what do you do when you get such comments / emails…?

‘Do not believe what these experts tell you. See the returns in the equity markets in the past 10 months even on an SIP basis is NEGATIVE. Do not invest in equity markets. Keep all your money in banks ONLY…at least your money will remain safe’. So true, so lovely!

Such people do us a favor. They keep all their moneys at all times with banks. Banks need to pay only 4-7% p.a. interest to these people. Then the bank can use the money to lend it to the borrowers at about 13-21%p.a. Not bad margins na?

So the market loves such people. They create margins for banks. Sadly banks are so much laden with money that they buy offices, promote large life insurance companies, mutual funds, brokerage arms, …..and create more value for the share holders (or destroy share holder value!!).

So when you see people leaving a lot of money in their banks….go and buy State Bank of India – it has all the PSU salary accounts, army pensions, …and tons of money lying unclaimed. The unclaimed but inactive accounts are a mind blogging figure in excess of Rs. 10,000 crores!!

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  1. I think Banks and PF trusts are two godowns of unclaimed and may be unaccounted money šŸ™‚

    Do you have any idea about the following ?

    I know that the PF interest is credited at the end of year and credited to individuals accounts one time in a year. But what happens to the interest portion of all PF accounts which gets transferred mid year ?

    e.g., if we assume the interest is credited to PF account in the month of April and say someone transferred his PF account in the month of Jan because of change in job. Does he get interest for the period till Jan that at the old PF office or the new one ?

    It’s all a black hole because the PF orgs treat our PF statements like some weapon secret which is not be revealed till the technology is fresh. We are still waiting for the PF statements for Year 2008-09. Am in Bangalore.

  2. no Sujatha, this is a mistake that people make. All publicly available info (howsoever accurate or otherwise) is already in the price. So this is just one piece which makes SBI look nice…there may be other contradicting factors too šŸ™‚ be careful. Caveat Emptor.

  3. HI Subra,

    I really liked the email you got.. 10 month SIP giving negative returns.. I dont know how people get into a 10 month sip and benchmark them to equity markets being bad and so on.

    There is a market for everything especially in India where anything can be sold to anybody.. In Life Insurance, they call it CONCEPT SELLING… I liked their concept of selling ;-)..

    God’s Great šŸ™‚

  4. Mr.Subra ā€“ I never know that you are a supporter of efficient market hypothesis. Iā€™m referring your reply to Ms.Sujatha. Do you really believe that markets are efficient?

  5. No one analyses of what kind of people keeps huge balances. Most of the people comment that ‘risk averse’ category park the funds in FDs. Lot of HNIs be it NRIs, Celebreties and Businessmen including corporates keep their funds in deposits. If some one is jobless, the pressure is there for him/her to generate the additional income that beats the inflation to survive. As long as some one gets their income through job (good raise/bonus/increment) and should not be advised that the returns from the deposit do not exceed the market returns. As Warren said, the focus of individuals and businesses should be on primary income rather than spending energy on savings or profits.

  6. how much money you have at the end of your working life is a function of how well you managed your money. Not how much money you made and did not manage well.

    Or you work much more than what is ‘financially’ necessary.

  7. Hi Krish,
    You are saying that jobless people invest in assets which might beat inflation. But with high returns comes high risk. The jobless person might lose part of principal if bets go wrong. So I think jobless people should invest in safest instruments.

    The answer is not very simple though. If a jobless person has money which is 100 times of annual expenses then he can bet on high risk assets.
    If a jobless person has money which is 5 times of annual expenses then he would play safe and put money in FD.

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