Goal Based Investing

Can you predict the weather ?  Well. Seems, the investment climate is again - where to  forecast the weather is filled with peril. The year – 2012, began on a gloomy note, but  the month of January saw the Sensex rise by 10.68% over its previous month close. And then it was volatile and in May’12 fell by over 6%  .However, the YTD return as of Sep’12 is a staggering 20.78%.

This yo-yo in the equity market, would make anyone very apprehensive.

Shared my views on the investing methodology to be followed in the volataile environment .Click on the link below:

http://www.financialexpress.com/news/with-volatility-the-new-normal-patience-is-key/1010436/0

September - Is this the beginning of the rally or a bubble ?

The policy announcements in US and India in September and earlier by ‘ Super’ Mario ( the ECB Chairman) have rallied the world markets. The ‘sentiments’ in the equity market have sparked optimism. But then, the political equations can never be   foretold. There is a dichotomy between politics and economics   The pronouncements by the ECB and Fed Reserve points  towards one thing , as of now – the QE ( Quantitative Easing ) , or in layman terms – the printing of notes will continue to spur growth. 

Our take is that – in the long run ( well , the definition of long term , in this context is blurred and do not want to take any guess) , the world economy can go in a tailspin. But , right now, the rallies will definitely make you paper rich ( Remember, its only when you sell and realise your gains that you make a gain).

With the CRR cut and more cuts expected later, long term debt products should deliver attractive returns.

 So the strategy will be again simple .

·         Have a goal based investing strategy .

·         Get your asset allocation right.

·         Believe in your strategy and have patience.

Also make periodic sells to realise your gains.

Do understand, investing is today is a core activity.  Understand the product  / asset , before investing and once invested , have faith and make your gain

Wealth Creation - A journey and not a destination

A journey begins with a small step and then as you go along, you reach the destination, you first wanted to reach. But then a human being is a different animal. He’s not satisfied. He wants more, and that too quickly. He’s greedy. And then a new journey begins for a newer destination.  So enjoy each of the journeys

 The goal will be different in  each of the periods :

Say till you are 22 -24 years, you are building the  basic skills, wherein you study and get the various degrees.

Let me try to put a framework n this journey / destination :

·         Age  25-30 – Early days, new money , enjoying the money, fulfilling the basic needs – moreso,  consuming more rather than saving .

·         Age  30-35 – You realise the need to save and accumulate some monies. ( Marriage, kids, emi’s all come in play)

·         Age 35-45 – You work crazy to accumulate assets .

·         Age 45-50  - You realise you have to accumulate more, as inflation is eating into the assets and the new gadgets and lifestyle looks too good to lose.

·         Age 50 – 55 – Again work crazy  and invest for retirement.

·         Age 55 onwards – Ponder as to how much should I save for a retired life.

The above may not be true in all cases.

Wrote a piece on retirement in Financial Express . Do check the link

http://www.financialexpress.com/news/cash-flow-key-factor-in-planning-for-retirement/1000689/0

In today’s world, one thing which we you need to understand is that each one of you need to be financially literate. Do understand that its your money and you know the best. ( the product manufacturers, the brokers, the intermediaries are all enablers who needs to be used only as a guide for wealth creation)

In the World of Investing - Find out your enemy

Are you your own enemy ? Find out ....

My take in this piece in Financial Express .

http://www.financialexpress.com/news/tactical-asset-allocation-pays-handsome-dividends/835663/0

Benchmark the returns

So you follow the index or sensex or what is the other name nifty. Well... you're not alone. But is this the true representative to benchmark your expected return ?

My take on setting the benchmark index in the piece in Financial Express is shared below:

http://www.financialexpress.com/news/the-basics-of-tracking-a-benchmark-index/980043/0

Financial Literacy

Buyer Beware... ccreams at you, when you buy. Do you know the basics or do you want to know the basics ????

Financial literacy is a must for all and my take on the same in this article in Financial Express.

http://www.financialexpress.com/news/why-financial-literacy-is-crucial-for-all-players-involved/987922/0

Health Insurance - Why do you neglect

Health is Wealth - goes a old saying. And majority of us, happily ignore it. Sharing how and why you should have one , through my article in Financial Express - check the link below

http://www.financialexpress.com/news/health-is-wealth-why-you-shouldnt-ignore-this-cover/969506/0

Mid Term Review - Investment Strategy - 2012

5 months is a good time to review the portfolio. As a follow-up to the strategy which was suggested on 3rd Jan'12, in the  article in Financial Express, sharing the recommended strategy post the mid-term review .

This article appeared again in the Financial Express on 5th June'12 - the link shared below:
http://www.financialexpress.com/news/its-time-for-a-midterm-review-of-your-portfoilo/957931/0

Again, I would restate that Asset allocation alongwith goal based investing is the key. Accept volatality as your friend. Happy investing.

Investment Strategy - 2012

At the beginning of the year, shared my investment strategy for the year 2012.

The piece was publised in the Financial Express on 3rd January'2012.

Sharing the link below :

http://www.financialexpress.com/news/before-rates-fall-invest-in-gilt-products-for-doubledigit-return/894941/0

Do remember, Rome was not built in a day. Have patience .

Power of Compounding - 8th Wonder

Great wealth was never made during prosperity. The seeds were sown when there was extreme pessimism. Seeds sown at pessimism becomes the tree at the  time of prosperity.  The  period since 2008, has been a period of volatility. The extremes of the earlier decade caught up in early 2008 and since then it has been a period of disillusion. Rome was not built in a day. So  is the wealth creation journey. Do you know what was your first take home salary and what is it now. Did it grow overnight or happened gradually. Same is it with your investment.  You cannot have your expected return overnight , but if you  go with goal based investing, using asset allocation , understanding your risk profile, a double digit annualised return over 5/7/10/12 years can be expected.

 Real Estate has been the favourite Asset class in the last decade. And continues to be so. However, now the time  has come to exercise caution in this asset class. The runaway bull run which was witnessed across any property, is a thing of the past. Do tread with caution .

Gold again has been in a 5 year bull run, outsmarting all other asset class, except Real Estate. Again being overweight in this  over longrun,is not recommended. A 10-15% allocation ( being prudent) is the approach recommended .

The investing methodology being practiced currently by the majority is adhoc ( ok. I have ‘x’ amount and tell me what will I get. The financial intermediary based on the product incentive, pitches a product , and well the sale is made).

Its time you revisit this and go in for a goal based investment.

The Power of compounding which comes on account  of this will be :

At 15% CAGR,Rs. 1 becomes nearly :  ( acknowledge the inputs of Prashant Jain – HDFC MF) 

2 in 5 years

5 in 11 years

10 in 17 years

20 in 22 years

And if you take  a more conservative return of 12% CAGR,Rs. 1 becomes nearly :

1.76 in 5 years

3 in 11 years

7 in 17 years

12 in 22 years

So you see that a 3% additional return has a big impact on your wealth creation.

Investments are never bought , they are sold. You buy your house, you buy your car, you buy your clothes, but when it comes into wealth creation laziness takes over you ( not for all ). Why ??????

Well, act now. Have a goal based investment schedule and watch your wealth grow. You are the Arjun in this ‘Kurkshetra’

What should I do now?

Headlines today do not inspire confidence. So much of gloom being painted , primarily because of the after effects of aggressive financial methods and leverage and hand-in-glove of the politicians and policy makers. 

If the situation does not improve in the next 12-18 months, this decade could well end up as the ‘ lost decade ‘. So when everyone is being fearful from the greedy,  it is the time to pick and choose.

If you have planned your investments with a goal and time horizon, with asset allocation in place, no need to panic .

If you have not, do have a financial plan in place and act as noted as above.

Also, with fireworks expected in Eurozone and with policy paralysis by the Govt. of India, the economic environment looks gloomy. Staggered purchases in equity with overweight on debt instruments could also be an approach worth a merit.

Real Estate also would play up. But only if you know what you’re doing and do not need funds for the long term.

All in all ,  the ghost of 2008 seems to be visiting. However, as we say, this too shall pass….

What you need to do is have your goals and asset allocation in place and trust your gut and avoid the noise in the media.

Do understand it’s your behaviour which will determine your wealth .

·         If loss aversion is the key ( long term debt funds  with a horizon of 12-18 months is the one for you)

·         If status quo is your style ( then again overweight on debt instruments is the way)

·         If controlled risk taking is the one ( which means you can sleep t night with the volatility around you, have an equity exposure of atleast 20% of your portfolio

Whatever you do,  trust yourself and ask if this is what I would do, and then go ahead.

Happy Investing .. Remember , not taking a risk is also a risk.

Strategy - Investment

Investing is a boring exercise. Boring because once you identify the goal, the time horizon , the expected rate of return and the financial product , you go ahead and invest accordingly.

One of the long term disciplined method for investing is Systematic Investment Plan ( SIP) .

Shared the strategy in  Financial Express in Feb'2012 ( the link shared )

http://www.financialexpress.com/news/sip-an-excellent-tool-to-help-achieve-longterm-goals/911823/0

Big Bang -2012

"Invest when others are fearful and sell when the rest are greedy” , sounds good to hear and say , and when it comes to implementation, one find comfort in the herd  - A perfect receipe for  you know what… disaster.

It is said “ You are condemned to repeat history” . What happened in May’2009 , the encore happened in Jan’2012. The swiftness with which the monies were poured into the Equity Markets across the globe, left the majority stupefied.

So the Maxim “ It is not ‘ timing ‘, but ‘time-in’ the market, that ensures your wealth generation and creation.

So what we were saying in the last few months , holds true even today and will repeat once again……

The steps being:

a)      Time Horizon ( with a goal)
b)      Risk Profile
c)       Asset Allocation
d)      Liquidity

This simple mantra coupled with control to filter the media noise , will help you to generate wealth.

At the end of the day, it's your EQ ( Emotional Quotient),  not your IQ ( Intelligent Quotient) which will help determine your growth.

Happy Investing. And try to embrace your new friend ( acquaintance for a few) – Volatility.