Category: General

Some of the employees recently got a notification from their employers that they have to give a “joint declaration” if they want to opt for higher pension in EPS or not?

Let us try to clear the confusion on this.

Background 

So when a person gets a salary, there is a component called basic salary in their salary. 12% of that is contributed by employee end and 12% of that is matched by the employer.

However the 12% part which employer provides is further divided into 8.33% and 3.67%. The 8.33% part actually goes into something called EPS (Employee pension scheme) and rest goes into EPF. However the EPS part is limited to maximum of 8.33% of 15,000 which is considered as the ceiling for basic salary, due to which what happened is that a very small portion of money went into EPS and big part went to EPF.

Over the years, people were dissatisfied that pension portion is not matching their high salary which results to a very tiny pension amount does not makes sense.

Hence recently supreme court has given the order that all the eligible members (who were part of EPFO scheme before 2014) shall get a chance to correct this and some part of their EPF can be transferred to EPS which will result in higher pension.

We have created a small video presentation to make you understand this topic in detail , so please watch the video below.

5 reasons why you shall NOT opt for higher pension in EPS-95

• If you want to get a higher lumpsum payout at the time of your retirement
• if you don’t like EPFO as an organization and want to not engage with them post retirement
• If you are someone who wants to retire early in life
• If your salary can reduce in later years of your career
• If you have already shifted many jobs and not transferred your earliar EPF accounts into current one’s

Conclusion

In the last I just want to include that if you want flexibility and want a bigger corpus then don’t opt for higher pension scheme. But if you are someone looking for fixed and guaranteed and you are comfortable with lower corpus at the time of retirement then you can think of moving into higher pension scheme.

This article is dedicated to Late Rakesh Jhunjhunwala Sir. The article is not about him or on him, I just felt like dedicating to him.

The article is written on health and trust me it has a direct connection with your overall life and wealth journey. We have trained hundreds of investors on retirement planning and our session starts with the conversation around ” Life Expectancy”. How long is the post retirement phase going to be after 60?- and we get answers like 80-85-90 yrs and and some claim they are going to live till 100 yrs.

Most investors are working hard to build a bigger corpus that can last till 80-85-90 or till hundred years of age. But are our body and habits truly aligned or prepared or are we preparing ourselves to live till 85-90-100 yrs?- is the question we all have to ask ourselves. If the answer is no, why have the retirement goal in the first place, why build a huge corpus in the first place? Why save and invest bigger amounts to secure monthly income till 90?

If you are not taking great care of yourself, if the stress levels are high, you stay very busy and there is very little or no time for yourself then this article will act as a wake-up call for you.

Health-worth vs net worth?

You may be shocked to know the way people treat their body is atrocious because we get our body for FREE, it is actually very bad and I can say that because I was doing the same for many many years. Most people are actively seeking to destroy it. The most natural state of vitality, aliveness and longevity is unknown because every person is actively engaged in destroying their body.

Take a pause and check your habits, your relationship with food and exercise and you will get your own answer or look around and examine people closely. I can say this because I was doing the same, no exercise, unhealthy food habits, no fixed time to sleep and working late nights. Make a list of things you are currently taking for granted.

There is really no excuse for abusing your body. Your body and your wealth are like your left and right foot on your journey to create an awesome life. Your relationship with your body shows how much respect you hold for yourself, taking extraordinary care of your body is the primary requirement or condition to create an awesome life.

We witness people in our life who suddenly go bankrupt ( diabetes , blood pressure , etc ) in the area of health, boom they have achieved their goal of destroying their body. We get so busy in our day to day life, the body becomes like a non-stop machine and in that process our health takes a back seat very easily.

It has been 5-6 years since I became conscious about my own fitness and health, I became a student of health and wellness, I started reading and applying things to my life to check what impact it can have on my quality of life. I am writing this article to share some of the health and fitness rules of my life.

This blog is about personal finance but trust me one breakdown in the area of health and all your wealth and the biggest of the corpus can lose its meaning.( Now, you know why the article is dedicated to Late Rakesh Jhunjhunwala sir)

Why take care of your body? ( In the first place)

Your body is a place for you to see and experience the world. It is the vehicle which helps you to experience being loved and for you to give love to others. You would not throw a televisIon set down a flight of stairs and then expect a clear picture from it. Yet you treat your body worse than you treat the television set and you expect exquisite performance from your body.

Our body comes without an owner’s Manual and so you must take it on yourself to learn about how to take great care of your body. The neglect of learning about your body is itself a way you neglect your body. When was the last time you learned something powerful about your body and you also put into practice what you learned? Unless you can say that you do that everyday, you are abusing your body through neglect.

Check for yourself are you addicted to some substance? Are you putting things into your body which you know is difficult for your body to handle? If you are committed to living an awesome life and you want to enjoy the corpus you are creating then you have to give that up, right now.

If you are unwilling to give that up, you are not serious about living an awesome life, you do not want to enjoy the wealth you are currently slogging for. It is possible that you may find this article “interesting”, a lot of people are interested in fitness and health conversations, they read, discuss and have all the world’s knowledge of health and fitness. But I give a damn to people being interested, being interested is lousy.

I want you to get off your back-side and start taking actions regarding your health. If you choose not to take actions , please know that you and I are not in the same reality. If you want to get on my wave-length there is more required than passing your life being interested in living an awesome life.

Oh come on when you give-up something( laziness, casualness, habits) there will be pain but do it anyway. This article has to be a turning point in your life, write to me [email protected] what is going to be your health vision from here onwards, what are you willing to give-up. Get damn serious about taking care of yourself. As I said before, health and wealth are like your left and right foot, it is going to be a long journey ( retirement and overall life) and you cannot jump on one foot for a longer period of time. You need both legs strong, health and wealth.

10 learnings from my personal fitness journey

Now, let me share top 10 changes or learnings from my personal fitness journey:

1. Intentional movement

What is important here is the word intentional, bring some intentional movement in your life. From morning till night you get many such opportunities to bring intentional movement in your life. I never use elevator in my office

2. Morning Regime

For years I started my day by consumed tea in the morning, instead of tea I now consume the green smoothie. It has kale, celery and other herbs which helps me to rich start my day very powerfully. Having a powerful gut is critical, our gut is like our body headquarter and we have to take care of our gut. Most diseases starts or are connected to a bad gut.

3. Break-up with Sugar

It was very hard for me to give-up on sugar. Trust me it is not going to be easy to quit sugar. An average Indian consumes more than 70 KG of sugar in one year. Sugar carries empty calories and puts you on a slow poison.

4. Stop Dieting

I think the word dieting is dangerous, it puts you in a temporary zone where you get results but you fail to hold on to those results in the long run.

I am not on diet, I have made some lifestyle changes which I can stay consistent with all my life. You will find many fancy diet programs and books on the internet, trust me you do not need any of them.

All you need is, ” Whatever you put into your mouth has to be high in nutrition”- Simple
Every plate of mine has – 40% Protein, 20% carbs,40% fibre ( Have these three in all your meals and you will start seeing the results)
5. Calisthenics

I spend time doing body weighted exercises, you actually do not need heavy weights or fancy gym equipment. Our body weight is enough for us to get the desired results. There are some basic movements one needs to understand, craft a simple daily schedule and follow it. I think every alternate day 30 min workout is all you need to keep yourself fit.

• Push movement – Eg. push-ups
• Pull movement – Eg. pull-ups or hanging exercises
• Legs – exercises like squat or hinge

6. Breathing

Breathing is life and we have forgotten to breathe properly. Three times a day I do the 5-5-5 Breathing exercise. In this exercise you inhale at the count of 5, hold your breath on the count of 5 and release on the count of five. You repeat the same 3-5 times in a day. Let your colleagues watch you, don’t think about what they will think , practice breathing as and when you find time.

7. Water intake

If you want to enhance your fitness you have to keep yourself hydrated throughout the day. I think water is the key ingredient in weight loss and it helps to enhance your overall fitness level. Drinking 8-10 glasses of water is extremely important, make this a rule in your life. Stay hydrated, have clean water and most importantly no soda or clod drinks or packed juices. They are liquid but not really good for you.

8. Skip breakfast

For years I was told breakfast is the most important meal of our day and we can’t dare to skip it. Well, I did not find the same in my research, it suggests that I skip my breakfast and it has worked for me. If you think having breakfast is vital for you then you can continue the same.

It is also important what you eat in your Breakfast, avoid cornflakes and cereals and watch for the ingredients. Do not consume things you do not understand. Have fruits at the start of the day or have some hot water and lemon in it to kick start your day.

9. Weight is a wrong measure

Most people are weight watchers, they measure their overall fitness by how much they weigh right now and what is their dream weight. Your weight is just one of the measures, you have to check how much muscle mass you have, what is your BMI and other internal parameters. When you get your body profiling done you get to know about so many hidden things about your body. If you want to take care of your body, get your body profiling done once every month. You can also buy a good weight scale which does body profiling on amazon or some other website.

10. Intermittent fasting

Fasting is truly magical , it is very powerful and it helps to reset your body to its natural rhythm. Start small , no need to go for long fasting windows, learn to first ride the wave, fast for 5 hours or 6 hours and slowly increase the window of fasting. Intermittent fasting is about giving a break to your internal machinery so that healing can take place. Instead of reading a lot about intermittent fasting just start implementing.

Here is a short fitness test video by Himali Desai for you.

Let me know in the comment section, if you were able to finish it or not?

And do share the article with others who can benefit from this article.

If you want to join a webinar I am doing next weekend on 18th Dec, 2022 at 10 am to share more about my fitness journey, here is the link to sign-up, and we will send the joining link (zoom).

Happy Health and Wealth to all!

Most mutual fund investors get lost in the world of various equity fund categories like Large cap, Flexi-cap, midcap, small-cap, focused funds, multi-cap, and whatnot.

Do investors keep wondering which category will provide the best returns over the long term? And in real life I have also seen most of the investors out of their ignorance compare the  fund return with the Sensex or nifty as thats the most easily benchmark to compare (example – market double ho gaya, but mera fund to utna accha nahi performance kar raha)

So here is what I did

I downloaded 9 equity categories mutual funds from advisorkhoj.com and sorted them on the basis of the last 10 yrs’ returns and found out how much a one-time investment of Rs 10 lacs became in value terms. In this period Sensex went from 17700 levels to 60,000 (this journey is just a single data point from 19th Aug 2012 to 19th Aug 2022, which I know is a biased data point, but that’s when I am writing the article, so whatever is the situation,I am doing it). This turned out to be approx 12.98% CAGR return and Rs 10 lacs became 33.94 lacs.

Before I go into charts and data, let me admit that this is not the “right” analysis as such and with some flaws. However, it reflects how many novice investors look at data. Some important disclaimer and important points I must share before you e-lynch me in the comments section for my stupidity.

Disclaimer and Important Points

• This post is simply the data presentation of the data and not some analysis of which is the better or bad funds.
• The article simply tells you about what has happened in the past and does not predict anything about the future.
• Mutual fund SEBI categorization was done on October 6, 2017, but the fund performance data was taken before that, so a lot of funds are not in true sense the midcap, or large and midcap, etc, but we are simply taking them as it is, because that’s the current situation.
• Not all funds categories were fixed from start. some funds exchanged hands from one category to another and their mandate was also changed. But we will let it be for creating the charts
• Some very famous funds are not part of this analysis as they have not completed 10 yrs.
• While the fund benchmark is different for each category, I am simply creating a simple comparison of which funds have at least created more wealth than Sensex.

Funds Category considered 

• Large Cap Funds
• Large and Midcap Funds
• Midcap Funds
• Small Cap Funds
• Multicap Funds
• Focused Funds
• ELSS Funds
• Flexicap Funds
• Index Funds

Category #1: Large Cap Funds

There were 25 funds in this category with 10+ yrs of data available. The topmost fund returned 48.3 lacs for the investment of 10 lacs and the worst did return 27.4 lacs. Here is the data in the chart.

Category #2: Large and Mid Cap Funds

There were 20 funds in this category with 10+ yrs of data available. The topmost fund returned 82.5 lacs for the investment of 10 lacs and the worst did return 32.9 lacs. Here is the data in the chart.

Category #3: Mid Cap Funds

There were 17 funds in this category with 10+ yrs of data available. The topmost fund returned 66.3 lacs for the investment of 10 lacs and the worst did return 42.1 lacs. Here is the data in the chart.

Category #4: Small Cap Funds

There were 11 funds in this category with 10+ yrs of data available. The topmost fund returned 98.1 lacs for the investment of 10 lacs and the worst did return 39.3 lacs. Here is the data in the chart.

Category #5: Multicap Funds

There were 6 funds in this category with 10+ yrs of data available. The topmost fund returned 66.7 lacs for the investment of 10 lacs and the worst did return 37.2 lacs. Here is the data in the chart.

Category #6: Focused Funds

There were 12 funds in this category with 10+ yrs of data available. The topmost fund returned 54.8 lacs for the investment of 10 lacs and the worst did return 29.9 lacs. Here is the data in the chart.

Category #7: Flexicap Funds

There were 16 funds in this category with 10+ yrs of data available. The topmost fund returned 53.2 lacs for the investment of 10 lacs and the worst did return 27 lacs. Here is the data in the chart.

Category #8: ELSS / TaxSaver Funds

There were 25 funds in this category with 10+ yrs of data available. The topmost fund returned 64.2 lacs for the investment of 10 lacs and the worst did return 33.3 lacs. Here is the data in the chart.

Category #9: Index Funds

There were 19 funds in this category with 10+ yrs of data available. The topmost fund returned 41.7 lacs for the investment of 10 lacs and the worst did return 30.6 lacs. Here is the data in the chart.

Looking at all the funds in one frame

Let us put all the funds into one single chart to see which category returns have been better than others, worst than others, and their variation within the category.

There is no conclusion I am making from the data and chart in this article, as there are many issues with the fund’s category. You are free to make whatever inference you want to make out of this data.

Do leave a comment below with what has surprised and not surprised you about the data.

Recently I got a call from an insurance company sales executives and they tried to sell me an insurance policy which they said had Guaranteed 11% returns.

The policy was Reliance Nippon Life Guaranteed Money Back Plan

I knew that there is surely some catch and they are kind of misselling me, I didn’t know what exactly it was. So I decided to dive deeper and find out more.

After I asked them tough questions, and once they realized that my knowledge about these things is much more than an average uninformed investor, they were ready to mail me from their official email id about what I will get. Finally, I solved the mystery like CID and told them the policy has just a 4.6% return and not 11%.

Do watch the video below to quickly understand the whole game.

Guaranteed 11% returns

So when I got this sales call, a lady told me that this was a 15 yrs plan, for which the premium payment term is just 10 yrs. I will have to pay Rs 1 lac for 10 yrs and I will get a total payment of Rs 24.72 lacs towards the end and the return turns out to be 11% IRR

This sounds quite attractive and anyone who is not happy with the FD returns these days will get attracted quite fast.

Here is the breakup of the amounts she told me I will get in 15 yrs

I told her to send me an illustration and she did that after some time (here is a PDF Copy)

When I saw the illustration, I saw that the premium was not Rs 1 lac, but it was Rs 1,05,263. This is the first thing that she never informed me of. So instead of 1 lac, the outgo from investors pocket is Rs. 1,05,263!

When I looked deeper, I found out that few numbers she told me over the phone are visible in the illustration, but the amount of Rs 8,99,147 was missing from the illustration. This was the SUM ASSURED amount.

She had mentioned to me on call that we will get this sum assured amount also, but the illustration had no information about it.

This was the Catch

So when I asked them – “Why is the sum assured not in the payment section?, you told me that I will get that also”

To this one of the seniors told me that it’s not in the illustration, but I will get it because “Sum Assured is always paid in the policy”. I told him that it’s paid when a person dies, but where is it written that I will get the sum assured amount apart from the other numbers he had mentioned” for which he didn’t have a clear answer.

The sales guy kept telling me I will get it and finally, he told me that it’s mentioned in the policy brochure. When I looked at the policy brochure, it was mentioned that it paid

but… but …but it paid in installments and THAT WAS THE CATCH

The sum assured is given to you in small parts in year 11th, 12th, 13th, 14th, and finally in 15th year. So it’s already paid to you which you can see in the image below.

However these guys were counting the sum assured again when they told me about the plan over the phone and that’s the reason they tell you that you will get a very big amount, which you will NOT!

They are just counting the same thing twice in the benefit and they are not even lying when they say that they can mail you that you will get “sum assured” in this policy because you are GETTING IT!

Are you getting the whole game? They are just saying the thing in an incomplete way and twisted format.

To properly understand the details, do watch the video above

This was a catch which most of the investors are not able to catch and believe the sales call.

They also don’t find any mistake or bluff and even though they have heard that lots of misselling happen in the insurance sector, they still go with these policies.

IRR returns of just 4.65% instead of promised 11%

When I calculated the IRR of the policy with the correct numbers, the IRR turned out to be just 4.65% rather than the 11% they claimed over the call.

Conclusion

Do not fall for this kind of policies which does not clearly give full information on the returns and is too complicated to understand. They will try to convince you by saying things like they will email you from their official email id because they have learned that people have learned from previous missellings of ULIPS etc where nothing was given in writing and if they say something like that, it will look very trust worthy!

Just avoid it.

For your insurance needs, take a plain vanilla term plan and for your investments do invest in pure investments products like stocks, PPF, mutual funds, bank FD’s, NPS, etc, and keep things simple.

So the topic of debate today is “Is Cryptocurrency like Bitcoin be considered as an asset class?”

Till now we all know that there are many asset classes like Equity, Fixed Income, Real Estate, Cash and Commodities. Some people also argue if “Art” is an asset class or not.

And now, there is this new debate is crypto is the new asset class in itself or just an alternate currency or at best a speculative instrument?

Does Cryptocurrency fall under the definition of “Asset Class”?

Investopedia defines Asset Class as follows :

An asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset classes are made up of instruments which often behave similarly to one another in the marketplace.

If you look at “fixed income” asset class and see various instruments under it like Fixed Deposit, PPF, EPF, Senior Citizen Saving Scheme, NSC, Debt mutual funds etc. you will see that they have common characteristics (As they all are basically a loan given to someone) and various laws and regulations are similar across the country and globally (though the names of products can be different)

The same thing can be said to the Real estate asset class where Land, bungalow, REIT, Commercial shops all are physical spaces and their prices go up and down mainly due to similar reasons.

Can this be said for various cryptocurrencies also?

While all of the cryptocurrencies are basically a digital payment alternative based on blockchain technology, we are not very sure if it can also be considered a “store of value” unlike other asset classes. Also, there is no common agreement on how various countries want to see cryptocurrency? While there are various countries that have legalized crypto, there are many that have not done that.

At the same time, a large chunk of crypto investors is buying it mainly for speculative reasons and not as a fundamental investment instrument where they want it to grow in value due to some fundamental reason linked to the economy or its usage.

Here is an excerpt from a paper, which gives more idea on what I am saying!

Why I personally don’t want to consider Crypto as an asset class?

Cryptocurrencies have gained extreme popularity in the last 3-4 yrs and major crypto’s like Bitcoin, Ethereum, Tether etc has seen its market cap go into billions. It’s a complex world based on a very complex technology, which is again not like other asset classes which are quite easy to explain and understand for a common man.

Try explaining Real Estate or Equity to someone against the Crypto mining process and you will understand what I am trying to say.

Another reason why I personally don’t consider Crypto as an asset class is that cryptocurrency is in the end purely a software code. While it’s widely accepted and used, Are we saying that something which is so much dependent on a computer and electricity is considered as an asset class? What will happen if one day the world runs out of energy or all computers crash?

In the same case, things like equity, debt, real estate, cash (in any form), commodities, art all will survive and be there in some form.

When I asked this question on our telegram group and on Twitter, here were the responses.

Do you consider Crypto as another asset class or just a new-age online payment technology?

Coming to you, it’s also a matter of perception if you want to consider it as an asset class or not. Can you please share your thought process around it? What do you consider it?

Disclaimer: I am not saying that cryptocurrencies will not rise in value? All I am debating is if it shall fall under the definition of asset class or not?

Dear readers

Today we are releasing a FREE, very exhaustive and detailed google sheet for everyone which can act as a single point of information for your family to access all your data and information related to your financial life.

In this COVID Pandemic, a lot of families lost a family member and in many cases, it was the main breadwinner of the family. This left them in a situation where they had no idea about the insurance and investments made. They had to literally find each and every small piece of information from scratch and it was a very frustrating experience.

A lot of this be avoided if one just creates a master document file (also called as BlackBox file) and save all the information in that and share that file with their family.

We released it on Twitter platform, which has the link to COPY it on your google drive.

Here is a FREE Gift from Jagoinvestor to all investors

Download this amazing master document template for all your financial information, ID, passwords and important contacts

Link to copy: https://t.co/fEZCJAx5pu

Took me 2 days to prepare this..

Please RT to amplify pic.twitter.com/UP5TirobDb

— Manish Chauhan (@jagoinvestor_) June 3, 2021

Can I request you to like the tweet and also retweet the same so that it can reach more and more people.

What all does this BlackBox file has?

• Various Investments Details
• Various Insurance Details
• Various Contact Details
• Various Important ID
• Assets and Liabilities Section
• Checklist of what to do after the death of account holder
• Term Insurance Claim Process
• Banking Claim Process
• Mutual Funds Claim Process
• PPF & EPF Claim Process
• NPS Claim Process
• Property Claim Process
• Demat Claim Process
• Video on 20 things to do post-death of a family member (English & Hindi)
• Intro video on about this Sheet

Please copy the master file in your google account and fill it up and then share it with your spouse/family members. Do share this link in your office platform or other WhatsApp groups you are part of.

Also, do share your feedback about the sheet and if you liked it?

This is a guest post by our reader Phani Kiran, who has tried to see personal finance from the software industry perspective. It will be more clear to software people but I think the way its written, everyone can understand it. Over to Phani Kiran

—

Hi All

DevOps needs no introduction to people working in the Software industry.

It is a set of best practices where Developers (Dev) and IT Operations (Ops) work together in delivering Software faster, cheaper and with better quality. This article tries to explain how DevOps can be applied to the world of “Personal Finance”.

For those who are hearing the term ‘DevOps’ for the first time, a rough analogy can be made with the FIRE (Financial Independence, Retire Early) movement. Both are best practices where we need to change our thinking, behaviour and tools but at the same time there’s nothing cast in stone and no one size fits all approach.

DevOps is needed as old software methodologies are no more relevant in a world where innovation needs to happen faster. Same with personal finance habits and practices – we need change as we move towards a lower PPF, EPF and Savings rate regime.

DevOps is frequently explained by CAMS Model (not your CAMSOnline :)). CAMS stands for

• Culture
• Automation
• Measurement
• Sharing.

Let’s see how each of these can be applied to Personal Finance.

C – Culture

• Investors need to start moving away from the culture of only investing in ‘fixed’ income investments. As Warren Buffet, mentioned in his recent annual letter – “fixed-income investors face bleak future”.
• Culture of treating tax saving as a separate and as a year-end only activity needs to be done away with.
• Need to stop combining insurance and investment needs and start saying ‘No’ when resorted to pressure tactics from a so-called relative or a well-wisher selling ULIPs.
• Start focusing on goal setting, risk profiling and asset allocation.

A – Automation

• SIP (Systematic Investment Plan) is the automation you can make to your personal finance. In her book – ‘Let’s Talk Money’, Monika Halan talks about keeping investments on an auto-pilot mode using 3 different bank accounts. (Salary, Investment & Spending accounts)
• Automating SIP or RD instalments inculcate discipline and removes personal biases. This can be your first step towards ‘passive investing’ as you no longer will be focusing on – if Market is High or Low.
• For those who are prone to more discretionary spending, SIPs can be scheduled in the first half of the month so that you will establish a ‘Culture’ of Saving before Spending.

M – Measurement

• The portfolio needs a periodic (quarterly or half-yearly depending on one’s perspective) review of performance. This is possible only when you have a target goal – ie. ‘target corpus’.
• As they say about your year-end KPI (Key Performance Indicator) goals, equally personal goals like retirement, child’s education need to be SMART – Specific, Measurable, Achievable, Realistic and Timely.
• Investment deductions on Auto-Pilot mode need course-correction as and when required. This doesn’t mean too much ‘Action’ (churning) though.
• Measuring and monitoring returns and tracking whether you are on the path to achieving the desired goal or not needs more emphasis as equity returns can be volatile.
• As SIPs automate the corpus-building phase, you can use SWPs (Systematic Withdrawal Plan) to move accrued investments to safer avenues once you are nearing a target goal.

S – Sharing

• Keep your family in the loop about your financial and insurance decisions and documents.
• Be a life-long learner and don’t hesitate to learn and talk in ‘numbers’ (compounding, inflation etc)
• Read good blogs and attend personal finance workshops (Even DIY (Do It Yourself) needs some framework and strategy).

Just like DevOps improved software delivery productivity and reliability, following these principles should lead to a ‘virtuous cycle’ of prosperity. Keep your corpus build-up ‘flow’ by following a CI (Continuous Investment) strategy and let your periodic portfolio reviews provide the required ‘feedback loop’.

Happy Coding. I mean Happy Investing 🙂

–

So share if you liked this article or not in the comments section. And I thank Phani Kiran to give an attempt in writing this article.

 

Do you have a daughter? Saving in gold for her marriage?

Nice! .. Nothing wrong with it.

Just that I wanted to tell you what your daughter wants?!

Yes, that’s exactly what we did. We ran a survey with around 1,996 people which was a mix of men and women and tried to get a perspective of how women (and men also) see the gold which is given in our Indian marriages.

Check out this 20 min video below where I have shared the results of the survey in detail and also gave my commentary.

Indian marriages are not complete without GOLD.

Every parent tries to give enough gold to their daughters in form of jewelry which is worn by the bride in marriage and it also kind of becomes a scorecard for others to compete. But do daughters really want gold from parents to that extent?

Here is what females replied to our question when we asked them “What is the main reason why you want GOLD for your wedding?”

Check our more survey results in our video above..

There is enough for me to talk on this on this topic, but I would save that for another day and rather point you to this excellent article which talks about GOLD, Dowry and what women have to go through in our country

My parents, however, decided to give me — a person who does not wear any jewelry, not even a wedding ring — a pound or two of gold jewelry. A matter of pride.

“Your father is a doctor and mother is a professor; people will expect you to wear some gold,” an aunt explained.

“What you do today will reflect on your sister and will affect her wedding,” another aunt said.

Weddings are hard, and I had no fight left in me. So I went along with it. I wore an armor of gold. The numerous chains were stitched onto my sari to keep them in place. I never saw that jewelry again after the wedding. My mother-in-law has it safe in a bank locker somewhere.

One of the first conversations I had with my mother-in-law was when she told me that her son had certain responsibilities to his sister. She then asked me to not stop him from fulfilling those.

Years later, I decoded that cryptic message.

She was trying to tell me that when the time came, I should support my husband in paying his sister’s dowry.

But I don’t think I can support a system that turns women into bargaining chips.

I would really love to get your comments and opinion about this topic. Please share that in the comments section.

Disclaimer: The survey results don’t claim to showcase what the whole of India thinks. The survey was taken by only 1,996 people and its not a very big same size as such, however it’s not very small though.

We recently had an opportunity to conduct a personal finance session for the millennial.

For those who don’t know this word, millennial means the people who are just reaching their adulthood. They are quite young, and may be just out of college and recently started earning money. I am writing the article so that we can inspire other young professionals to kick start their journey as an investor.

This was my first experience leading a session ONLY for the millennial

It was done for an organization called Squareboat based out in Gurgaon and the experience was awesome. I was amazed to see a high level of energy, participation, and hunger to learn from each participant.

I started with a statement, “I am leading the session to my Younger Self and not to an audience”.

I covered things which if someone would have shared with me at the start of my career, my financial life would have been very different. At the start of my career, I was not at all serious about managing money. I was extremely casual and would only focus on spending.

I was also having some junk financial products in my financial life which later discarded. I was candid with them, it was a casual chat with personal finance as a theme.

10 important lessons and realizations from the session

Here are the 10 things which I realized from the session and I am putting them up here. You can forward this for your young brother or sister or any other person you know can benefit.

1. The first 10 years of our career are CRUCIAL

All the major Mistakes happen in the first 10 years of our working life. We taste the blood called “salary” and start spending money on things we love the most. The first few years set the tone of our entire financial journey and so it is important to manage money well at the start.

In the first few years, people are so busy in establishing their career that they end up buying many financial products without doing the homework. The participants learned an important lesson to avoid common mistakes and to keep their financial life on track.

2. The Unit System

I shared my Unit system theory with them.

After I got serious about my financial life I decided to work on my net worth. Now, I was always scared of the word “Crore” and so I use to call “10 Lakh” as one Unit. I started playing for the units so that I can stay relaxed in the area of money and the word crore does not put pressure on me.

In the session, I invited the participants to play for their first unit. It can be 10 Lakh or 5 Lakh or even 1 Lakh. Many liked my Unit System and they started sharing about their first Unit.

3. Learn to think small

I invited participants to think small.

Everyone wants to directly become Warren Buffet. Well, first you have to learn to become better in any area and then great. The world always teaches us to think BIG and almost all of us have bought the idea of thinking BIG.

There is nothing wrong with thinking big, but to think small can also be equally powerful. I invited the group to go very slow and to set a very simple and easy goal as an investor. I wanted them to have a sense of winning and the idea was to help them to experience winning.

We took examples of the power of starting small, we saw what Rs. 5000/-. Rs. 10000/- and Rs. 20000/- can help them to create in the next 20-30 years of time frame. They loved the idea of starting small and then continue to expand their game of wealth creation.

4. Become Rich Slowly

I was sharing with them the conversation between Jeff Bezos and Warren Buffet in which Jeff asked Warren, “You have shared all your secrets around wealth creation with the world through your talks, videos, and books but then why not many people are RICH”, the answer by Warren buffet was, ” Because not many people want to become rich slowly”.

Yes, everyone wants to become RICH quickly and that is where all the problem starts.

I invited the millennial to focus more on the word “CREATION” than the word ” WEALTH”. It takes time and there are no short cuts. No stock or 1-2 actions will make you a millionaire quickly. Wealth creation is always like a plant it grows slowly, row by row, Inch by inch.

Well, that is exactly how wealth grows.

5. Goals are always a by-product

We did an interesting and insightful conversation on giving and serving. The song which is being played in our mind is the “want” song.

• I want a car
• I want a house
• I want an iPhone

Our want list occupies 99% of our Mind’s bandwidth and in that, we forget to serve our financial life, we forget to serve people, we forget to serve our organization.

The participants learned the biggest lesson of their life and decided to give time, commitment, consistency, and discipline to their financial life and if they do so the goals will automatically start entering their world. I wish someone would have given this learning or insight at the start of my career, for many years I was finding wealth on the wrong side of the river.

6. One action at a time

I made a statement at the start, “only action products WEALTH”– It is not the thinking, worrying, planning, imagining, visualizing that helps to create wealth.

The book called, “Think and Grow Rich”, is a great book but the title is totally misleading. The participants learned the most important personal finance lesson that, “Only action Produces WEALTH”- One action at a time, I asked them to find their first personal finance action and encouraged them to complete the action in the next few days.

7. Cost of Delay

I did not want the session to be preachy and so instead of asking them to start investing, I showed them two different scenarios, what if they start now and what if they delay and I left for them to decide. After seeing the example and calculation they decided not to delay their investment journey anymore and they made a commitment to start their monthly Investments.

I was happy to see the session was helping them to give a new direction to their financial life. It was more like a wake-up call for many and was making them a confident investor.

8. Power of HABITS

Our Habits have the power to make or break our financial life/future. Habits are Powerful, they are brutal and they are our invisible enemies to create wealth. It is absolutely normal to have habits but the problem starts when habits start to have us. That is from where the real disconnect happens between you and your financial life.

Almost all participants admitted some habits they need to work on to improve their financial life. I think it is a very important realization and it takes courage to accept your disempowering habits. At the start of the session, I invited every participant to bring in a lot of honesty and they did so, I appreciate them for their honesty.

9: Compounding is the way of Life:

Again a very powerful conversation learned by the participants. Personal finance is not about money, it is about YOU. We all have learned compounding as a concept and we all know the formula of compounding but it is about practicing compounding as a way of life.

I invited them to practice compounding beyond personal finance, maybe in the area of health, learning a new skill, or doing some activity on a regular basis. No Break. We took the example of being overweight, calories compounds, good work you do in your Organization compounds, efforts compound, and money also compounds- In Life everything compounds and we need to build a strong relationship with compounding.

10 The One-page action Plan

I wanted the session to end with a simple and easy action plan. I gifted a one-page simple action plan to all the participants, I am sure the actions listed will help them to kick start their journey as an investor. I promised them at the start, if they complete the training you won’t be the same person in the area of money.

The participants shared their results and actions before ending the program and it filled by heart with a lot of happiness.

Are you an HR or Entrepreneur?

I invite all the HR Professionals, entrepreneurs, and everyone to join hands with us in spreading financial awareness. You can become our partner in spreading financial awareness.

Let’s GIFT financial wellbeing to others, trust me there are many who are waiting for a helping hand and you and I can become their helping hand. The conversations we do helps an investor to reset their mind and personal finance actions and it saves them to create wealth, avoid the debt trap, and have a smooth financial journey.

If you are an HR of any company or someone who can help us conduct the sessions for investors. Do fill up the form below.

We have already done programs for several Companies like HPCL, Wabtec, Tata communications, Airbnb, IAS officers Academy, BSF, symbiosis, and many other institutions and Organizations. I invite you to join hands with us to make a difference in someone’s financial journey.

Today we will discuss an interesting topic – How many times of your annual expenses do you need as your retirement corpus to retire comfortably?

For example, if someone has an annual expenses of Rs 6 lacs per year, then can they retire with Rs. 1.8 crores (30 times)? This is the focus of the article today!

The current state of “Retirement” Advertisements

From last 4-5 yrs, I can see a lot of conversations, articles and YouTube videos which talk about retirement and its importance.

There are many retirement plans and pension plans also launched these days which talk about importance of retiring with enough money and a secured way of generating pension once you stop working.

There is no doubt that retirement is top most financial goal (and the longest one) for any investor. We all will probably have a much longer retirement life than we imagine today. Our parents also have retired just few years back (or going to retire soon).

A 60 yrs old person can expect to live anywhere up to 85 – 105 yrs in future. With changing life style, less dependence of kids, increasing expenses at retirement – planning for retirement has become much more important than any time in history.

The problem is that we don’t know when we will die. You CANT plan for just 20 yrs of retirement, because what if you die at 100 yrs? It’s quite a tough thing to predict when you will die, and almost impossible to plan for it.

Hence the best you can do is take the worst case, and plan for a very long retirement.

Retirement Planning is very tough

First thing you should know is, that there are many variables when it comes to retirement. There are things like

• Inflation
• Returns
• Taxation
• When will you die
• When will you retire

When you do any retirement calculations, you make some assumptions and you get an answer.

One big problem is that in reality there can be a lot of changes in these numbers, and your planning can go for a toss. Hence you need to look at things realistically and plan in such a way that takes care of worst scenarios.

Next 40 yrs cash flow

So let me start with asking how your expenses will look into future? If someone wants to retire today, how will their next 30-40 yrs of cashflow may look like.

Assuming that you want to retire at some point of time and your annual expenses at retirement is 1 unit. Then how this will change over time?

Can you see how drastic the expenses can vary in your retirement life due to various inflation rates? Note that in reality, the expenses might come down a bit once you are old enough like 80-90 yrs, but I have still not considered it because there can be other types of expenses like medical costs which will shoot up.

Is 30x corpus enough for retirement?

Now let’s dive deeper into the main question and focus on this article – “Is a corpus of 30 times yearly expenses enough to lead a long retired life?”

The short answer is YES, but before I go deeper into the answer – let me show you a case study

Imagine a person retires with following numbers

• Per month expenses in the start of retirement = Rs 12 lacs (1 lac per month)
• Corpus = 3.6 Cr (30x)
• Inflation Assumed = 7%
• Post Tax Returns = 9%

How long will the retirement corpus last in this case?

The answer is 43 yrs as per excel calculations. For simplicity purpose, for now we have taken a case where inflation, returns are all fixed and the person only needs the monthly expenses as per increasing inflation and no other withdrawals are done till end. In which case, the corpus change will be very smooth.

Here is how it looks like

What if your assumptions are wrong by 10% margin?

Most of the calculators just give you an answer like above graph, but does not ask a question – “What if things go wrong?”

• What is the inflation is more than what you assumed?
• What if you needed more income in future than you planned?
• What if you were not able to generate the returns you assumed?
• What if you had less corpus than you originally planned?

How different will be the result now if you are wrong by 10% margin on all 4 variables?

So, lets see that case too.

• Corpus is 10% less = 3.24 cr (instead of 3.6 cr)
• Monthly Expenses are 10% more = 1.1 lacs per month (instead of 1 lacs)
• Inflation is 10% higher than assumed = 7.7% (instead of 7%)
• Returns are 10% lower than assumed = 8.1% (instead of 9%)

So instead of 43 yrs, how fast the corpus will finish now?

The answer now changes to 27 yrs

Yes, from 43 yrs .. it now changes to 27 yrs, which is 16 yrs earlier.

However in real life, either all 4 things can go wrong by some margin, or just 1 or 2 or 3 things may go wrong.. so there are various scenarios here..

• Nothing goes wrong
• One variable goes wrong
• Two variable goes wrong
• Three variables goes wrong
• All four variables go wrong

This in total makes 16 different combination.. We have seen the best case (when nothing goes wrong) and worst case (when all 4 variables go wrong) ..

But when we see all 16 variables together .. it looks like below

Note that these calculations above are assuming an inflation of 7% and post-tax returns of 9%. If you take lower returns or higher inflation, then the results will be different ..

Testing the data for 250 iterations

I assumed that Inflation and Returns will come down slowly over long term as we move towards a more developed economy. We might reach to a 2-4% inflation (starting with 7% today) and 4-6% returns post tax (starting with 9% today). I added a variation in calculations and plotted 250 variations of the same chart and here is the results.

As you can see from above graph, the results can vary a lot depending on inflation and returns combination. On an average the corpus lasts for 41 yrs.

I also took 5000 iterations to see how long the money finishes and here is the plot.

What we observed was that 98% of the times the money lasted in range of 35 yrs to 47 yrs, which is a decent enough planning, but the assumption is that all our assumptions about inflation and returns hold true.

Investing in Fixed Deposits for Income Generation

A lot of investors are extremely conservative and don’t want to invest in anything other than bank fixed deposits. We know that bank fixed deposits are highly secure, but at the same time – they are extremely inefficient in taxation and also provide below inflation returns.

But let’s test that case as well.

Let’s assume that a person is putting all their money in fixed deposits only. In which case the returns can be taken as 4% post tax (30% tax deducted from 5.5% returns)

Below I have shown how long the retirement money will last when a person has 60x, 50x, 40x, 30x, 20x and 10x corpus. I have done 250 scenarios and plotted them to see how the corpus ends.

As you can see, when the returns are lower – you need much more than 30x corpus if you want to last it for a very long term.

With just 30x, it will last for just 22 -24 yrs. The frustration of seeing your money finishing while you are still don’t see your death coming your way might be very horrible experience.

So conclude, Yes 30x corpus is good enough to retire, but the assumption is that you will not be dipping into that corpus to withdraw any big amounts like for buying house, or for your kids’ education or any large medical emergencies.

Better to have those things separate than your 30x corpus.

What if my corpus is less than 30x?

It’s going to be an issue if you are retiring with less corpus like 20x or 10x or 15x. In which case, you will have to make sure that you also have some decent equity exposure to bump up your returns so that your corpus can last longer. We at Jagoinvestor are working on various strategies which can be used to make sure that the corpus last longer using an equity exposure and generating a regular stream of income for our clients.

Do let me know what your thoughts about this article are.

Also, if you are interested in the topic of retirement planning and want to listen to a casual but very detailed talk on this topic, do listen to my talk with P V Subramanyam where we have discussed various aspects about retirement

Disclaimer : Note that these calculations are highly complex at times and there are lots of things which contribute to the calculation. I don’t claim to have done things perfectly from statistical point of view. This article is only a basic calculation with some high level assumptions. Do talk to your financial advisor before creating your retirement strategy.