4 Reasons Why You Should Not Worry About Market Declines

The stock and bond markets always change in value. If you are invested in the markets, you are going to experience the financial effects of fluctuation. Should you worry or not? Here are four reasons why you should not worry, and two reasons why you should.

You should not worry about downward moves in the market for these reasons:

1. If you primarily invest for dividends, the dividend income is your focus, not the value of the shares. Dividend investing has some similarity to the real estate owner who rents his or her property. The monthly rent helps determine the return on investment. The market value of the property is not of great concern since the owner does not intend to sell. The current purpose of ownership is the receipt of income. If you are content with the dividend income from your mutual fund or stocks, the market value is a secondary concern.

2. If you are purchasing shares regularly, a downward move in the market is not a problem–it is an opportunity to accumulate more shares at a lower price. The downturn can be a welcome event. The renowned investor, Warren Buffet, seems to find good values during periods of market declines. A lowering of prices does not necessarily mean a scarcity of good value. Sometimes prices are lower because the demand for ownership has fallen–and not because a business or a property suddenly has less value. If you believe that a decline will not be permanent and that demand for ownership will increase in the future, the current market price is not that important.

3. If you are a long-term investor, current prices should not cause worry. A long term maybe five years or more. The question is, what will prices be in five years? The answer should be based on the investment’s prospects. As an example, the cost of real estate may be calculated by using rental income return as a determining factor for investment value. This return on investment reasoning can apply to dividend-paying stocks as well. If rents will go up in the future, or if business profits will increase in the future, so will the price that someone has to pay to assume ownership of the asset. As a bonus, you have had the benefit of the dividends, or return on your investment, throughout the entire term of your ownership.

4. If you understand that there is a relationship between risk and reward, you should not be upset as the investment process unfolds. Informed risk-taking uses information and reason in an effort to offset risk. Risk is never eliminated. For you to claim the fruits of excellent investment results, you must also be willing to bear the negative possibilities that accompany risk-taking.

Here are two reasons why you should worry about downward market moves:

1. You are an equity investor. You do not invest for income. The market price of your assets must move higher from the price you paid for you to make a profit. When you are not looking for income to provide a return on investment, you have no other choice than to rely on the increase in market price. Why does market price go higher? Because there is a demand to own the asset or because there is a belief that the asset’s value will increase. An income investor has a real indication of an asset’s productive value, the anticipated dividend, while an equity investor relies on less concrete indicators. Therefore, a downward price movement is of more significant consequence.

2. You plan to sell your investment soon. You want the highest price you can get. Will the rate go higher or lower from where it now sits? The need for cash and a pessimistic view of near-term market direction are both strongly tied to the current price.

Whether your interest is in participating in dividend-paying stocks or in buying low and selling higher, your temperament and tolerance for various levels of risk are factors to consider when choosing your investment strategies.

Howard Feigenbaum is Registered Principal and Owner of Sharemaster, a Broker-Dealer firm that specializes in monthly dividend income funds.

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” – John D. Rockefeller

This article is a general discussion of the subject and is not intended as a solicitation or specific investment advice.

12 Personal Finance Mistakes I Made!

I have shared (in past) several lists of things to do for a successful personal finance setup — most of the items in those lists were my learnings over past 15-16yrs.

Today I was talking to someone to get their personal finance in order and remembered all the mistakes I have done and so thought putting them here for others to use:

1. The lure of passive income

A lot of people aim for financial freedom and passive income. Well, it is almost impossible to achieve it unless you are fortunate or have an inheritance or have underestimated your expenses. When I started “investing” back in the early 2000s, one crore corpus was a good standard of retirement. Today it is not even a safe corpus.

Lesson: So, instead of focusing on passive income, the focus should be on active income. Work hard till you are 50 and ensure you hit the point where 80C is taken care by EPF only. The moment you hit this mark, a lot of things will fall into your place.

2. Multiple credit cards and bank accounts

I love credit cards and believe it is the best product in the world if used correctly. However, IF YOU CANNOT MEASURE IT, YOU CANNOT MANAGE IT!

Lesson: Keep the number of bank account, Demat accounts, credit cards, MF schemes, stocks in the portfolio to an ideal number. There is hardly any sense in having more than two bank accounts and 2-3 credit cards.

3. Multiple Demat accounts/ Learning macro and microeconomics

Contrary to point 2, have multiple Demat accounts, however, operate only one Demat account. The rationale for various accounts is to get equity research reports on multiple names.

Lesson: You May be a SIP only person; however, it is critical to understand the economy and sectors. The best place to do it is reading reports. There will be people who will say Indian Equity space sucks and the report quality poor – Don’t listen to them. It takes time to learn and understand economics, and most of the cynical people are the ones who don’t understand these reports

4. Always talk to the shopkeeper/Maids/Cook

There is a multibagger right in front of your eyes. The next Asian Paints, Eicher Motors, HDFC, Havells, Finolex, Page Industries, are in the aisles when you shop.

Lesson: Talk to the small shopkeepers and gauge the mood of the buyers. Also, look into the carts of the people standing in front of you. You will be able to get the next TTK and Asian Paints. It is not tough to spot them. Not for a moment, think all the multi-baggers are gone.

5. Follow a broad set of stocks

While it is essential to own a fewer number of shares and MFs scheme, it is necessary to track a broader set of stocks and MFs. In the long run, it helps to know a sector or a stock well while churning the portfolio

6. You will never miss the bus

I can’t fathom why people crib on missing buying a stock when it was X (today price is 5x). This is the stock market; the end is not near.

Lesson: There is one big “correction” once every decade. This decade had one when Southern European countries were on the verge of collapse and Greece bonds’ yield was 60%. You will always get a chance to enter – whether you are brave to enter during such a time is another matter.
I thought the world was ending in Sep 2008 and then in 2012. But now I have more grey hairs, a fatter waistline, and slightly more relaxed mind although I get scared even now 🤦🏻‍♂️

7. Spend money on yourself and your loved ones

Back in the mid-2000s, I chased the shit out of RPL and RNRL (few people will remember these stocks), and I made a fortune out of them. I paid up the majority of my education loan using these two stocks, and I reached a point where I started cutting serious corners to save money for extra leverage on day trading. I was stupid. I should have enjoyed more and should have spent that money on a few luxuries (like the trip to Sikkim that I skipped and bought Suzlon at 390 a share 😂)

Lesson: My engineering days are long gone, and that carefree day will not come back. While some of my friends have great memories of those time, I have memories of watching a black screen with quotes of two stocks that don’t exist anymore. Spend money on things that make you happy.

8. Buy a term plan

OMG! Every time I meet someone who doesn’t have a term plan, I pinch myself to stop me from punching him. Yes, it is outrageous not to buy a term plan. Buy one today if you don’t have one. Top it up to meet your current lifestyle if you already have one.

Lesson: Indian insurance sector is one of the most stable and well regulated in the world. Also one of the cheapest. Freeze the rate as early as possible to the maximum amount you can. AND PLEASE DONT EXCEPT for ANY RETURN FROM A TERM PLAN – term plan is for your loved ones and not for you to benefit!

9. Subdued returns? The brochure said Sensex gives 15% return

So your portfolio has a CAGR of only 9% while someone else has a CAGR of 12%. This is the end of the world – let me churn my portfolio. Don’t be this person. 9% over the long term is an excellent return; the days of 15% returns are behind us. Live with this fact.

Lesson: Don’t churn your portfolio at the drop of a hat. There is a whole line of finance that deals with portfolio management, and most of the well-performing portfolios/funds have a low churn rate. Buy quality and stick with them.

10. Dividends

The dividend yield is only 1.8%, why to bother about it. Dividends are more than just the money you get annually. A dividend paying company confirms several things which are critical for long term growth:

a) The company knows how to reward long term shareholders
b) The company is making enough cash to sustain its growth and hence can share profit
c) The company is making real cash and hence is able to share it. The profit is not just accounting magic.
d) The mgmt knows how to navigate short term financing

Lesson: Always give a premium to dividend paying stocks.

11. Buy gold

I know it is not in fashion to buy gold but keep 5% portfolio in gold. This is my personal opinion. Gold has a habit of sleeping for decades and then jumping suddenly in 2-3yrs to sleep again for decades. This is mostly because politicians world over has a habit of screwing the currency once in a while and gold is a hedge against the weaker currency.

Lesson: Buy gold on Diwali every year. Not only does it keep the spouse/parents happy, it will stabilize your net worth. How you wish to buy is up to you. I buy physical gold because I love the feel of it 🙂

12. Damn! He bought HDFC when it was 200 bucks. He is a genius

No, he is not. He is lucky. In personal finance, you can follow all the tips and rules, but in the end, it all boils down to luck. If your years of earning match the year of economy expansion, you will make money. It is as simple as that. Rest all is just garbage.
Yes being knowledgeable and having a plan will be useful and will give you an edge but luck plays a big role. As they say – The more you practice, the luckier you get.

Lesson: Don’t envy people who say he got X stock at 5% of today’s price. I have 3 Suzlon, Welspun, Jai Corp for every TTK and Page. I rarely mention Suzlon and Jai Corp and almost always mention TTK and Page. It is the case with everyone (including Rakesh Jhunjhunwala and other biggies). Just listen, smile and walk away. Some people have luck, you should have a plan. Eventually (after 40yrs), both of you will meet at the same point.

Phew! That’s all for today.

10 Lessons for Investors in the Indian Stock Markets

1. One should trade cyclical stocks only when one understands the start and end of cycles. Cyclical stocks peak in their prices not when their earnings peak out when expectations of earnings peak out.

2. MNC consumption commands a premium and should be looked at as a safe zone when markets are in an uncertain phase.

3. The financial mess can be more profound and trickier than manufacturing or product based company’s mess. In a finance company, troubles are unknown, leveraged and also have a ripple effect on other good assets.

4. Quality, the reputation of management, and quality of earnings provide a better margin of safety than cheaper valuations.

5. The market is smarter than all of us put together. If a stock trades at 30-40 PE, 50-60 PE, there are reasons for it. Predictability, longevity and quality with high growth command premium and price anchoring.

6. If the approach is not well defined, and strategy is not rolled out clearly, then random bets are bound to suffer.

7. Stock becoming cheaper and cheaper is not the right criteria to buy it, single-digit price is not at all a compelling reason to buy. If you ask me if it has assets, not so bad earnings and it’s in 10s or 20s of price, how much it can fall then answer is Zero. Sentiments and happenings to conduct in the future, perception towards them plays a significant role in price movements.

8. Turnarounds do not often turn. Stocks that have fallen from a ratio of 5 to 1 will not change their longer-term direction bouncing to 1.3 or 1.4 from 1. many stocks make such rallies in between but not able to sustain them when have fallen from very high.

9. no situation lasts. At one point people were picking mid-cap and small caps, now finding large cap as the holy grail. This won’t last all the time too. Time changes so do the momentums. Ability to hold good stocks for long, buying them on correction, digesting their falls only will produce substantial, durable returns. No shares or portfolio in the world has been invincible. Most revered veteran investors had witnessed 40-50% drawdowns in their holding value in their stock market investment career. Conviction and stomach will only make sizable investment and returns.

10. By merely avoiding what you don’t understand, stocks having pledges, low margins or cyclical margins, low promoter holdings, and investing in better roce, better visibility companies, one can do very well passively.

Lessons have a long way to go. The market is the best teacher.

Never Invest in a Mutual Fund Product You Don’t Understand!

A couple of days ago, I was having a discussion with my father about the recent DHFL default in debt Mutual fund space. He reads the newspapers regularly and  had read about ILFS, Essel group crisis and now DHFL. So he got concerned about the liquid mutual funds.

The first thing my father said was that he sees an ad daily on the television, “Mutual fund Sahi hai“. If Mutual fund sahi hai, then what do all these instances of default mean. I had explained many times earlier about the risks involved, but he was disappointed to learn that the sales team hide information about risks and just focus on one point to prove that mutual funds are always right.

My parents don’t know much about financial products, so I manage their portfolio and risk. My father retired four years ago and gets an indexed pension which is sufficient to meet their day to day and medical expenses. After checking the retirement calculator, I always knew that they wouldn’t have a sufficient corpus as most of their savings were spent on my and my sister’s education.

Thanks to an indexed pension, they get active income throughout their life so we didn’t have to think about buying an annuity. Also, funds get stuck in annuity and what if you need large corpus to fulfill any emergency. I also remember the day when we went to bank to deposit his retirement cheque. The manager tried to sell a ULIP. Since I was there I clearly told them no.

Later when we visited another bank to get KYC done for Mutual fund investments, they tried to sell regular plans. It’s like wherever you go for an investment product, the salespeople will be ready with a pitch to complete their target and sell a junk product to you.

After reading about the bucket strategy, we decided to keep 60% portfolio in FD, MOD, etc. and some part in Senior Citizens Savings Scheme (SCSS). The plan was to protect the corpus and let it grow matching with inflation as senior citizens get higher rates. Also, in case of emergency they can withdraw it anytime without much hassle.

15-20% was invested in liquid mutual fund due to its taxation benefits over FD and remaining in equity (as it should not be required for at least 10 to 15 years and I am always there to fund any emergency through my corpus). I don’t trust anyone to manage the risk for my parents as most people out there like distributors, bankers, etc will try to take customers for a ride.

The reason for this post is I have managed risk properly for the last four years for their equity portfolio, but I never thought that one by one there can be crisis in debt part. It’s like you focus on improving your middle order problems as the top order is sorted out then suddenly one or 2 of your top order gets injured and can’t recover for months.

Now you are staring at a fragile top order which was not there in your contingency plan.

Fortunately neither me and my father suffered a lost a single penny in debt portfolio due to recent events but this has been a very good lesson for everyone who invests in debt MF. They are more complex than any equity MF. Choosing an equity MF is more easy compared to debt MF. Losses in equity can recover with market (only with long term investment) but its almost impossible to recover it in debt MF.

Finally, for my father’s portfolio we decided to max out SCSS as it has some scope left and rest debt will be kept in good old FD only. I can’t imagine a situation for them where they would have lost their hard earned money due to such events. I would not have been able to sleep properly if something like that had happened.

Also, those who manage their parents portfolio due to their limited knowledge on financial products, please never invest in any product which you don’t understand clearly and younger generation and senior citizens have different risk appetite so quantify that before taking any decision. Sorry for a long post but I thought to share my experience as it might be helpful to others

A Quick Analysis of Overnight Funds

Why am I talking about Overnight Funds now?

I Got hit finally after years of escaping debt fund mayhem! UTI PSU And banking fund is bleeding… Banking and PSU funds are created just for this purpose as they eliminate interest risk compared to Gilt. They are supposed to invest only in Govt backed holdings as per their SID. This case also the SPV has a deal with NHPC, NHPC pays the money to SPV. But since SPV was created by IL&FS, they have stopped payments to adhere to supreme court order of stay. There should not be any credit risk in these family of funds unless the state or central or municipal govt refuses to honor the contract. This SPV was supposed to be the Govt backed deal but this time it failed. This is the only time it failed BTW. Got to know lot about the structure of SPV as I researched. This is an interesting case. Many lawsuits will be filed now saying this SPV is sovereign as payments are from NHPC and this is not linked to parent group IL&FS

Even though it’s a tiny amount as I have invested in many debt funds but this made me lose confidence in debt funds. I am done with them… Already from the past many years, I am building my own NCD, GOI bonds, Treasury list, etc. and accumulating it slowly.

Anyone who has a substantial corpus in debt funds bewareLiquid funds are also risky. Even the most popular Reliance liquid which gives instant money holds many risky instruments! Its AAA just for namesake. Majority of the fund managers are god damn stupid/fraud and change the portfolio like they change their dress. They should be fired and sent to jail literally!

My only rescue funds are overnight and arbitrage fund. But guess what the arbitrage funds are becoming greedy and making the same goddamn mistake of storing junk in debt folio. Overnight fund I am not sure when CBLO guarantee turns out to be fraud.

What is an overnight fund?

An overnight fund has the mandate to invest in overnight securities that have a maturity of as low as one day. They are typically money market instruments viz — Treasury bill (T-Bills).

In contrast, Liquid funds invest in papers up to 91 days of maturity. More than 60% of the Liquid funds AUM is invested in Corporate paper (mostly unsecured) which makes liquid fund riskier than an Overnight fund. Hence Liquid funds could show a drop in NAV just like the other short duration, and credit risk and corporate bond funds did.

The Pros and cons of Overnight Funds

Overnight funds are the lowest in the spectrum of risk returns, i.e., Low risk and Low return. The returns match or slightly exceed the RBI Repo Rate. The RBI repo rate was incidentally was reduced to 5.75 by the recent RBI MPC.

A look at the offering of Overnight funds shows that many funds are less than one year and returns are around 6% … this is likely to fall as the repo rate has been reduced and hence more likely to be below 6% going forward.

These are good for a very short duration instead of Savings Bank.

Only two funds seem to have decent corpus (HDFC and SBI fund offering), and the total corpus across all funds is less than 17000 crores which is a very small compared to what gets invested in Liquid funds.

8 Lessons from The curious case of DHFL!

DHFL – one of the darlings of the market over the last 5yrs has been demolished and how!

So without going into the reasons behind it (we get to know the real details may be 6 months from now), let us see how we could have seen this coming and lessons we must learn.

1. Forever long on equities is not the way forward

I know a lot of people who are forever long on Indian stocks or NSE index or in mutual funds. This is the biggest mistake you can ever make – being forever long on an asset class or sector.

Yes if you would have held onto Wipro or Infy since 1991 today, you would have been a $ terms millionaire. But how many people you know achieve this? I see a lot of people who destroyed their wealth holding onto to shit (I still hold Suzlon that I bought in 2007 😂)

Always. Always. Always look for indicators

2. SIP

The fact that you do SIP in the 5-star fund doesn’t mean the tension is over and retirement is done and dusted.

Always check the top holdings of your mutual fund and check for concentration risk.

Concentration risk becomes even more critical in debt funds because the Indian debt market is not deep. Funds have nowhere to park the money, and they end up buying the same or similar paper again and again and again!
The result is fund starts to hold over 10-15% of papers from the same company of different maturity.

3. Debt funds are safer

Nothing can be farther from the truth. Fixed income securities are a beast and a beast that is very tough to manage. Avoid this beast unless you know what you are getting into.

With the shallowness of the Indian debt market, debt funds are very very risky.

If you love fixed income, put money in PPF or EPF. Please, avoid debt funds. They are not as safe as you think.

If you don’t believe me – google this “Risk associated with fixed income securities.”

4. Keep your eyes opened for DHFL like issues

For a change, I saw DHFL thing coming. Yes, it is easier to say this now but think about this news I read last month. It is a different matter that I missed making money off this and trust me. I am more pissed with myself than the person who lost money in the debt fund today. (Read more on this)

The company had stopped fixed deposit withdrawal. That is as big a red signal as it comes.

If you have a stock, keep notification on for that stock on your phone. You tend to get these indicators, and they provide you enough hints!

5. NBFCs

A sector leads every market rally and, once that rally ends, that sector gets demolished to never rise again for years.

Infra in the mid-2000s
Pharma in the early 2010s
IT in the early 2010s
Auto in mid2010s
NBFCs in 2014-17

The NBFC story is more or less over. Regulators will come heavy on them. Avoid this sector for the next few years. If you have made money on these, book the profit. DO NOT LOWER YOUR AVG COST!

6. Banks

I don’t know where Indian markets are heading. The growth can’t come without credit, and with ILFS and DHFL, banks will have to take a massive haircut. More provisions, more regulations, more costs, and less money to lend.

I was looking forward to buying banks after Modi’s win however now this a sector to avoid.

7. Insurance firms

Not a lot of commentary around these listed firms. Only god know knows what kind of losses they are writing off on bonds and how this will affect the pricing in the future.
The Indian insurance sector is one of the best regulated and stable sectors in the world. God bless them to cross this hurdle.

8. Asset allocation

This tragedy again confirms the importance of asset allocation. PPF, Real Estate, Gold, Equities, Bonds. Mix them well. Don’t go overboard on a few of them.

Some of these asset class act as a natural hedge while some collapse together.

Finally, a bond default is terrible news. A bond default by a financial institution is catastrophic. FIs trust on each other and one defaults hits everyone. And I mean everyone. I hope this is the last name that faces the problem in NBFC space (although I have a feeling this won’t be the last).

March quarterly result season is coming to an end

Two thousand one hundred twenty-six companies declared their numbers till now of which as high as 768 companies reported in last week. Of 768 companies, 480 companies CFT scores have fallen while 309 companies have improved.

So, what are big takeaways from the March 2019 India Inc numbers? First liquidity dried up pushing the cost of funding for many of NBFCS. Also, many companies who had ILFS papers in their books were forced to write down their investments. ILFS crisis continues to impact India Inc. Many consumer-facing companies reported weak volume growth suggesting poor consumer sentiments. Mid-season sale at many retail stores shows that retailers want to reduce inventory. Uncertainty on global trade war is not giving enough confidence to entrepreneurs to build new capacities. With inferior liquidity in the system, banks are not very keen to lend money for projects in fear of the same turning into NPAs at a later stage. There is no animal spirit either at banks level or entrepreneur level. Two legs of economy-consumption and capital investment-both are struggling.

The new government that has sworn in yesterday has task cut out for them. The big challenge is that they need to put more money in the hands of consumers so that they can spend more. This can be possible by cutting Taxes. Second private capex is just not happening. Time has come that government gives some significant benefits for companies to do capex that can help to generate employment as well as increase economic activities. One of the best ways is to reduce corporate tax. This can leave more money with corporate to fund capex.

It would be interesting to see what measures new finance minister- Nirmala Sitharaman takes. In the next 30 days, she would be presenting her first budget. Her focus should be on long-term goals rather than a quick fix solution.

What should one expect in the June quarter? We sense that June would be another quarter that may not live up to the investors’ expectations. We are expecting sales as well as net profit growth subdued in June quarter. In the next three months, we can expect one more interest rate cut from RBI. Crude prices would have gone soft, and if that continues, we can see margin expansion. The new government would have spelled out their vision for the next five years. That means there would be a lot of action by the time June quarter season ends.

Right now, the market should remain firm till Budget. Post that market sentiments would be a function of local as well as international news flow. Fear of weak monsoon is now fading away. That’s good news for the market. If all goes well, one should expect earnings growth revival from the September quarter.

The Ladder Strategy for the Super Conservative Investor

Time and again I have come across investors who shy away from equity investing or so to speak they do not understand how this market functions and are neither keen to invest into products such as the mutual fund, debt funds or in the equity market.

All that they look for is the safety of their capital amount and are pretty happy; earning a small rate of 6 to 7.5% p.a., even though such returns cannot even beat the market inflation rate but so what they are still contented with it.

So then how does this ladder strategy works? Let’s take an example of this:-
Suppose you created an online recurring deposit account in the following manner : –
1st RD created on 01/06/2019 for 1,000/-
2nd RD created on 01/07/2019 for 1000/-
3rd RD created on 01/08/2019 for 1000/-
4th RD created on 01/09/2019 for 1000/-
5th RD created on 01/10/2019 for 1000/- and the cycle goes on till you create the 12th RD account on 01/05/2020.

So in such a situation in June 2019, only 1,000 will be debited from your account, and with each new month, this debit amount will keep increasing further by 1,000 from your account and by the time one reaches the month of May 2020 an amount of 12,000 would be debited from one’s account.

After every 12 months, one of your RD accounts will start maturing. Such type of an investment strategy works well for such investors who are either risk averse or those who struggle hard to save regularly. Like – those who have recently got their first job or those who are a spendthrift but wonder if they can still save some money each month.

Thus, by playing a safe bet, they are gradually able to amass their investment corpus. Please note that such type of investment strategy is only meant for those who want to inculcate a savings strategy.

Well, how does it sound quite complicated or easy? The idea is simple to create a forced monthly saving, and as you understand the value of investing regularly, one can start a SIP in mutual funds and so on.

I hope this was informative till then Happy investing.

Volatile in short term and bullish in long term | Mutual Funds Sahi hain

Almost every other post has people believing in the above two fables in the title of this post.

Yes, they both have been right in last 5-6 yrs, however, bear with me. These are my experience over the last decade and a half.

1. PPF

Don’t underestimate the power of the tax-free (EEE) compounding. Always use the max limit every year. Let this be the rock on which you will build your portfolio.
A lot of people haven’t seen their portfolio in deep red, and the pain is massive. PPF brings stability

2. Asset reallocation

One of the essential things in long term planning. No asset is evergreen.
If everyone knows Mutual Funds Sahi hain and long term mein Equity will outperform, then the game is straightforward. The fact is the game is not easy.

Always look for assets that are beaten down and keep an eye on indicators that point towards them turning around.

Trust your instincts and reallocate your portfolio

3. Follow politics

Keep a very close eye on the politics of the state and the country.  Politics decides the policies and policies decides which industries will do better.
If you know the politics well, you will know when to buy a thematic fund and when to exit it. I am not even talking about stocks here.

4. Don’t berate people who are buying against the tide

Whether it is stocks, real estate, gold, bonds all move in cycles. Eventually, Stocks beats the other assets classes by a few % points in the long run. The key is to buy the asset class when no one is looking is it.

5. Dividends

Most of us are chasing the elusive financial freedom. I don’t believe in economic freedom as every time drag the Excel formula, I see costs moving faster and faster.

IMHO, the key is to create dividends, coupons, and rents that are more than your monthly salary.

Anyways, if you are buying stocks, keep an eye on the dividend policy of the company. Eventually, the companies that pay back the investors regularly tend to outperform.

6. Financial advisors

Pick your financial advisor with the same care as you pick your life partner. Trust your financial advisor after that.

However (Big, however), learn things on your own. People change, and so do the motives of your financial advisors. Never trust them blindly after a point.

If the advisor is only advising stocks and mutual funds, be careful.

7. Learn Finance

You may be an engg or a doctor or any other profession. You may have hated basic finance lectures in your school. However, it is critical you understand how the money moves around.

You must also invest your time.

Attend investor presentations as a starting point. Bajaj Fin investor presentation is an excellent starting point for newbies. Learn market trends

8. Tools to learn

  • Investor presentations – Always attend these of stocks in your portfolio
  • AGMs – Go to these if they are in your city. If nothing at least you will get free ice cream and lunch (sometimes). Plus you get to see the CEO and CFO. It is a lot of fun.
  • Track your portfolio – IF IT CANNOT BE MEASURED, IT CANNOT BE MANAGED
  • Don’t ask someone directly if you don’t understand something. Google about it and try to learn it on your own and talk to someone who might know about it. Self-learning is critical

9. Use leverage intelligently- Debt can be your friend

People hate credit cards. I always wonder why. There are points to be collected and interest-free, collateral-free credit to be taken. THERE IS NO PRODUCT LIKE A CREDIT CARD IN THE WHOLE WORLD. I have worked in equity research, M&A, Commercial banking across different countries, and I am yet to find a product as good as a credit card.

People hate home loans. Why? Use leverage to maximize your returns on equity. Of course, don’t go overboard on debt.

10. Don’t be a Kanjoos

No one likes a kanjoos. Don’t be the person you want to hate. Money can be earned. It is not tough. Saving a penny here and there won’t make your rich.

Try to maximize your gains and not worry about expenses. There are just a few years you genuinely enjoy life. Spend it well – Go to the best of the restaurants, travel business class once in a while, ask for sea facing rooms in hotels, gift that gold necklace to your wife (ya gold is lousy investment), throw money on home renovation.

Everyone is stressed these days, so if something makes you happy, that is already Alpha return.

Five Ways To Save In Grad School

Most graduate students are strapped for cash. Even with the Federal Stafford Loan, Graduate PLUS Loan and alternative student loans students often do not have the money to live a comfortable lifestyle. Between tuition payments, rent, food, and only being able to work part time things can get really tight. Here are five creative ways for graduate students to cut back on expenses and save more money.

1: Shack up with roommates: Although you may prefer to live alone living with roommates will save you hundreds every month. If a one bedroom place by yourself goes for $800 a month and a two bedroom place with a roommate goes for $1,200 a month you would save $200 a month right there!

2: Find the nearest Starbucks: Ok I know we are trying to save money here, but Starbucks has free WiFi! Get used to writing your papers and doing research there or at the school library or anywhere else where the internet connection is free.   This way you will not have to pay for home internet access which could save you as much as $100 a month!

3: Nix your cable and phone bill: Face it; you never use your home landline so cancel it. All you really need is your cell phone. You also barely ever have time to watch TV because you are always studying so cut the cable. Most of the shows you watch are online anyway!

4: Eat at home more: This is my big weakness. I love going out to dinner, but I know that if I stayed home more, I would save a lot of money. Try only going out once a month or set a strict dine out budget for yourself and stick to it!

5: Try public transportation: If you live in the city try getting rid of your car and sticking to public transportation. It may be tough at first but getting your car payment back and not paying for gas will make a massive difference in your budget.