet, a quick first cut analysis can help you eliminate researching further if you come across these common account red flags…
The Indian stock market, in aggregate, carries a relatively high risk that a minority shareholder will not realize the value in a listed firm because the controlling shareholder (or promoter as they are known in India) will appropriate value for himself, leaving little on the table. The risk is higher relative to certain other stock markets mainly because of limited regulation. In addition, lax enforcement indirectly encourages such behavior. Kimi writes on how one can avoid such landmines in his elaborate article peppered with examples.
Successful investing is all about avoiding the companies/ sectors/ industries which are mismanaged and going aggressively after the good ones…As Charlie Munger famously said “Tell me where I’m going to die, that is, so I don’t go there.”…..
Martin Seligman author of ‘Authentic Happiness’ and research psychologist has said that there are three parts to happiness : Pleasures, Engagement and Meaning.
Pleasure is the feel good part, the short term happiness of material possessions in life.
Engagement refers to good life involving work, friends, family and hobbies.
Meaning is using our time and strengths towards a larger purpose.
He reckons, that Although all the three are important , it is the last two which make a significant difference.
Now a lot of time we spend goes into increasing or earning money. Hence it is worth figuring out where money and hence financial freedom comes into play in our overall happiness.
Does Higher Income really lead to Happiness though? Is the million dollar question.
When researched , the results are surprising. ? A study from Princeton University found that a larger paycheck does lead to a happier life—but only to a certain point. ($75,000 per annum to be precise)
What really affects our happiness more than how much we make is our attitude toward money and the way that we handle it. When we hold fast to the belief that money directly determines happiness, life becomes a constant pursuit of accumulating ”more”.
Would winning a lottery make us the happiest people on earth? Harvard Psychologist Dan Gilbert says NO.
He goes on to prove that we human beings are very good at adapting but extremely poor in predicting when it comes to our emotions and feelings.We tend to overestimate the duration and intensity of our future emotions.
For eg: A dream home with all modern amenities couple of extra bedrooms, with a beautiful view gives pleasure for a few months. Before the purchase, we tend to think that the possession will provide everlasting happiness and also experience that the happiness will be the ultimate satisfaction. But the same disappears later. At times it can also possibly have a negative effect on happiness at times.
Even when you change jobs or progress in career he has found out across subjects that in approximately 3 months they are back in the same place in terms of happiness. You can extend the examples to Car , let’s say you buy a porche or a BMW , the impact is the same.
This is one of the most important research subject in behavorial finance. Known as Hedonic treadmill. We work hard, earn more, and are indeed able to afford better and nicer things and yet it dosen’t make us any happier. The deeds and things you worked so hard for no longer make you happy; you need to get something even better to boost your level of happiness.”
Wouldn’t it be better if we knew exactly how happy a new car, career, house or relationship would make us? It is quite possible if we do the following :
Avoid negative things that you cannot get accustomed to such as commuting , noise, chronic stress
Expect only short term happiness from material things such as cars, houses, lottery tickets, prizes, bonuses.
Accept your present
Aim for as much free time and autonomy as possible since long lasting happiness comes from what you actively do
Follow your passions even if you have to forfeit a portion of your income for them
Invest in friendships
Finally, Understand your relationship with Money. Don’t let money control your life . Rather Get a control over Money.
Have clear financial goals, focus on purchasing assets (rather than accumulating liabilities) and make your assets work along with you in order to achieve those goals. Remember, assets is something which puts money in your pockets, where as liabilities is something which takes money out of your pockets.
Make your money work so hard for you so that you never have to work for money….
Resolve to achieve financially freedom in your life!!!!!
Your parents are not your emergency funds.
Your children are not your retirement funds.
BUILD YOUR OWN WEALTH.
If you only goal is to become rich, you will never achieve it. ~ John D Rockefeller
James Montier, a favourite among the readers of value investing, produced a white paper in March 2011, entitled “The Seven Immutable Laws of Investing”. In the paper he presented a set of laws to guide investors towards investing sensibly in stock markets.
“In my previous missive I concluded that investors should stay true to the principles that have always guided (and should always guide) sensible investment, but I left readers hanging as to what I believe those principles might actually be. So, now, for the moment of truth, I present a set of principles that together form what I call The Seven Immutable Laws of Investing.” ~ James Montier.
They are as follows:
1. Always insist on a margin of safety
2. This time is never different
3. Be patient and wait for the fat pitch
4. Be contrarian
5. Risk is the permanent loss of capital, never a number
6. Be leery of leverage
7. Never invest in something you don’t understand”
Here is the complete text : The Seven Immutable Laws of Investing ….. By James Montier
Systematic Transfer Plan refers to Mutual Fund investment method where an investor is able to invest lump sum amount in a scheme and regularly transfer a fixed or variable amount into another scheme. Transfers are usually made from debt funds to equity funds if the market is doing well and vice versa if the market is not performing well.
Why should one opt for STPs?
Business Leadership lessons from Steve Jobs. The 12 rules of success…
Abolition of Wealth Tax.
Additional 2% surcharge for the super rich with income of over Rs. 1 crore.
Rate of corporate tax to be reduced to 25% over next four years.
Total exemption of up to Rs. 4,44,200 can be achieved.
100% exemption for contribution to Swachch Bharat, apart from CSR.
Service tax increased to 14 per cent.
Rs. 25,000 crore for Rural Infrastructure Development Bank.
Rs. 5,300 crore to support Micro Irrigation Programme.
Farmers credit – target of 8.5 lakh crore.
Rs. 70,000 crores to Infrastructure sector.
Tax-free bonds for projects in rail road and irrigation
PPP model for infrastructure development to be revitalised & govt. to bear majority of the risk.
Rs. 150 crore allocated for Research & Development
NITI to be established and involvement of entrepreneurs,researchers to foster scientific innovations.
Govt. proposes to set up 5 ultra mega power projects, each of 4000MW.
AIIMS in Jammu and Kashmir, Punjab, Tamil Nadu, Himachal Pradesh, Bihar and Assam.
IIT in Karnataka; Indian School of Mines in Dhanbad to be upgraded to IIT.
PG institute of Horticulture in Armtisar. Continue reading
Highlights of Railway Budget for 2015-16
Following are highlights of the Railway Budget for 2015-16
* Emphasis on gauge conversion over next 5 yrs
* Must run fast trains like Rajdhani, Shatabdi
* To up track length by 20% to 138,000 km next 5 years
* Must substantially regain freight mkt share
* No hike in passenger fares
* To have professional agencies for railways cleaning
* Ensuring higher standards of cleanliness a priority
* Swachh Rail to be a driving force
* To create new dept for clean stations, trains
* 1,219 sections on high density network
* Railway is a unique integrator of India Continue reading