Author: Jagoinvestor

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When will you become a Millionaire? Top 1% of world

Posted on by Jagoinvestor

Recently, I came to know that around 6500 Indian millionaires have migrated to other countries this year.

The moment I heard this, the first thing which came to my mind is “How many millionaires are there in India? and entire world?”

Are you part of that list of millionaires? And if NO, then when will you be on that list?

When we say “Millionaire”, it means someone who has a total net worth of around $1 million, or Rs 8 crore in Indian currency apart from the house they live in!

0.7% of people in the world are millionaires

We all want to create a big retirement corpus and achieve financial freedom, but what if we keep it simple and just think of reaching $1 million first in our life? And if we can do that by the time we turn 50 yrs of age, that would be a wonderful achievement.

Especially because there are just 0.7% of people in the world who are millionaires!

Yes, you heard it right!

number of millionaires in this world

Only approximately 56 million people on their earth are millionaires (many of them are multimillionaires and billionaires also). We have close to 8 billion people on Earth, so that makes 0.7% of people on Earth as millions.

What about INDIA?

If you specifically talk about India, as per the official data, there are close to 796,000 millionaires out of 140 crores people and that makes it just 0.06% of the population.  The US alone has around 2.55 cr millioanires, while China has around 62 lacs.

So if you achieve a wealth of $1 million, then you are amongst the topmost cream layer of the country.

But how easy is it to create $1 million in India by the time you turn 50 yrs?

Truly speaking it’s not an easy task per se.

One has to be super aggressive when it comes to investing money, from an early age if one wants to reach that kind of target, especially because we also have to buy a house (most people take home loans) and clear off the loan too. Apart from these, we have other goals like buying a car, vacations, children’s education and marriage etc.

Forget creating $1 million, most people will struggle to close off their home loan by the age of 50 and create enough corpus to meet their children’s education by the age of 50.

However, A tiny percentage of people who earn very handsomely and invest smartly create good wealth and many of them will become a $ millionaire too. A good thing is that while many are leaving the country, the rate at which millionaires are getting added every year is very high.

millionaires migrating from india

What is required to create $1 million by the time you turn 50 yrs?

Let’s deal with the idea of what exactly is required to become a millionaire ($1 million or approx Rs 8 crore) by the age of 50. Here are some assumptions before we start!

Assumptions

  • This amount is apart from the primary house and any other financial goals like kids’ education, car, vacations etc
  • We will also assume that the person can increase their SIPs by 8% every year and the return on investments is around 10% (net of taxes)
  • We are assuming the same Dollar Rupee conversion rate in future also.

Note: In future (after 10-15 yrs), even $1 million will not be of same worth like today in India, however we are mainly focused on the calculation part here.

If we go with the above assumptions, here is what is required at different ages (an example)

Case 1: Age 25 

  • Current Wealth : 0
  • SIP required: Rs 35,000 per month

A 25 yr old person, with no wealth in their hands, wants to become a millionaire by the age of 50, then they will have to start a monthly investment of approx 35,000 and then continue that for the next 25 yrs. Here is how the growth will look like

Case 2: Age 35 

  • Current Wealth: 50 Lacs
  • SIP required: Rs 1,00,000 per month

A 35 yr old person, with around 50 lacs in hand, wants to become a millionaire by the age of 50, then they will have to start a monthly investment of approx 1,00,000 and then continue that for the next 15 yrs. Here is how the growth will look like

Case 3 : Age 45

  • Current Wealth: Rs 3 cr
  • SIP required: Rs 4,00,000 per month

Finally, let’s also talk about someone who is 45 yr old. They must have approx 3 cr in hand and shall be able to invest around Rs 4 lacs per month (this is just one combination), if they want to become a millionaire by the age 50. This is quite tough for most people, but still, an example has to be given.

As you can see, it’s not a child’s play to become a millionaire by age 50 yr. One has to start early and start very well and continue for a very long time to do that.

Hence, The topmost thing to focus on has to be your income-generating capability which will be income on the table and then the next step will be your discipline to continue your wealth creation path.

I hope you were able to get insights from this article. In case you want to start/continue your wealth creation journey with right-hand holding, then our wealth creation services can be helpful for you. Please click here and reach out to us to explore how we can help you in reaching your millionaire target by age 50.

5 myths about FIRE busted (Indian context)

Posted on by Jagoinvestor

We all want to achieve financial independence in our life!

  • That day, when we will have enough money!! 
  • That day, when we will no longer have to worry about our future expenses!
  • That day, when we are out of the rat race finally!

For the last couple of years, we are hearing an acronym FIRE for this!

Myths about financial Freedom

Financial Independence Retire Early (FIRE)

FIRE, or Financial Independence Retire Early, refers to achieving a point in life where you have enough money to cover your expenses and financial goals without having to work for a living.

Ideally, this happens well before the traditional retirement age of 58-60 years. Achieving FIRE means having financial security for your future, as well as the ability to travel well, spend on big-ticket expenses and also leave a legacy for future generations.

At this point, you no longer have a compulsion to actively work to “earn money”

FIRE is a great achievement 

Achieving FIRE is a wonderful accomplishment, but there are many myths that are still there in investors’ minds who have not explored or read much about this topic.

This article will bust some myths around the topic of FIRE for you today.

Let’s start!

Myth 1: FIRE is all about a big number!

Most people feel that FIRE is all about just reaching a target number. Like 5 cr or 10 cr

For those people who are totally new to this concept of FIRE, you shall know that one can call themselves financially free when you have

  • 30X of your yearly expenses – at age 60
  • 35-40X of your yearly expenses – at age 50
  • 45-50X of your yearly expenses – at age 40

* Note that all these are high-level thumb rules only!

For example, if you are at age 50 and your yearly expenses (considering everything in this) are Rs 20 lacs, then you would need 7-8 cr to call yourself financially free (FIRE’d) assuming you will live for another 40 yrs

NO, it’s not about reaching a number, but more about creating X times your expenses, when X can range from 30-50 depending on your age and your ability to invest the money properly.

  • For someone with a Rs 50,000 per month requirement in life, they need roughly 2-3 cr today
  • For someone with a 3 lacs per month requirement and wanting to FIRE at age 40, it would mean a 16-18 cr corpus today!

As you move in life, your expenses will change and hence your FIRE corpus goalpost will also shift!

Myth 2 : Life is all set after FIRE

Contrary to what most people imagine, life is not hunky-dory after you achieve FIRE.

Yes, life is very comfortable and you will surely be less worried than someone who doesn’t have enough money. But still, you have to constantly think about how your money is invested and how it’s going overall and if it will really last your lifetime or not.

This is especially true if you dont have enough margin of safety in your FIRE corpus. So if you do your calculations and Excel tells you that you need 10 cr for all your life, then if you actually FIRE with 10-12 cr, then you are on the edge!

You have very little margin of safety. The inflation can be totally different in future, you may not make exactly the same return on your portfolio, and you may have some totally unexpected life event

All these will still keep your thoughts occupied to some level.

Don’t expect yourself to be chilling on the Goa beaches with Pina Colada after FIRE. Life will be almost be the same for you  minus a lot of money worries

This is of course not true for someone who has multiple times what they truly require for financial freedom.

To learn more about FIRE, you can also watch my video below on various types of FIRE

Myth 3: So many people in India are achieving FIRE, and I am a looser

There is a lot of buzz around FIRE these days. You constantly see people on social media, youtube, telegram channels, and podcasts where the conversation is alive about FIRE.

There are many people who have already achieved FIRE or they are somewhere midway.

This has started putting a lot of “pressure” on millions of others that other than them, everyone is getting financially free these days!

Let me tell you something!

Me and my team have already interacted with more than 5000+ families in the last 10+ yrs in India + NRI and we have not seen more than 5-6 people who have achieved FIRE by the age of 40-45 yrs. I am talking about people who are into regular jobs and have to create their wealth from scratch.

Apart from these 5-6 people, there are dozens of other families who will achieve FIRE by the age 50 yrs, but not in their early 40s.

Rest all others, will at best retire at their regular 58-60 yrs age bracket. In fact, many of them may not even retire properly and may face financial crunch. I am considering the whole population here and not a specific class of people.

Only a tiny minority of people in India achieve financial freedom early in life in our observation now.

In absolute numbers, you will often see many people talking about achieving FIRE but remember that thousands of others are not close to it. In a group of 1000 people, if 2 people talk about reaching FIRE, the rest 998 people starts feeling that it’s a common thing these days

Having a few crores means FIRE?

Also, having a few crores does not mean a person has achieved FIRE.

A person having a nice loan-free house plus Rs 3-4 crores may not have even reached midway of FIRE. They look RICH (and they are) but they are not Financially FREE in the true sense. They have their own share of financial worries and insecurities.

FIRE before 50 yrs of age is a wild achievement, but it’s statistically very rare. Understand that it’s quite TOUGH to achieve and it’s normal to not achieve FIRE. You are surely not missing the FIRE bus, however, you shall give an honest attempt to achieve financial independence as early as possible

Myth 4: Achieving FIRE means never working again

FIRE is “Financial Independence Retire Early”

However, most people focus on retiring early part which is often unreal. It’s very tough to not do anything all day and just retire from your job.  Humans are designed for staying busy and be active, to pursue something. People who FIRE actually keep working and dont sit at home.

One of our readers once shared with us that to experience how it feels after retirement, he took a very long break from job (around 2 months) and tried to see what life looks like and soon realised that it’s very tough to spend the day and also withdraw from your corpus for your day to day expenses. He had to return back to the job in 2 weeks as he could not take it.

Now that’s not the best example I could give but it simply gives you a hint that “I am not working again” after FIRE is mostly wishful thinking and mostly comes to mind if you are into a stressful job and dont take enough time to enjoy your life.

Better not aim for FIRE with that mindset.

At best, what will happen is as below

You will achieve FIRE, take a very very long break and then get back into some low-stress job/work which gives you a lot of flexibility and help you explore your hobbies/what you enjoy.

Also, its a good idea to talk to your spouse once about your plans of staying at home all day after FIRE, mostly you will be directed to keep working for a few more years as they won’t be able to tolerate you all day long at home 😉

Myth 5: FIRE requires extreme frugality and deprivation

This is one of the biggest myths in my opinion about FIRE.

A lot of people feel that cutting down on expenses and depriving themselves of the initial years will help them move towards FIRE. After all, what you save will get added to your wealth kitty.

This is not TRUE!

Most of the people who actually reach FIRE early in life are those whose focus is on increasing their INCOME and not those who cut down on their EXPENSES.

Cutting down on expenses has a limit, and truly speaking depriving yourself is not a healthy way to achieve financial freedom.

There are people who earn 5 lacs a month, stay their life in a decent manner in Rs 1 lac and save Rs 4 lacs a month in the right manner with discipline for years. These are the people who mostly FIRE young and not the one who earns a smaller income and is trying to squeeze the expenses a “bit more”

Dont do that!

Cutting expenses beyond a limit will mostly take away all the FUN from your life and add up some extra money in your kitty which eventually you will spend on something stupid again. It will not lead to financial independence.

How financial independence or FIRE is achieved ?

If you are naturally a frugal person and live with a very small amount of money, then it’s fine. But just make sure you dont fool yourself with trying to cut expenses where you truly dont want it.

Aim for Financial Freedom

The mail of this article was to simply present some facts about retirement and clear some myths so that one can pursue financial freedom with the right mindset. Do focus on your income and try to increase it and save a big chunk of that to invest smartly in inflation-beating financial products to create wealth in the true sense!

I have tried to share my personal thoughts and what I feel about the topic based on my experience.

Do share your thoughts about this topic. Have you seen some more myths in the minds of your friends/family about financial independence? Do share in the comments section!

No more Indexation benefits for pure Debt mutual funds

Posted on by Jagoinvestor

In a major change in the finance bill 2023, the govt has brought some changes in mutual fund taxation which will now treat pure debt mutual funds on par with Fixed Deposits. Most of the investors were not very happy with this sudden change, how this change is now a reality and we have to accept it.

As per the new rule, any mutual fund where not more than 35 per cent of its total proceeds is invested in equity shares of the domestic companies will be termed as “Specified Mutual Fund” and it will be taxed at the marginal rate (as per your slab).

However, the gains from these specified mutual funds will still fall under “short term capital gain” category and not as “interest” income, which still leaves debt funds with some advantages which I will share at the end of this article.

Rule applicable from Apr 1, 2023

This change is applicable only for the new investments which will be made after 1st April, 2023. No impact is there for any old investments.

So if you have any debt fund, you can still hold it for future and you will be eligible to get the indexation benefit. Infact, its suggested that you hold it for long term because the taxation will be only 20% with indexation benefit which makes it a very attractive investments.

Also note that we still have the indexation benefit for those funds where the equity exposure lies between 35% and 65%.

Here is a small chart which will give you a clear understanding of the bifurcation on taxation.

Changes in debt fund taxation by Govt to remove Long Term capital gains benefit

Which category of funds are Impacted?

If you look at the definition, here is the list of categories which will now not be getting the indexation benefit

  • Liquid Fund
  • Conservative Hybrid Mutual Fund
  • International Fund of Funds
  • Dynamic Asset Allocation Funds
  • GOLD ETF

The fund of funds which invest internationally will also be impacted as they are still treated as debt funds when it comes to taxation because they don’t invest in “domestic equity”. Their portfolio has equity, but its not domestic, and hence they don’t quality as equity funds.

Why Govt made this change?

As per govt, one rational given was that debt funds have a very strong indicative returns and there is almost no credit risk, so they are very much having predictive return and they shall be treated at part with a fixed deposit and not get preferential treatment.

This a bit odd, because debt funds still carry interest rate risk and default risk still exists no matter how small it is. A person investing in debt fund is investing in a market link product and shall get some extra benefit, however govt has other views.

What does this change mean to retail investors?

Truly speaking, this change will mostly impact those investors who are heavily dependent on debt funds for their long term investments and those who were looking for a very safe investment option with low risk and high tax advantage.

Any ways most of the investors were using debt funds for short term and money would get redeemed in 2-3 yrs, for which it was always a marginal rate earliar also.

So right now do not take action in hurry. Anyways the old investments are not impacted due to this rule.

3 advantages of pure debt funds going forward

While the taxation advantages of debt fund has gone, still it has several benefits worth considering as gains from them still is considered as a “Capital Gain” are as follows

  • Tax only on Withdrawal, not on accrual – You can postpone taxation in future when you withdraw unlike a FD
  • Setoff of gains with losses – You can adjust the capital gains if any with the capital gains which you incur now or later asyou can carry forward the losses for next 8 yrs in your ITR
  • Liquidity – You can withdraw anytime from a debt fund without penalty (after the initial 1-3 months) and not pay any penalty like you do in a fixed deposit

We hope it explains what changes have taken place recently. Incase you have any doubts, do write us below, so that we can answer any of your queries.

10 major changes for salaried person in Budget 2023

Posted on by Jagoinvestor

Today we will be highlighting the important points from the budget 2023 that would be most relevant for the salaried people.

1. There is no change in the old tax regime.

So first thing to know is that the old tax slabs remain unchanged. The slabs are same like last year which are as follows

Old Tax Regime Slabs

2. New tax regime tax slabs made more attractive

The taxation slabs got better in the new tax regime, which are as follows. The taxation got better for middle class and all the people who will choose new tax slabs will pay lower tax. Here are the new and previous slabs

New tax regime slabs

3. Standard Deduction of Rs 50,000 in New Tax Regime

Earliar, the standard deduction of 50,000 was available only for the old tax slab, but in this budget its also extended to the new tax regime. Which means that one can directly reduce their income by 50,000 before finding the taxable salary.

4. No Tax up to Rs 7 lacs income under new tax regime

Its time to cheer up, as one will not be paying any income tax if the taxable salary is upto 7 lacs. This simply means that a person earning upto 7.5 lacs will not pay income tax because there will be standard deduction of 50,000 now which will make sure you come under that 7 lacs limit. here is an example where we show Tax calculation

Based on the information above, when does it make sense to choose between new and old regime?

When to choose New Tax Regime?

  • Income is less than 7.5 lacs
  • Your Total deductions are less than 2-2.5 lacs (if you claim just 1.5 lacs in 80C and 50k to 1 lac in other things)

When to choose old tax regime?

  • Your exemptions and deductions are very high like 4-5 lacs ( when you claim full 80C, 80D, HRA, LTA and home loan interest)

Old Tax Regime will most likely get killed !

Govt has made its mind and aiming to move towards the simple tax structure with minimal compliances. In future there will be no 80C , HRA, 80D , home loan interests or any kind of deductions. Slowly New Tax Regime will be made attractive and old tax regime will be abolished.

5.  Senior Citizen Saving Scheme Limit raised to 30 lacs.

The senior citizens will feel extremely happy after this amendment as the limit in Senior Citizen Saving Scheme has now increased to 30 lacs which was earlier 15 lacs. The current interest rate is 8% for the Jan-March 2023 quarter

6. Post office MIS limit raised

This clearly shows a glimpse that this budget was in favor of the salaried class. National Savings Monthly Income Account the previous limits have increased.

MIS Limits

 

7. Leave Encashment is tax free upto 25 Lacs.

Now one will not have to pay any income tax when they get the leave encashment amount upto Rs 25 lacs at the time of retirement or leaving their job. This amount was set at Rs 3 lacs till date which was set long back and was very low. So if one gets 40 lacs as leave encashment, then there wont be any tax upto Rs 25 lacs and rest 15 lacs will be taxable.

8. 20% TCS on foreign remittances under LRS scheme

Taking a foreign tour package or investing abroad will increase one cashflow, as there is a 20% TCS rate now. which means that you have to pay an extra 20% money which will be deposited as advance tax from your side to govt when you make any high amount transactions which sends money to foreign. This is applicable only when the amount is  more than 7 lacs.

Below were the slabs ..

TCS Chart

Note that this TCS amount is not the TAX, but advance tax, which means that at the end of the year you can adjust it with your total tax payable or claim it back by filing a refund in your ITR.

9. Traditional Life Insurance policies maturity amount is taxable if the premium is more than 5 lakhs

All life insurance policies proceeds as income/maturity will be now be taxable if aggregate premium paid per year by the person is more than 5 lacs. Aggregate premium means total of the premium paid in a year by the person in his name from all kind of insurance policies

  • This rule is applicable only for all policies issued after 1st Apr 2023. All past policies does not get impacted
  • This rule does not apply for death benefit (if someone dies and family gets the money, then its tax-free
  • This rule also does not apply for ULIPS

 

10. Capital Gains exemption on investing in other property is capped at 10 cr

Till now there was no limit on the capital gains exemption under sec 54 and 54F, which means that you could buy another property with all the capital gains and just not pay any tax. But now you can only do this till 10 cr.

This is anyways going to impact only super HNI who deal in properties worth multi crores.

Let us know if you have any query on budget 2023. We hope you got a fair idea on all the changes made.

5 priceless benefits of Financial Freedom

Posted on by Jagoinvestor

I’ve heard the phrase “financial freedom” several times in the previous 3-4 years from the investors community.

Every time I speak with a customer or an investor on various forums, it appears that “financial independence” has become the new catchphrase. So I decided to talk about it more today.

financial freedom benefits

What is Financial Freedom?

Simply said, Financial Freedom is the accumulation of sufficient wealth to cover your living expenditures for the rest of your life. You’ve saved enough money to cover all of your bills for the rest of your life. After that, you won’t have to worry about money.

How much money makes a person financially free is a deep question and there can be debate on this topic alone, but in the most simplest form, once a person acquires 35-40 times their yearly expenses requirement, they are said to be financially free. You can read more on this 30X rule for retirement here

Let me get to the point of this article and discuss the top 5 reasons why I believe most individuals should strive for financial independence early in life (strong>hint/strong>: by the time they are 45 or 50 years old).

5 benefits of pursuing Financially Freedom

Benefit #1 : To buy Freedom in Life

We all labour all hours of the day and night to make money. Money covers all of our costs. Rent, food, school fees for your children, and healthcare costs. Everything..

If money is not everything in life, it is certainly a very important factor!!

Many people do not feel FREE in their lives. They become money slaves because making money becomes their major aim in life.

  • They cant say NO to their work
  • They cant say NO to the schedules
  • They can say NO to their bosses

All the times, money dictates their life and decisions.

Sufficient money in life can give you a lot of freedom.

  • Freedom of when to work
  • Freedom of with whom to work with
  • Freedom of when to wake up
  • Freedom to take long vacations ..

You name it and you can feel freedom in that area

If you want to experience a lot of freedom in life in various areas, you shall work towards financial freedom.

#Benefit 2 : To bring more power in your career

A lot of people have this myth that one shall achieve financial freedom, so that they can quit their job and retire from work.

Not TRUE!

One has to reach financial freedom so that they can bring more energy and power in their career or anything new which they want to truly do in life.

Most of the people have to do things in life with the primary motive of earning money and not because they wish to do it.

  • You feel that the new project in your company is quite exciting, but does not pay enough? What do you do? Forget it!!
  • You feel you really enjoy taking risks and do something challenging in your workplace, but wait.. what if it fails and you are fired or do not get promoted next year? You forget it and you focus back on things which are “SAFE” for your career.

We are continuously looking for ways to boost our compensation package, even if it means avoiding activities that we would like doing if money were not an issue!

When the money component is gone and you have to do things just for the love of working and reaching greatness, your job takes on a completely new vitality. You achieve more quickly, and your job happiness grows. This is the actual method of working, but it does not happen for most people since MONEY stands in the way of what you truly want to achieve in life.

#Benefit 3 : More flexibility to pursue other passions

Financial Freedom also gives you freedom to pursue any long due passion which you were not able to fulfil while in the regular job.

“What will you do once you are financially free?” I ask our workshop participants. I receive some unusual responses, such as

  • I will become music teacher
  • I would like to run a restaurant
  • and even I would like to become a scuba diving instructor

Compulsion of “earning money” has crushed a lot of dreams and financial freedom is that point where one can explore those new careers or opportunities.

#Benefit 4 : Reduced stress and worry about money

This is a no brainer.

Ask the question to yourself right now. If you loose your job and are never getting another one again, how many years worth of expenses do you currently have?

  • 3 yrs?
  • 10 yrs?
  • or 2 months?

And wait!..  What about repaying all your outstanding home loan, and funding the expensive education of your children on top of that?

Its quite scary right!

We are all concerned about the future since we do not have enough money.

Here is a quick 25 questions financial health checkup, if you wish to take

The day you have enough money to support everything and live comfortably is the day you feel really safe and at peace. Money does not solve all issues in life, but it does solve MONEY problems:)

#Benefit 5 : Pass a strong Legacy and build generational wealth

  • Your grand-parents worked for money
  • Your parents worked for money
  • You now work for money

Where is your generational wealth? Do you have family legacy which takes care of atleast the basics of your family?

You will see various family where they work towards generational wealth. They have enough money which produces income for family, be it some business, equity wealth, real estate wealth or whatnot!

But lot of families are not able to create it because they dont have attitude like that. They earn and finish the money and at family level they always are in that never ending cycle.

If you achieve financial freedom early in life, there is a good chance that you may put seeds of generational wealth, but you also have to ensure that you teach right attitude towards money to your next generation.

Conclusion

I have kept a very simple version of financial freedom for this article. This topic is quite deep in reality.

Do let me know if you liked this article and if you can add any more benefits of financial freedom?

 

 

Cashflow committed vs Networth committed – Which one are you?

Posted on by Jagoinvestor

I have seen two kinds of people in my last 12 yrs of experience in the personal finance domain.

One is the Cashflow committed and another is Networth committed!

Do you know which one are you!?

cashflow vs networth mindset

What is a Cashflow vs Networth committed mindset?

Let’s talk about these two kinds of mindsets.

Cashflow committed Mindset

When you buy things and repay them back, you depend too much on your future cash flow, you are a cashflow-committed person. If you have to buy a car, a vacation, a training course, an expensive mobile, or anything for that matter, you say to yourself – “Let’s take a loan and I commit my future earnings (cashflow) for this purchase”.

You basically trust and rely on the future to consume TODAY.

You don’t think twice if you can afford something or not, because everything looks within your reach because everything is sorted IN FUTURE. The future is unlimited, the future is always amazing where you will EARN with no difficulty.

cashflow committed

If this mindset has become 2nd nature of yours or at I shall say you are almost addicted to buying things on loans, then you are a cashflow-committed person.

Networth committed Mindset

On the other hand, there is another mindset at work!

If you want to buy anything, you are committed to first building the networth required for it and prefer to pay out of your networth. Your nature is to consume when you have the money, or else you don’t want to consume things or defer them in the future.

You are a bit uncomfortable to commit for your future cash flow to the purchase, your internal design is to first acquire wealth, and then out of that wealth you want to pay for things. Even if you get a chance to take the loan easily, you deny it because, in your world, you want to be fully in control of your future cash flow.

networth committed

What if there is no income in the future? What if you don’t earn enough? Why have the headache of keeping track of how much loan is remaining? These are your conversations when you want to make any kind of purchase.

Which mindset is better than the other?

If you look closely, you will realize that the cashflow-committed lifestyle is becoming famous for the last 2 decades in India. Before 90s, the culture of buying things on loan and paying in the future was almost non-existent in the common man’s life. You first saved for things, built your wealth, and only if you could pay for it, you bought it. So everyone was forced to be a net-worth committed investor.

However, in the last 25-30 yrs, the culture of buying first and paying later has gained popularity and we are nudged to become a cashflow committed investor from all directions. Easy availability of loans on anything and everything and the peer pressure to match the lifestyle of friends circle along with rising aspirations and low control over one desire is the reason that most youngsters today are becoming cashflow committed investors.

When a person does not create their wealth creation on time and when their desires are more than what they can afford, it’s natural that one will turn out to become a cashflow-committed person.

Cashflow Mindset may lead to Debt Trap

However, you will also see that most of the cashflow-committed investors fall into a debt trap and then cashflow commitment is not just a choice but it becomes their internal nature or way of life.

On the other hand, I have observed that most of the people who create good wealth and are on the path to financial freedom are those who are of “networth committed mindset” as they keep their desires in check and are successful in postponing their wants to the point which makes sense and also balanced out things.

This is a vast topic and I want to limit myself to speak on this. I think you got my point and now you have to answer yourself on what is your internal design as an investor and do you think that design is helping you in life. What are the pros and cons of your design? Can you share in the comments section?

How to track your mutual funds & stocks in google sheet?

Posted on by Jagoinvestor

Today, I will share with you a very simple way of tracking your mutual funds and stock portfolio in google sheets.

A lot of investors keep it simple and track their stocks and mutual funds portfolio in either a google sheet or excel sheet on their laptop. If you are someone who likes to keep track of their portfolio on google sheet, you may be updating the current NAV of the mutual funds or stocks every time on the google sheet.

Instead of that, you can use a google sheet formula =GOOGLEFINANCE() and pass on the mutual funds/stocks code which you can get from the google finance website. Let me give you an example of a mutual fund.

How to find the code of the fund/ stock from google finance?

Let’s say you want to get the NAV of Axis growth opportunities fund. All you have to do is, go to google.com/finance/ and search for that fund, you will see it in the search box and once you click it, you will find the code MUTF_IN: AXIS_GROW_OPPO_1LDB7MS

You just have to remove the space after “:” and then in google sheet apply the formula below

=GOOGLEFINANCE(“MUTF_IN:AXIS_GROW_OPPO_1LDB7MS”)

This will fetch the latest NAV of the fund and then you can multiply the NAV value with the number of units this way you can get your funds value. This way you find all your mutual funds and stocks’ current value and add them up. These values will keep updating automatically every day.

Note that if you are doing the SIP in a mutual fund, then you will have to apply some formulas to find out the latest number of units, but it won’t be that simple.

But if its a fixed portfolio, then you can just update the UNITS one time or update it when you invest more money.’

I hope you liked this quick information and you will apply this.

How to buy cheaper property in online auctions in India?

Posted on by Jagoinvestor

Today I will tell you about foreclosed properties and how you can buy them for lower than the market price.

What is the meaning of Foreclosed Property?

Many times, banks seize the properties when their owners fail to pay their EMI payments for a long time. These properties are called “foreclosed properties” and banks put them for sale in the auction in order to recover back their dues. Once the properties are seized by banks, they are the rightful owners of the property under the Sarfesi Act and they have 100% legal rights to sell off these properties.

These properties are mainly sold below the market price because the focus on banks is mostly to recover bank their dues and not to make profits. So you can strike a very good deal if you are ready to go through the process of buying foreclosed properties.

What are foreclosed properties? How can I buy them?

Advantages of Buying a Foreclosed Property

  • Price Advantage: Auction properties are approximately 20-25% cheaper than the market price.
  • Legal and Safe: Banks / Financial Institutions approve loans after verification of all the legal aspects only. Bank Auctions are legally safe and fall under the SARFAESI Act and DRT Act.
  • Quick Process: The entire transaction will be over in less than 2-3 months period. Ownership will be transferred within a month’s time.

Disadvantages of Foreclosed Property

  • No Guarantee of quality or internal condition: Bank cannot provide any disclosures as to property history/condition issues. If there is any damage to the property then the banks will not repair and give. Property conditions might be suspect due to damage done by upset homeowners.
  • Heavy initial Money requirement: Only serious buyers are entertained as you have to put a big amount as a guarantee
  • Tedious Process: To some people, the process may seem to be tedious and daunting.

How to find a foreclosed property?

The data and information about foreclosed properties are quite fragmented. There is no single central database of information but divided a lot. Here are some ways you can find information about foreclosed properties

SBI auction official page

 

Next step after shortlisting the foreclosed property?

Once you get the preliminary information about an auction, you can visit the property along with the foreclosing bank’s official.

All exact information about the property is given on the website such as the name of the borrower of the property, the property belongs to which state and city, what is the reserve price of the property, exact time and date of the auction of the property and so on

What do I need to do, If I want to participate in the auction?

To participate in the auction, you will need to submit an application and KYC (know your customer) documents, along with the bid value which can range from 5-20% of the reserve price, to the bank.

Then on the main bidding day, whoever is the highest bidder wins and they have to then pay the rest of the money to secure the property. There may be some advance to be made and the remaining money has to be paid in a few weeks. So you can go with a home loan if required, but remember that you will need to have a decent amount in your hand to participate in the auction anyways.

Beware of these small issues with the foreclosed property

Remember that the foreclosed property is coming into your hands from another owner who was financially distressed, and there is a good chance that there might be some

  • Pending property taxes
  • Pending Maintainance to Society
  • Pending Electricity bill/gas bills etc

Banks are not going to recover these and these are your headache, but even after paying these, you may be getting a great deal.

Is it worth buying a bank auctioned property?

Below is a short video that answers your question.

3 precautions to take before taking a Foreclosed Property

  1. Do hire a lawyer so that all the legal papers can be checked thoroughly especially if the amount involved is very big.
  2. Do not buy a very old property as that would require major renovations.
  3. The chance of earlier owners staying in the house is less because banks usually ask them to vacate before auctioning the property. However, if the property is already let out, the tenants may be still staying in the house and it becomes your responsibility to evict them. Freeing a house of its tenant is difficult, especially if the tenant has been staying there for a long. The best strategy is to avoid a house that is already occupied by tenants.

This was all that I wanted to share in this article. If you have any queries post them in the comment section.

10 precautions to take before transferring money to someone online deal

Posted on by Jagoinvestor

Online scams are on a rise in India for the last 5-6 yrs as the UPI and online transactions have increased over time.

Recently a guy I know told me that he accidentally lost Rs 56,000 in online fraud. He wanted to go on a tour and when he searched online, he came across a website that had a tour operator number where he called and enquired. Everything looked genuine and after some basic checks, he did a UPI transfer of the whole amount of Rs 56k.

The website link where he got the number was https://www.bharatibiz.com/en/gurdwara-sri-hemkunt-sahib-093392-58256 and the phone number was 9339258256

Precaution to take while doing money transfer to a new person online

It was a big mistake

As soon as he transferred, he soon realized that he was taken for a ride and realized his mistake. In general, this guy is very cautious and does not trust these kinds of online contacts, but in this case, there was some element of RUSH and overtrust as in the recent past he had some online bookings in a similar way it worked.

I feel that while we all are aware of these frauds and try to be cautious, someday even we all may fall for these tricks as the other side can outsmart us.

10 precautions to take before sending money to someone online

Let us see some of the basic checks and precautions we must take in order to prevent any online fraud while we are transferring any money online to someone for booking any tours, trips, hotels, or for shopping purposes. Let’s look at them one by one

1. Search for the number/company name on google once

One small search on the phone number or email of the person may reveal a lot of details at times. If the same person has cheated others, there is a good chance that you will get some pointers for it. When I searched for that number 9339258256 online, I saw that the same number was listed for various businesses, which clearly shows that’s a cheater.

Same phone number is registered for multiple business in google. Its a clear online fraud and scam

2. Use NEFT/IMPS transfer instead of UPI

UPI is fast and secure, but only valuable if you are transferring money to the right and genuine person. The problem of UPI is that it MASKS the details of the person and just gives you a scan code or simple details which does not tell much about the person. If you are in doubt, always ask for the bank details to transfer money through NEFT or IMPS.

This will at least give you details like a bank account, Name of the account holder, branch etc. You can use this to verify or complain later at the bank easily. Also, the bank account name shall be of the same person.

3. Don’t Rush

What’s the rush?

Never take quick decisions while sending big amounts. At times, when you do things at the last minute, you are in hurry and often do not pay attention to small red flags. Also, your mind may not go into details that might have prevented a fraud. Always start a conversation with the person, talk to them once, wait for hours/days and then make any transfers after proper research.

4. Always transfer Advance money, not full

Most of the time, people pay the full amount if things look genuine and they don’t want to get into a headache of paying the balance later. They overtrust others. As far as possible, always pay an advance first and pay the balance later. This gives you a lot of time and in case you are unlucky, you do not lose all the money in fraud.

5. Continous callbacks are a red-flag

Most of the fraudsters/scamsters have a tendency to spam you with calls and messages again and again. I have personally seen this in “NGO Scam” where someone calls you or WhatsApp you to donate money for an ill child in hospital, If you show any small interest, you will be bombarded with WhatsApp messages and callbacks to donate the money NOW.

This is a big red flag. At times you get a call from some senior or higher-up following with you. If this is happening in your case, be very cautious about it.

6. Validate the number or contact person with online groups/sites

Most genuine businesses have a strong online presence. They have their own website, Facebook page, Instagram page or some other social media identity. You can read others’ reviews, their phone numbers are published there and other details like address, and business details are mentioned.

I am not saying that fraud people cant create these things, but it’s a very simple checkpoint. If you got in contact with someone who is missing these things, you have a strong reason to doubt them.

7. Search on Truecaller

Another great trick is to simply check the phone number on truecaller App. Others who may have come across that fraudster or same phone number must have tagged them as “fraud”, “scam”, “Spam” or similar words. It will give you some hint on their genuineness

Check for a phone number on truecaller to check if its spam or fraud or not

8. Ask for compliance like GST / Cheque/ References

One thing you can do additionally asks for a CHEQUE copy and mention to them an excuse that you will make payment from your corporate account and this is the mandatory requirement by the company. This way you will get all the details of the account holder, branch, and account number. A lot of things you can cross-check if the account belongs to the same person or not. A lot of fraudsters do not use their own account. This can become a basis for more questioning and you may catch a fraudster.

Also if it’s a business entity, do ask for a GST number, etc too as added security.

9. Don’t trust the random low key websites advertisements

Never trust people or phone numbers that are listed on low-key websites, after all, they list their business on dead sites which have no credibility. It simply appears in the search engine for someone who is searching on google.

10. Listen to the Gut feeling

Finally, I would say, that you shall listen to your gut feeling and if your inner voice says that things are not right, better do not do the transaction. Do talk to the person to whom you are transferring the amount, and do watch their language, their tone, and many small things. But do trust your inner voice and don’t do the transaction or at least wait for more time.

More precautions to take

  • Never share OTP, or PIN with anyone ever no matter what
  • Don’t respond to calls that say that they are from RBI, IRDA, or Tax department which ask for your personal details
  • You never have to pay your UPI pin to revise the money on any UPI App. A lot of fraudsters say they are sending the money to you but have sent you a “Payment request”
  • Never give access to anyone for sharing your screen for assistance purposes. Don’t use software like Teamviewer or Anydesk

Steps to take if you lost money to any online fraud

  • Do complaint to Cyber Cell immediately
  • Do file an FIR also if the amount is significant for you.
  • Do share about the incident on Twitter and other social media channels you are part of

 

Why you shall not obsess for getting “same day NAV”?

Posted on by Jagoinvestor

A lot of investors are quite worried that they do not get same-day NAV when they invest in mutual funds? There are days when markets are down by 1%, 2%, or even 3-4%, and it’s a great opportunity to invest in equities at lower NAV!..

However due to the recent changes by SEBI, Now the NAV is allotted on the realization of funds by the fund houses before the prescribed time of 3 pm.

Same day NAV vs Next Day NAV - Which one is better?

This simply means that most of the investors are not able to get the same-day NAV (except in a few cases). This frustrates the investors and they feel they are losing out on this opportunity because markets may go up the next day and they will not get a lower NAV.

In fact I am also seeing many articles and youtube videos teaching investors – “How to get same-day NAV in mutual funds” without even understanding if it’s worth the effort or not. There are some ways through which you get same-day NAV like if you invest through AMC portal directly or invest using UPI in the MFU platform or invest very early by 10 or 11 am so that your money reaches AMC the same day.

But is it really worth the effort?

So we thought of doing a small study on this topic and investigating if investors are really losing out a lot or not?

In our study, we found out that the same-day NAV or next-day NAV does not matter for investors over the long term and it has almost no impact on their wealth creation in equity funds.

Now let me share some stats and what we found

For this study, we picked 3 equity funds that are quite old, which were

  • ICICI Pru Discovery
  • Franklin Prima Plus
  • Birla Equity Hybrid 95

Also, these are at least 18 yrs old funds and we downloaded the NAV of these 3 funds since inception. We have the data for a total of 4350 NAV points.

As a next step, we assume that there is an investor who wants to invest when markets are down. For that, we picked all those days when NAV of these funds came down by 1%.

Then we also found out how many times NAV of that fund was again down the NEXT day!!. Let me show you the data

 

So if you look at the NAV data of ICICI Pru Discovery, there was a total of 543 out of 4350 days when NAV was down by more than 1%.

What happened the next day?

  • 258 days, the fund NAV was UP with an average upmove of 1.02% (average of those 258 days)
  • 285 days, the fund NAV was DOWN with an average downfall of -1.37% (average of those 285 days)

This simple means that on average, the next day NAV was actually lower than the day of investment and it was a good thing to get the next day’s NAV rather than the same day’s NAV.

Same-day NAV or next-day NAV? Which created more wealth?

Let’s assume that a person invests Rs 10,000 in the fund whenever NAV of the fund is down by more than 1%, then there are two cases..

  • Case 1: Investor same-day NAV
  • Case 2: Investor gets next-day NAV

We found out that the wealth created was MORE in case 2 actually, however, the difference was not significant enough to brag about. Let me show you the numbers

  • Case 1: Investor same-day NAV : Rs 3,47,08,084
  • Case 2: Investor gets next-day NAV : Rs 3,48,48,780

The difference between same-day and next-day NAV is roughly 0.41%, so by getting next-day NAV the investors create 0.41% more wealth, In this particular case, it was actually a good thing for investor to NOT GET the same-day NAV

Let me also show you how the wealth will increase over time in both the cases

Same day and next day NAV wealth chart

If you look at the graph above, there are actually TWO charts. The red line is the growth of wealth (with Rs 10,000 investment every time markets fall by more than 1%) in case the investor gets same-day NAV. And there is a black line that shows the next-day NAV case. You can see that both the lines are so close that you can literally just see one single line.

Data with the other two mutual funds?

Let me also show you the same study results with Franklin Prima Plus and Birla Equity Hybrid 95 fund.

Franklin India Prima Plus

Incase of Franklin Prima Plus, whenever NAV was down by more than 1%, the next day NAV fell again 56.83% of the time and it was more probable to get a better NAV if one got the next day NAV.

Investors created roughly 0.26% more total wealth by getting the next day’s NAV

Birla 95 fund Next day vs Same day NAV

In the case of the Birla Equity Hybrid 95 fund whenever NAV was down by more than 1%, the next day NAV fell again 51.66% of the time and it was more probable to get a better NAV if one got the next day NAV.

Investors created roughly 0.13% more total wealth by getting the next day NAV.

Markets down by more than 2% and one got NAV after 2 days?

Let us also see what if we changed the data a little bit. What if one invested when markets were down by more than 2% and one got NAV after 2 days (not just the next day)?

If this happens then how will data change? 

Research on same day or next day NAV confusion

You can see above that even if one gets NAV after 2 days, still, two funds created more wealth. If you look at ICICI pru discovery fund, 3.54% of the times the NAV of the fund fell by more than 2%, and whenever that happened, 48.70% of the times, the next day NAV was further lower, it was beneficial to get the future NAV and not same-day NAV.

Eventually, by getting after-2-days NAV, the person was able to generate 0.70% more wealth compared to same-day NAV.

Conclusion and What we can Learn

By the time you may have figured out that while investors visualize that the day NAV can again go up, they forget that the next NAV can go down also and they can get an even cheaper NAV.

Over time, if you are a regular investor who is there for the long term, sometimes you may get a little higher NAV the next day and sometimes you may get a lower NAV, which eventually cancels out the impact.  So here are the learnings

  • If you get next day NAV, there is almost a 50% probability that you will get an even lower NAV
  • Over a long time, the amount of wealth you will make will not be very different in the case of same-day or next-day NAV
  • The worry and frustration are not worth it at all, and you shall just not worry about what NAV you are getting.
  • If markets jump by 2-3% on a given day and you want to book profits, then it’s better to sell the next day as the chance of getting a better NAV is higher on the next day due to the same logic.
  • While you may lose out a bit on a single transaction, there will be other transactions when you will benefit and in totality, you won’t lose out at all. In fact, the study shows that you are better off getting the next day NAV to improve your returns, but then it’s a small margin.
  • Next time when markets are down by a good amount, investing on that day is more important than which day NAV you are getting. So focus on systematic investment more than anything else

Note that we are not discussing in this article if it’s morally right or wrong for AMC to give you the next day NAV. Those are surely technological challenges that need to be solved. In this article, we just wanted to do number crunching to find out which path is better and I hope we did the job

We would love to listen to your comments on this topic and if you think otherwise?