HA ha….most of you know where this question will head right?

The latest documents from the Fed reveal that they did not understand what is happening in the Economy. I always knew it – and those following me on FB know my views about the regulators in general and Fed in particular. For a momentary unit of time even if we assume RBI and MoF understand what is happening in the Indian economy, do you agree with the inflation numbers that they tell you?

OMG, NO! , is what you said, correct?

At a recent meet I asked a few couples to calculate inflation as IMPACTING them. The answers STUNNED them. In case of medical expenses it was 14%, in case of education it was about 15%,….ONLY in case of things like white goods (they did not even remember the price of the things which had got spoilt), ….was it under 10%.

So inflation is a number which should worry YOU. And only YOU know how much is that number.

Without caring what number the government puts out as inflation number, let me assume that YOU are hit with a 10% inflation.

Let us know ask a basic question.

What is investing?

Well investing is giving money to somebody for us to get back that money + something – and we have to make sure that the money got back is higher so as to cover tax at say 30%, AND inflation……and still make sense.

How many FIXED RETURN investments (technically called savings) today will give you a return so damn high as to get you about 15% return (30% tax will take away Rs. 5 as tax). Beats me. Or something that will give you 10% TAX FREE interest? None.

Now let us look at Gold – an awesome asset with a fantastic 10 year run, but a poor immediate one year track record. Gold is a good protection against the over printing by Central Banks in general, but not exactly a great protector of the value over say 80 years of life!

That brings us to land. Land is a difficult asset class for a retail investor to handle…chances are he/she who has to deal with real estate does not need any inputs from me at least, and will do it himself / herself. So Ulwe, Dombivili, …etc. etc. where you can buy a ‘house’ for Rs. 40 Lakhs is the thing to do? I have no answer. No clue.

If we now look at the last asset class – it is equities. This asset class has been a good performer for Calendar 2012 and is likely to be good even for the next 4-7 years. Does it mean 2013 will be bad? I am not sure.

I still stick to a 5-7 year SIP and if you do want to compare any other asset class take a SIP, moving weighted averaged return….and then come to a conclusion about this asset class.

Recently Ranjan Varma did a post comparing NPS to Hdfc Top 200 over a 4 year period. Brilliant. I only wish he had chosen 2003-2004.

I too did a comparison of Hdfc liquid fund from 24th Jan to 28th Jan – it had out performed Quantum Equity Fund. I wish I could extrapolate these 4 days returns to the next 4000 days when I will be fully invested…..any help? anybody?

Simple. Figures do not lie, it just depends on how you look at them. Liar’s figure that out. lol.

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  1. Two aspects of NPS acts as a detterence.
    1) Marriage to one Investment Manager/Advisor (SBI / ICICI etc who manage NPS). Not sure , if you can change Manager if you want to. However, there are six Managers provided within NPS.
    2) Max of 50% in equity. I think, equity will easily outperform Debt by 2-5% over the next 15 years. SIPs may probably do even better.
    3) What after the mandated lock-in period? Does the money compulsorily go into Annuities? Annuity generally give 6-8% returns – May chose annuity after 75+, but definitely not at age 60.
    4) Recent increase in Fee to 0.25% – there are a few Index Funds / ETF which can be bought at that fee. And unlike NPS, we have the luxury of withdrawing (after lock-ins if any), change + do whatever we want to do with it at Age 60.

    Not a big fan of PPF too. Would rather invest in Franklin Retirement Fund OR UTI Retirement Fund.
    1) Both have long-term returns of appx 10% compounded (1.5% more than PPF) – expenses included.
    2) I need not invest every year in Retirement Fund. PPF – I need to.
    3) A/c Maintenance is easy with Mutual Funds. PPF (esp the ones with Post Office) are not easy to maintain
    If somebody has a better opinion, please anyone enlighten how PPF could be a better option.

    Tks for reading.

  2. Subra Sir,

    Off topic.. Is it possible to remove Zivame advertisements from the blogs? Its right on top of the page and it becomes uncomfortable to read at workplace.

  3. Subra sir
    I did an analysis of sip investment from jan 9th 2008 to jan 14th 2013.Sip for Rs. 1000 in hdfc top 200 has generated 14% CAGR inspite of sensex flat return.Icici discovery and Idfc premier has generated much more.
    Rs.60000 investment is worth Rs.87700

  4. c j gopinath as long as you are happy with a 14% return, that is great. The media hardly knows what is a good market and what is bad. I am an investor in top 200, but thankfully much more money in Discovery and Templeton India Growth fund.

    Be happy and spread the word that ‘chasing’ timing is fun, but doing it successfully is tough…

  5. Subra Sir,

    I regular reader of your blog.
    Need explaination on your last comment
    “”I am an investor in top 200, but thankfully much more money in Discovery and Templeton India Growth fund. “”.
    In your earlier blog you mentioned that you switched your corpus from ICICI discovery to ICICI dynamic due to Naresh Shankaran.
    Then how your investment is more in discovery ?
    Also you are fond of Prashant Jain also then why Templeton India Growth fund ?

  6. Subra Sir,

    I am regular reader of your blog.
    Need explaination on your last comment
    “”I am an investor in top 200, but thankfully much more money in Discovery and Templeton India Growth fund. “”.
    In your earlier blog you mentioned that you switched your corpus from ICICI discovery to ICICI dynamic due to Naren Shankaran.
    Then how your investment is more in discovery ?
    Also you are fond of Prashant Jain, then why Templeton India Growth fund ?

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