All over the world the mistakes by young people seem to be the same. Hang on, we are all guilty of the same mistakes. Since we made the mistakes, we are requesting, pleading, with you guys not to make the same mistakes. I am calling those born post 1984 as Gen Y and these are the mistakes that I see (believe me some of them are very focused and may be doing well – well not as well as Mark zuckerberg but yes on the way to good finances). If you have seen the Bloomberg figures, it takes about 300 years income to buy a luxury flat in Mumbai. So damn it, let us ignore that !! Here are my observations:

1. Ignoring compounding: Time value of money is the most important thing in saving and investing. Every blog, speaker, writer has screamed about this. The best way to tap into this is to start saving / investing early. As early as possible. Make a start today. Do a SIP in an ELSS fund and do it from today to the rest of your life. Do not interrupt the process of compounding. If the fund in which you are investing is not doing well, start a SIP in a second fund, but do a sip in an ELSS FUND, now.

2. Ignoring the power of youth: It is in your young age that you can travel the seas and look for a job in Dubai, Singapore, USA. Remember the power of earning more and therefore saving / investing more. Resistance to change means people do not want to travel for work. It is so bad that boys and girls look for a job near their house even at an young age of 30. This is so sad. On the other hand I do see some young girls willing to travel 30km everyday because they get a better paying / better learning job. There is a huge difference between getting a Rs. 18L job in Vashi (because you are staying in Kharghar) and getting a Rs. 25 lakh rupee job in Andheri. Yes you have to travel, unless you are willing to ask your family to shift house. For heavens sake, do not be geographically handicapped.

3. Most of you understand that Income MINUS Expenses = Savings. You need to change this a bit. Income MINUS Money allotted for all your goals = is available for current spending. This means you pay yourself first. You pay for your retirement, your home buying, your children’s education, your life insurance, medical insurance, etc. and then the money that is left is used for current expenditure. This forces you to learn a little about patience. Also delays the gratification. Some of you do it very well and some of you do not. Pushing all of you to do it. That is all.

4. Listening to parents about investing: This is one of the worst crimes that some of you do. Especially true if your parents are the PPF, LIC, bank FD types of savers. The generation born in the 1950s and 60s ‘saved’ for their retirement. You cannot afford that luxury. You need to ‘invest’. So you will have to be in equities for your long term goals. So if you are investing Rs. 150,000 per annum for your 80C requirements, my suggestion is Rs. 10,000 towards term insurance, Rs. 10,000 towards PPF and Rs. 130,000 towards ELSS. In case you have a contributory provident fund, say Rs. 40,000 per year, then 10k term insurance, Rs. 1k ppf, and Rs. 79,ooo in ELSS. Maximize your exposure to equity, and do it fast.

also read this

Many of these kids do live frugally, and cutting costs is really great – savings are faster and investing that money is great. However what will really create wealth for you is geographical mobility to earn more, frugal living and investing in equity. This triumvirate is what is going to create wealth for you. All 3 are equally important. 

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  1. Dear Friends,
    I have done some research on the issues related to overseas investors, especially from US who invest in Indian Mutual Funds. I saw several comments on US investments in India and hence trying to clarify.
    There is definitely ramifications when US investors invest in Indian Mutual Funds. Please read the article from ThunFinancial below:

    More than the FATCA the Passive Foreign Investment Companies (PFIC’s) pose a big problem and now that the Indian MFs are bound to disclose the investments from US Investors to IRS as India is a FATCA (Foreign Account Compliance Act)Signatory.
    To my knowledge (I am a practicing Financial Advisor)other than Pramerica and Sundaram MF, all other fund houses including the names like HDFC, Franklin, ICICI have stopped accepting investments from US Investors.
    I have been advising my clients in US about these regulations and strictly dont encourage US KYC holders to invest in Indian MFs due to PFIC complications. The same applies to Canada too.

    However all other country Investors dont have this challenge and can freely invest in India. I sincerely request the readers (US Investors) to read the article published by David, CPA from Thun Financials and decide on the course of actions.

    I have also brought this to the attention of several Indian MFs through my relationship managers.

  2. Subra Sir,

    Thanks a lot for all that you do to help educate retail investors like me. I have your blog on my bookmarks bar and regularly follow the same.

    I have been living in Europe for more than 5 years now and investing in MF’s / direct equities through my NRE A/c linked trading Account. Before opening the A/c and starting to invest I had checked and was told that whenever my status changes back to Resident Indian, all my holdings in the NRE demat A/c will be transferred to my then new Resident demat A/c. I file my tax return here in Europe as well as Nil tax return in India yearly. Haven’t made any redemption yet but understand any redemption will be credited net of tax (capital gains if applicable will be deducted before redemption proceeds are credited to my NRI trading A/c). Hope this helps.

  3. Sendhil,

    Thanks for clarification. I have lived overseas for few years and interested in this topic. I met few Indians who didn’t apply for green cards while in US. Also met some Indians who surrendered their green cards after returning to India because of tax issues.

    For some folks returning to India and earning higher returns on investment resulted in bigger networth than earning higher dollar salaries but lower returns on investments. Typically when these people reached that stage, they returned to India and surrendered green cards. Generally such people reached this stage in their 40s.

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