After spending 10 years in the ‘profession‘ of training here are some expensive learning:

Television is an entertainment source – not an education source.

To be good in the media you need to say something interesting / controversial. Largely you can say anything and be sure that it will not come back to haunt you, because the program was not recorded by the viewer.

You can get paid to entertain far far better than to teach. Actors get paid more than teachers, correct? Do not argue with the market. Take to teaching ONLY if you are not Kareena kapoor.

Investing is a lousy group sport, but a great solo sport. Like golf you keep trying to get better than yourself each year!

Managing money is far more difficult than making it. Reasonable Index returns are easy to get, but trying to get that return above the index return (called alpha) can sometimes take you to the cleaners.

Managing money is not about doing difficult things, it is about doing simple things well, staying out of harm’s way and controlling your ego about stopping the feeling “how smart you are”.

Growing your money is about understanding risk and knowing how to react to it, not about your IQ.

more to follow….

http://www.subramoney.com/book-written-by-me/

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The typical middle class guy is happy, but of course skeptical. The questions he is asking are the following:
Will this market rally last?
Does it have the strength to last?
Will it come down again?
Is it a dead cat bounce?
What do the chartists say?
The most honest answer is nobody has an accurate answer to any of these questions. And when I say markets it is generic – US markets, Indian markets, all behave more or less similarly.

However, one theory that investors / traders are willing to buy is ‘the worst is over’. Having been in the markets on the journey up to 21k, many believe that 7500 will be re-tested.

People are skeptical (In US and in India) about the economy. Are they right?
Sure they are right. Lots of pain is left in the economy.

Let us look at the US economy first:
·    Jobs are still being lost
·    People find it difficult to believe that some banks can be profitable so quickly
·    Banking is in a mess – ask Warren Buffet!
·    Real estate is falling ‘less fast’
·    Nobody is sure about what Maddox has done!

What about the Indian economy?
1.    Banking is slowing but is not in a mess
2.    Jobs are still being lost
3.    Some new jobs are being created
4.    Real estate is down by a mile
5.    Salaries, rent, interest rates are all headed south

How much of an IQ do you need to say things can get worse in the real economy? Not much I guess. It took me quite a long time to realize that there is no direct relation between the equity markets and the direction of the economy in the short run!

So, a family hobby of buying high and selling low has been now converted to a more serious calling – teaching and writing!

The equity market goes up when all the pundits say it will tank and vice-versa! That is the reason why historians like us have learnt the greatest lesson from history – ‘you cannot learn from history’.

Why did the equity market in India suddenly add a couple of ‘000 points to the Sensex? That is about 23% jump! Or the Dow Jones spurt 20% in 18 days?
Well here is a confession – I do not know! However, if you agree that the market came down from 21k to 8k, surely there was some reason why it could also go up from 8k to 10k in a short term.

Is it a bear rally? Is it a dead cat bounce?

Remember when markets are down investors, traders, analysts, all of them look for reasons why it cannot go up – exactly reverse of how they behave in a boom.
A couple of friends who give a classic signal – when they leave the market it is a great time to buy – have left the market. To me that is a fine signal.
And all uncles and aunts say they will be out of the market for 2 years – in cash if need be – to me it is a great BUY signal.
If I knew that the market will be lower – which means I am still expecting a capital loss – I would be in cash. The problem is I do not know.

The Equity market delivers!
I have not asked my friends who shifted to cash recently – how it feels to see their next 4 years from debt markets already delivered by the market in the last fortnight! Sorry guys, I know it hurts.
Some other friends are saying “I will want stronger signals – I will wait for the markets to stabilize”. I find that sad. Wait till when? 10,342? 11,673? 12,500?

I do not think they have an answer. And I keep asking myself – is that the smart thing to do?
This is like waiting to buy AFTER the market has gone up. Why? And in a market with statistics to show that the best return is the steepest one?
Do they forget investment guru John Templeton saying “I do not know anyone who knows anyone who can time the market?”
Other investors have been pushed to the limit. They say they’ve had it. They’re done with the stock market for good.
This funny dialogue reminds me of a graveyard / a crematorium – where everybody says “what is life – it could have been you or me….” And then going home and continue doing what they have been doing.
Less cruel examples is a hangover or the promises we make ourselves at the weighing scale. Aw come on, do not kid yourself. You will be here before long. Maybe when the sensex is at 16k – and perhaps on the way down again!
Bluntly what is your choice?

If you are an investor who is investing towards some goals, do you have too much of a choice?
·    Will real estate give you inflation adjusted, post EMI return in double digits? You got to be kidding!
·    What about RBI bonds with real returns in the negative territory?
·    Or will you be tempted by Income funds – guaranteed to give you sub-RBI bond yields in the longer run also?
·    Or in gold – which has returned pathetic returns in the past 29 years – but has ridden the current metal boom?

Like it or lump it, but if you have long term goals – children’s education, own retirement, etc. you have to be in equities – directly if you know how to or through good fund managers.
Cut all this. Your question is simple. “Should I buy?”
The answer is simple. Yes. You should buy – stick to good fund houses, do good asset allocation.
If you do a SIP remember you are putting only a small portion of your money on a monthly basis.

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So let us start.

Step 1: If you have a financial plan include retirement planning into that plan. It helps to start early, and I have no clue how to convince anybody in their 20s to plan for their retirement! Imagine asking a person collecting the first salary to think of investing for retirement. It is tough. However it helps. Like any budget retirement budget starts by estimating your income and expenditure during your retired life. The most important estimate is how much will be your retirement expenses be – both day to day expenses and big chunky investments.

It is very likely that you will buy at least one house, a few cars, white goods, tours and holidays, nursing and care etc. during your retirement. Apart from these capital draw downs that you do, you will have to estimate the expenses on food, shelter and clothing too.

How much you will spend in retirement is a function of your standard of living and how long you expect to live! If your parents (or grandparents) have been living to the age of 90 years, chances are you will hit a century!

Make a realistic estimate of help that you may need for day to day living – say nursing, assisted living, old age home, inflation, un-insured medical expenses, medical insurance expenses – these are what we can call the ‘non-negotiable’ expenses. Then there are expenses like travel, fun, eating out, entertainment, – called the ‘discretionary’ expenses. These expenses will happen if the body listens to the mind!

Next draw up your list of things you own and the amounts you owe! Estimating how much you really have is an excellent exercise which you may or may not have done. This statement will tell you about all your assets and liabilities – and your ‘net worth’. Your net-worth is the mathematical difference between your assets and liabilities. Many people forget to add the cash value of their life insurance, their provident fund, etc. in their net-worth. Ensure that you include all your assets, and all your liabilities like home loan, car loan, personal loans, etc.

Your retirement life should be distributed into at least 4 parts, if not more. In case you retire at 55 and live till the age of 95 years. Your lifestyle (and therefore your expenses and income) will be different in 4 blocks as follows:

55-65,     65-75,      75-85 and       85-95.

Once you have decided your ‘blocks’ estimate your ‘retirement income’. From 55 to 65 years you may end up earning some amount by pursuing some activity – right from maintaining accounts for co-operative societies to teaching in a coaching class. Apart from this of course you should identify any income you will have in retirement – pensions, as well as any rental, dividend, interest, or other income.

Systematically withdrawing from your capital is something which you should consider only after you and your spouse reach the age of 72-73. Till then you will have to live within your income.

So make sure your expenses are less than your income!

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For me, principles are not negotiable. It does not change whether the index is at 21000 or 8000. You just have to live by them. If you went to a friend’s house and found Rs 50k lying unattended would you pick it up? That is the question you need to answer. You will not do certain things – immaterial of whether somebody is watching or not. However at 12am if you can take a ‘short cut’ – which is a ‘no entry’ there is a good chance that you will take it. Hoping there is no policeman to see what you are doing. However, if you are speeding into that ‘no entry’ road…and there is a truck coming in from the other direction…..need I say more?

There was an interesting research in US regarding being ethical. There was no clear conclusion that ‘being unethical’ made more money.

So my conclusions are as follows:

If you are unethical in your dealings, one day you will be caught. If you are caught when youa re 22 years of age, you are lucky – you can re-think your career. If you are caught at 85 years you are lucky – your career is anyway over. However if you are caught at age 45 you are neither here nor there! Ketan Parikh, Harshad Mehta, Ramalinga Raju, R Subramaniam (Subhiksha) all of them are sufferring because they were caught at what they thought was the peak of their career. There are enough and more ‘Subhiksha’ stories on the net – right from his alumni members, his ex-employees, his current employees, vendors, customers, etc. have written about him!

Take the case of Ketan Parekh. He came from a family of good repute. His grandfather and father used to be consulted for settling disputes amongst brokers in their time. He was rich. Seriously rich. However his machinations made sure his father went to jail – at least for a day. I do not wish to name a few of his family members who are now not allowed to come into India – one of them was a kid when I was in school. His father in law had to plead with the court to go abroad for treatment for KP’s kids illness. If there is a riches to sadness story, here it is. KP was from a rich family, was qualified as a CA, could have earned enough without any of his fantasy plans. Many people may not know, but he has paid a very high price for all that he has done – and socially he is ruined. God bless him.

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Many people know that Hanuman is the Guru according to Hindu mythology (for the very philosophically minded, Hanuman caused the Atma (Sita) to join the Parmatma (Ram) – and that is the essence of Ramayana. So you need a Guru to teach you from the learnings of all the great people mentioned above. However is that enough?

Many people know – and many others may not know – that Parvati (Uma) is the Hindu Goddess of Wisdom. Wisdom is about doing what you know. This is the crucial link. Training, Learning is all fine – but for it to translate into action, you need wisdom. That is the crux.

So knowing that compounding creates wealth, living a simple life gives peace, tobacco free, alcohol free, stress free living gives peace is not enough.

Seeking a simple life, doing a simple sip (and sitting tight during turbulent times), having a term insurance, one credit card, IS ABOUT DOING all that you know. That will give you nirvana. So as Nike says, Just Do it.

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