pension

interest and dividends

children

Well these people have some really tough decisions to make:

1. Where to stay? : I have stayed all my life in Mumbai, now I have a house in Pune, but I cannot stand the cold! For many people tolerance to the weather becomes an issue around the age of 70years.

2. Do I sell the main house: I have a house in old Mumbai – and it will fetch a nice big amount. However if I do not like the new location…I will not be able to buy back in Mumbai! This is a huge dilemma.

3. If I sell my house for Rs. 100 lakhs in Mumbai and buy a house in Pune for Rs. 50 lakhs – how do I make sure that my son and daughter do not ask for the 50L?

4. How to manage my portfolio – I have no clue how long me and my wife will live. I have Rs. 45 lakhs, one house in Mumbai with a current value of about Rs. 100 lakhs. I am 64…and no clue whether this amount is enough?

5. How much can I withdraw from Rs. 45 lakhs without worrying about exhausting the money during our lifetime?

6. The house I live is worth a lot, however it is in a building that is 30 years old…I am not eligible for a Reverse Mortgage because they fund only buildings that are less than 17 years old. What should I do?

7. I have lived in a comfortable budget all my life, how much should I worry about inflation?

8. Should I sell this house and buy 2 houses in Pune – staying in one and giving the other on rent to my son? He will not have to pay rent once we are not around…is there a risk in such a deal? what is the risk?

9. My son wants me to guarantee a loan that he and his wife are taking for doing a new business. My daughter and son in law are asking me not to sign, my wife is asking me to sign. I have no clue what to do!

10. I have medical insurance but I feel it is not adequate…what should I do?

more questions later

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This program was at Yashada – a very nice learning center in Aundh, Pune. It was a packed auditorium and if the people took back whatever Debashis and Sucheta said, they would be well off if they implemented even half of it. Taking it to the next logical step of making the client actually do it is a challenge. Scaling it up to reach all the corners of India (Youtube!) and making it relevant for a larger cross section of the population will be a challenge that has to be addressed. Was personally happy to hear Debashis talk about ‘investing’ in real estate and gold – it could not have found him fans . As time goes by will write more about Moneylife Foundation which is a CSR initiative for Debasis and Sucheta. Best of luck Sucheta, best of luck Debashis.

Sunday was a book reading session of ‘Retire Rich: Invest Rs. 40 a day’ also at Aundh, Pune. This was at Hotel Seasons and was organised by Twist n tales and the publisher Cnbc TV 18. Deepa Venkatraghvan read an important chapter and told people how to start early. Very good quality of crowd and very smart questions were asked. Convinced one woman why she should know more about money and her husband know more about cooking.

http://www.twistntales.blogspot.com/

Then I read from Deepa’s book – ‘What an agent will tell you, and you should not listen . …more will follow..

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If you or your kids have not read – The diary of Anne Frank – you must. Not because it is the greatest book ever written, but because it is a great story told without self pity. Scared yes, pitied no.

Anne Frank is a spirit. Do not let the spirit die. One day the oppressive machinery will fail – it is surprising that the Germans left behind a small red diary (which her father found and gave it to a couple of American film makers) – and the truth will prevail. There is after all the universal law “Good will bring good, and bad will bring bad”. Once in a while we feel that God forgets this law – that is our weakness, not God’s failure. Like in investing, in the long run price and value shall merge.

A good place to buy this book is Twistntales – a nice shop in Gaikwad Nagar, Aundh, Pune

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“Renting is for poor people.”
Of course renting is for poor people – very much true. But it’s for rich people, too. I know if I name some of the people who live in rented houses – with their designations some of you might torch me. The closest I can come to sharing the name is to call it the ‘Gandhi Topi’ trick and leave it to you to understand what it means. A few people who I know who have apartments costing upwards of Rs. 15 million have bought it from stunning equity market gains – to ‘redo’ their asset allocation in a bull market. So if there is a school of thought that ‘renting is for poor people’ I will let you live with that thought. Just add that there is one person who I know (net worth circa Rs. 1000 crores at least) who lives in a rented flat. High-income people, presumably with a dose of financial savvy, often rent nice houses instead of buying.

“I’ve made a fortune on my house in recent years. I cannot agree that houses return almost zero percent”

You’re referring to gross returns over a short time period (2002 to 2007 all assets went up) that combined low interest rates, high leveraging, an asset bubble build up, and  greedy lenders all over the world. Over the next 20 years I believe houses will return zero or slightly less after inflation and that stocks will return 7% – I can assure you that this is the most atrocious statement that I have made in a long time, and I hope you come back to me (in 2029) and say, hey it was only 5%. Can live with that!
2009 is likely to be different however – have seen offers at 50% of the ‘offer’ prices for bulk buyers!

“So you’re never going to buy a house?”

In this particular question I am on a sticky wicket. I hopefully will inherit a house from my father when I need it – an old age home in Pune. It is an excellent location, a great house, and will suit me in my ‘retired’ life. This could happen in say 15 years – but the longer I can put it off the more I’ll get out of the shares that i hold. If I have to buy one after some time, it will come from selling some shares rather than ‘borrowing’ and making money for the Hdfc shareholder. I’m going to try to rent for at least 15 more years. If my daughter needs a separate room, I’ll probably move into a bigger apartment. I’ll rent, most likely.

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It is met with an “obviously no. why do you even ask”. Well the obviously no is said and ‘why do you even ask is in the body language.

I tell them, if you get used to using a car for, say 3 years, you have a problem, do you not?

Let us say you retire at the age of 55 (highly probable) and live up to the age of 90 (sad, but again possible). This means you have about 35 years in retirement. If you use a car for say 5 years (instead of 3 at present) you will need to buy at least 5 cars (assuming you drive till 80, then, start using a driver). Also buildings that are constructed today may not last 35 years. So if you have bought a house when you are 45 years of age, that may last say for 35 years. So at your age of 80, you will have to BUY a new house!

My father bought a house in Pune – Athashree (see www.paranjapebuilders.com) – which is a beautiful place for senior citizens to live. It has fantastic assisted living facilities. My mom’s brother bought a place for himself in Coimbatore. My Mom’s sister bought herself a nice house in Bangalore – where they liked the weather compared to their Chennai residence. All of them were above the age of 70 when this 2nd house purchase was made. The funding came from their mutual funds, ppf, sale of equity shares.

All of them had kept their primary residence – just in case they had to come back!

So in your post retirement age you will end up buying at least one house, a few cars, a few mobiles, a few white goods appliances, a few vacations (optional), medical care, assisted living, long term care, etc.

The question is no loans will be available for these purchases. You will pay cash – and the cash will come from redeeming your mutual funds, ppf, ulips, equity shares, etc. So apart from providing for your food, medicines, etc. provide for purchase of all these assets.

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