However you may not find all of these in one place ..So here it is:

1. To be prosperous you have to believe and behave like you are prosperous.

2. Wealth is a subset – being prosperous is far greater than being wealthy.

3. Being Rich is much smaller than being wealthy

4. Being Rich, Wealthy or Prosperous is a mindset, not an amount of money in the bank..or elsewhere.

5. Givers Gain – prosperity and happiness are both got while pursuing something else. When you are enriching others, or creating happiness for others wealth and happiness come to you. Surely when you give, the natural laws ensure that you get. Seen it too often – so saying it from conviction, nor just somebody else says it. Givers Gain is the motto of ‘Business Network International’. Surely Mr. Ivan Meisner and Mr. Niiraj Shah will be happy to see this mention!!

6. Keep your mind clean, clear of clutter, develop powerful vision and do not be afraid to ask – and you will get.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

If you are wondering what this means for doctors, read on!

Very rarely do doctors seek advice on investing in their own ‘profession’ – and try to make it a business. They seek outside investments. Clearly wealth creation from your own ‘profession’ – being converted into a business is a great thing to do. Is it possible for a doctor to do so? I think yes. Ask Dr. Prathap Reddy – the founder of Apollo Hospitals.

If you are a doctor earning well it is time you tried converting the profession into a business. This means you are earning not only on your skills as a doctor, but also on the ability to leverage the skills as a doctor-cum-businessman. What are the steps required for this metamorphosis from a larvae to a butterfly?

Well the following steps would be nice:

1.    Decide on how to grow the business – geographically (chain of small clinics with your brand name?) or by creating a hospital.
2.    Once you decide to set up a hospital – look for a good location where you can one day grow to be a really big hospital.
3.    Make a business plan – make your strategy, invest in resources, work the strategy and just do it!
4.    Be ready to let go of non medical functions to a partner with good management skills. Such a person should be brought in early in life so that the business can grow.
5.    Spend time on good systems, people, marketing, brand building, etc.
6.    Keep in mind funding sources – angel investors, venture capital and then listing. It is clearly the best way to create big wealth.
7.    Creating a big business has to start with a nice idea, perhaps a couple of like minded people to team up with you and the guts to launch the business.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

If you are wondering what this means for doctors, read on!

Very rarely do doctors seek advice on investing in their own ‘profession’ – and try to make it a business. They seek outside investments. Clearly wealth creation from your own ‘profession’ – being converted into a business is a great thing to do. Is it possible for a doctor to do so? I think yes. Ask Dr. Prathap Reddy – the founder of Apollo Hospitals.

If you are a doctor earning well it is time you tried converting the profession into a business. This means you are earning not only on your skills as a doctor, but also on the ability to leverage the skills as a doctor-cum-businessman. What are the steps required for this metamorphosis from a larvae to a butterfly?

Well the following steps would be nice:

1.    Decide on how to grow the business – geographically (chain of small clinics with your brand name?) or by creating a hospital.

2.    Once you decide to set up a hospital – look for a good location where you can one day grow to be a really big hospital.

3.    Make a business plan – make your strategy, invest in resources, work the strategy and just do it!

4.    Be ready to let go of non medical functions to a partner with good management skills. Such a

person should be brought in early in life so that the business can grow.

5.    Spend time on good systems, people, marketing, brand building, etc.

6.    Keep in mind funding sources – angel investors, venture capital and then listing. It is clearly the best way to create big wealth.

7.    Creating a big business has to start with a nice idea, perhaps a couple of like minded people to team up with you and the guts to launch the business.

stop listening to people who ask doctors to do SIP, ULIP, PPF,…..that is for employees. You have a choice of where to invest – make that choice wisely. Stop buying properties and some stupid shares just because you got some advise. The adviser needs to be changed, that is all.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

The most important step towards financial freedom is to keep the yardstick to be judged to yourself. Why should you worry about the world judging you if you do not even agree with the yardstick that the world has created?

I have a friend with a net-worth of at least Rs. 150 million, but does not own a car. He spends more time in meditation than on his business. And I have friends who will take a lot of trouble to tell me that they are doing well. L O L.

If you choose to lead a contented life and find your near and dear ones liking you for doing it, tell the world to ‘go take a walk’.

This post was inspired by a mail that I received from ‘The simple dollar’ – he says something about ‘who judges you’ and though I do not agree with it completely here is the link….

http://www.thesimpledollar.com/2010/04/26/who-judges-you/

Comparisons, judging people with old yardsticks, over compensating for childhood inadequacies, etc. are a lower level living (hmmm I am judging you, ignore me ). Makes sense to come out of the rat race? Come out. Because even after you win you realize that you are only a rat, and so are the judges. If you live like a man you can get by with zero cheese. Let whoever wants it take away my cheese.

Hey wait, so what if you do not want to come out of the race? Be in it!

After all there is a very thin line between – laziness, not being able to achieve and being satisfied. It is like body pain and laziness  vs. body being sore – you have to make efforts to find out the line!

Nor do I have to become a Monk to sell my Ferrari. LOL.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

If you are wondering what is the connection, here is a hindu mythological story for you.

Have you ever wondered why ‘ghee’ is offerred as a sacred offerring in the Hindu festivals? Or why your grandmother and mother said ‘you should have some ghee while you eat?’

Well, a brown or black cow eats greeen grass and produces white milk. Now you may like the milk but you cannot really preserve it. To preserve it you need to heat it – and you have made sure that it lasts one day or perhaps two. Well you can turn it into curd and it may last say 3 days, but surely not beyond that.

However you can churn the curd…and churn vigorously and separate the ‘butter’ from the butter milk. Now by converting the milk into butter you have increased its life a little more ….maybe a week or a fortnight. However if you again subject it to heat it changes form..and some black particles come out of it – some are put back, and some are filtered out. However after all the heating, and stirring with a ladle…you are left with GHEE.

This is the essence of life – to build it you need a lot of introspection, outside heat, stirring, putting back, removing the black particles,….and it is the same in the case of creating an equity portfolio. You need to create a portfolio, keep looking at it, churn it (normally people keep the black particles and throw out the ghee!

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

I cannot comment for every one, but too many people I meet are in denial about their financial needs for retirement. Most of us do not want to accept that we will buy 3-4 washing machines, air conditioners, refrigerators, maybe about 2-5 cars, at least one or two houses during our retired life! Imagine you retire at 49 and live till 87. Ask yourself have you ever lived 40 years in one house? have you used one car for 40 years? Ditto for all white goods…so you know what I mean.

And all this buying will happen with our own money – i.e. by selling our mutual funds, unit linked plans, shares, etc. and from our pensions!

Strong financial planning is the key to a comfortable retirement

If you’re planning to spend your retirement in comfort, you’ll need to rely on some pretty strong financial planning. You’ll want to take into account your current financial position and your anticipated retirement income, preparing for contingencies and unexpected expenses along the way. Then you’ll need to develop a strategy for setting aside money on a regular basis to fund your retirement financial planning and choose wise investments so your money will build as much as you need. It’s kind of a daunting task, and it’s no wonder that so many people planning their retirement are worried about the quality of financial planning available in the country.

Benefits of the top financial products for retirement planning – Critical need for Long Term Care Insurance.

There is a critical financial aspect of retirement planning today. If you lose the capacity to take care of yourself and require either in-home assistance or be transferred to a nursing home, all the financial resources you set aside when planning your retirement may be spent in just a few years on the cost of health care. Long term care insurance will cover the cost of your medical needs without jeopardizing the wealth you’ve accumulated for retirement or want to pass on to your heirs. Unfortunately no such insurance is available in India as of now.

From whatever discussion that I have had with a few insurance companies, there is no such plan in the near future also. Choosing the right type of life insurance is also part of planning for the financial circumstances of retirement. If something were to happen to you before you retire, you likely would want your spouse to still have the lifestyle and financial security in retirement you envisioned in your planning, and the right life insurance policy can ensure that.

happy retirement.. Did you know you could ‘Retire Rich Investing Rs. 40 a day?”. I will tell you how….soon!!

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Most Indians (sorry this may be homogenising all other religions!) know this prayer. Today is Teachers’ day. It is one profession for whom my fascination will never end. I recently met a Pediatrician with 35 years ex experience – she teaches for an amount of fees that is less than the cost of petrol from her house to the college. Why people teach even if not paid well could be to ‘learn’ from their students, but after 35 years of experience?

 Well that is the ‘love’ of teaching, is it not? Here is an amazing story.

 A ‘white’ journalist from Europe was visiting Jagadguru Shankaracharya of Kanchi. The journalist asked him saying “you are a guru to a handful of south indians – that to largely of a particular caste, how can you call yourself a ‘jagad guru’ \ teacher to the world. Shankaracharya just smiled and said “Your interpretation of the word is different from mine. When I am called Jagadguru, I mean Iam learning from the Jagad. Every person, tree, animal, incident, book to me is a learning opportunity so I am a Jagadguru – the Jagad is my guru. It is a fantastic learning for anybody.

The other example I like to tell my students is to say  – Look at the entrance of any temple – it has an elephant and a lion. Elephant stands for prosperity and the lion for strength. Wealth and strength are normally the causes of a person’s ego. When you go into a temple, the symbols remind you to leave the ego outside. It is exactly how you should enter a classroom – there is always something to learn. If you go in thinking ‘I know more than the trainer / teacher, you miss out on the learning opportunities. It is a complete waste of time, you might as well go watch a movie without disturbing others in the class.

Hey thankyou all my teachers, students, professors, trainers, customers, readers, colleagues, ….I am what I am because of you. If there is something lacking in me -it is my ego preventing me from correcting it.

So hey God give me the strength to over come it. Happy teachers day to all of you. Most of us have been created by our teachers.

Mata, Pita, Guru, Daivam!

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Similarly if you want to be a good investor watching television or the pink papers or the personal finance magazines and websites may be not the best way to prepare!

What do you really need to do to lead a simple, healthy life? Eat simple food (which your body knows), keep regular habits, get some exercise, get adequate sleep – these simple things should help you in your quest for a good healthy life.

It is exactly same for your investments – keep it simple (do not invest in asset classes you do not understand), invest regularly in mutual funds (for your short term requirement i.e. less than 6-7 years) or unit linked plans (longer term requirements), keep some money in banks for an emergency, spend less than what you earn. Learning about equity, commodities, ‘real’ estate and debt markets is a must if you are serious about investing. Learning happens from books – classic well written books which have stood the test of time. It is very difficult to learn from magazines, television, etc. and there are valid reasons for the same.

The limitations that media has in ‘educating’ an amateur is multi-fold. Let us look at some of them:

Journalists are trained to be journalists, not financial analysts. To create wealth over long periods of time you need to do some simple things – like goal setting, creating a financial inventory, etc. whereas a journalist ends up giving ‘tips’ on which share to buy or which mutual fund to pick. For doing this he is aided by websites (nationally valuresearchonline.com and internationally Morningstar.com) which do a fantastic job of using the past data.

Unfortunately they come with a plug line ‘past is not an indicator of future performance’. Though of course for most of the investors and advisors what some of these funds say is the basis of creating ‘future’ portfolios, usually to the detriment of the ‘poor’ investor. In fact stories like “Ten best funds to invest TODAY” are great on the cover of a magazine but do precious little to ‘educate’ the real investor. Topics like asset allocation, risk analysis, compounding, indexing, etc. are surely not cover story material at all. That unfortunately is perhaps what the retail investor needs!

Media does not employ specialists – the person covering mutual funds covers banking, life insurance, car loans, and everything in personal finance. This person is completely out of breadth – from where will they find depth?

When an an expert speaks on television – it sounds more like weather prediction or astrology. The take away for the viewer is almost nothing. For example I have caught myself saying “Before you invest you should do a proper fundamental analysis of the company”. Take a worse statement “Frankly this share looks very weak fundamentally, but technically I do not know whether it is a good time to sell or some upside is still left”. This may be a perfectly accurate statement, but it is utterly useless for the common investor.

There is a huge conflict between what is good for the investor (not trader) and what the financial services industry wants him to do. Warren Buffet says ‘inaction’ for long periods of time is a sensible strategy to adopt. However the media can make you feel rotten for doing nothing. Programs are titled “Is it time to switch from Equity funds to Gold funds” – this is enough for the retail investor to start twitching his thumbs and call his ‘adviser’ who will help him churn. In a rising market – analysts, media and the end user of the information (for whom purportedly the information is being sought, analyzed and delivered) are all optimistic about the company prediction. It is exactly the opposite in a falling market. Does the media coverage of a single share create more volatility in ‘trading’ markets? I do not have enough evidence to speak for or against this.

One fantastic exercise a retail investor can do. Invest in a 200 page note book and see what each person coming to the channel (or writes) says. Make a summary and read it after 6 months. You might have a humor book on your hand. Maybe the publisher may pay you a nice round sum which you can use as a retirement plan.

If on television you hear me telling one viewer “you should reduce your exposure to Kotak K-30 and use the proceeds to invest in Franklin India Prima” and tell another viewer “you should sell your Franklin India Prima and invest in Kotak K-30” am I contradicting myself? No. One viewer may be shifting from large cap to mid-cap and the other shifting from mid cap to large cap schemes. Imagine the plight of a viewer, especially if he is making notes.

Normally in sectoral funds you should be buying it only when everybody is shunning it – which means when it is languishing at some low net asset value. Currently for example if everybody is pushing an infrastructure fund, maybe as an investor should be looking at a FMCG fund or a pharma fund! So the inherent conflict between advising, media and selling comes to the fore.

For a seasoned investor magazines and television come across as a series of advertisements – some obvious and some not so obvious. So to make out the difference between advice, and noise is significantly difficult if not impossible.

Most magazines (and channels) can rarely make out the difference between ‘traders’ and ‘investors’ – which means you will hear statements like – Investors will benefit by a reduction (or abolition) of securities trading tax. Frankly investors should not be worried about transaction costs at all – it is for the traders to worry about transaction costs. There can be many such examples to quote from.

Investment advice is very simple – but has to be delivered in a different way for each of the recipient. At times it has to be delivered like a teacher, sometimes like a friend, and sometimes like a child to a parent – and sometimes like a parent to a child. It is difficult for mass media to do this consistently and for a long period of time. At times the end user may not find it palatable, but deliver you must. Like a doctor giving bitter medicines to a patient or a mother mixing bitter medicines with honey so that it can be eaten.

In case of a magazine the editorial is clearly in a different location from the articles and the advertisement. In case of television unfortunately that distinction is impossible to make – in most times for the journos themselves! There is no website or magazine which ever checks the ideas given by ‘an expert’ after some time – say 4-6 weeks or on the happening of an event.

So if your teacher is the pink paper or a television channel, please have a plan B for retirement – it will be too late by the time you can correct!

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

A friend who heads wealth in a big branded organisation was sitting in his office…and I was one of the persons in the room when this happened. We were having coffee when his immediate assisstant came asking him to come along for a meet. My friend said all the right words..You must learn to make big calls, this bank encourages people to grow…and actually pushed him off alone.

I wondered why. I must have wondered aloud! He immediately said “I know too much about the product, market and the clients needs..if I go my body language will spoil the sale..but he may be able to bring the Rs. 10 crore cheque. Not bad I thought!

The second friend was talking to me about how one product – a pretty convulted mutual fund operating from Dubai with a choice of 350 fund schemes etc. I violently protested saying that putting away that kind of money over the next 3 years was not exactly my way of managing my money. Then I asked him whether there was any conflict of interest. He said only if you can prove that I have YOUR interest at heart, is there a conflict against my bank’s interest….Oh la la la I said.

But this one takes the cake!

Having spent a lot of time in a wealth advisory job. Collected contacts, established credibility, pushed products….now  has quit and started own wealth advisory firm. The reason for creating own outfit has been given as ‘conflict of interest in the previous job’ – having spent 5 years there….!!

So, God bless!

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Signals for survival
P.V. Subramanyam
February 17, 2009

You have heard about the clash of civilisations; now read about the collision of markets. Mohamed El-Erian, argues that the global financial crisis is only the effect. The cause is the process in which “the markets of yesterday collide with those of tomorrow”. What lies beneath this meltdown is a series of hand-offs, such as the earlier debtor nations building wealth and buying assets and influence, and new financial products coming into play.

When markets collide Price    Rs 350 Author    Mohamed El-Erian  Publisher    Tata McGraw-Hill
Target audience    Serious students of investing
Quick read tip    Go through the first three chapters, which give a good overview and are bereft of the ‘home’ bias that comes in later
Language    Difficult
Style    Academics
Visuals    Graphics, tables and charts

This collision, like all clashes, produces noise. But the crux of El-Erian’s argument-and the point relevant to investors worldwide-is that within this noise are signals. The investors who are able to understand these signals are the ones who will be able to prosper in the emerging, chaotic, new economic world order.

El-Erian tries to provide his readers with the anchors, the analytical tools, necessary to find safer havens in the stormy financial seas that they must encounter. He should know. El-Erian is the co-CEO and c-CIO of PIMCO, one of the largest investment management companies in the world. He has also spent 15 years at the International Monetary Fund, and earlier, managed a $35-billion endowment at The Harvard Management Company.

The book is aimed at the mid-level audience- it’s too simple for an academician and complicated for the lay reader-and tries to explain that sensible investors too need to observe market data and spot the anomalies. After the screening, investors should analyse the noise episodes, recognising that there will be false positives when they try to find the signals. They must not forget that though most causes will be cyclical factors, occasionally they will be long-term structural changes that will fundamentally alter the approach to be taken.

El-Erian’s effort to deconstruct the collision process and our understanding of it is fairly comprehensive; the problem begins when he suggests solutions. He tries to create a simple portfolio that will stand the test of time. Similar to the detailed asset allocation model of David Swenson, who manages the endowment at Yale, this one too has a mixture of low correlated assets. But with the economies intertwined and constant change, the fear is whether the model is sturdy enough.

Also, tactically, each individual needs to change his asset allocation and cannot stick to just one model as a strategy. Though conventional wisdom has been that equity in emerging markets is not too correlated to the US equity, the fact is that the US recession is taking a toll on both the Chinese factories and the Indian call centres.

Similarly, when share prices of a particular company, or even an industry, come down, you see the debt being downgraded (for instance, the construction industry). So having equity and debt, which is traditionally seen as a risk reduction technique, may not help. Besides, the recent craze of stripping all cash flows and creating separate assets out of each has increased volatility and trading expenses while reducing the returns for the end investor.

Another surprising fact is that though El-Erian wants to create an asset allocation plan consistent with forward-looking realities, in Chapter 6, he quotes Jeremy Siegel’s study on equity returns and agrees with his historical view that the market offers an attractive ‘equity risk premium’. It’s a classic example of what Peter Lynch calls ‘looking at the rear-view mirror and driving’.

Currency risk, differences in accounting and governing structures, rule-of-law concerns, etc, only find a passing reference. However, it’s a fact that there is less disclosure in Japan than the US. In India, shareholders are not given information about any transactions conducted in scrip by top executives, while it is mandatory in the US. The book is clearly aimed at the money managers in the US. Hence, perhaps, the ‘home bias’ in the portfolio. Could an Indian fund manager (even assuming full convertibility) create such a portfolio? Doubtful.

One cannot feel the ‘recency’ bias-the allocation to commodities is 11-15%. Swenson allocates 30% to the US securities; El-Erian, just 15%. Swenson has no commodities; El-Erian does. If it’s because the commodities market has performed better in the past three years, no logic for the weightage is provided. He talks about construction bias in indexing, passive positioning, identification and assessment, all of which are bound to leave the common investors confused. He also refers to Sovereign Wealth Funds, but doesn’t say how they will react to meltdowns.

The book is a neat primer and too good to ignore if you are a serious student of investing. Keep your analytical eyes wide open, but investment expectations low-and you won’t be disappointed by the returns.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.