Category Archives: Asset Allocation

Personal Finance Website Update

Nine months ago I did not know what a blog is? Stuck up at home due to a back injury, I was casually chatting up with a geeky friend asking him about how to create a website, purely in jest. “Why don’t you begin with a blog and then see if you can make it bigger”, he said and gave me a link of Blogger.

300 posts later, the dream of translating it into a website seems plausible. Just take a look at what I’ve created without knowing html code! (Well, I can figure out the a href link code, but just!!) Now you know why there’s no post here. I have exported these posts to my website blog

RSS readers are requested to take this feed please: http://feeds.feedburner.com/personalfinanceforeveryone

Personal Finance 2.01: It’s a one stop personal finance website and I urge you to take a test drive. Feedback will be of immense help.

Discussion Forum: It’s a forum where you can discuss all your doubts and questions about personal finance, planning and various products like insurance, stocks, mutual funds, etc.

PF 2.01 Blog: I have started a blog focussed on personal finance and I would invite you to share your thoughts. Let’s have a real conversation of PF going on here.

Weblinks: I am regularly out on the web. When I find a great site I list it here for you to enjoy. From the list choose one of my weblink topics, then select a URL to visit.

NewsFeeds: We have some great news feeds to take a look at. Suggestions are welcome.

Financial Advisors Directory: We invite professional and net savvy advisors to register and provide the information needs. This one is a first in India to the best of my knowledge.

The design stage will take another two months after which I’ll be ready to go live. The real action begins only after then. Wish me luck.

Financial Literacy Drive Treasure Post

This post links to a treasure trove of information on personal finance. Actually, April was National Financial Literacy Month in the US and JDR (GetRichSlowly) has the ultimate collection of posts covering everything on Personal Finance.

Other than the 20 posts linking to the literacy drive, he also links to his popular articles and the websites which provide such information. Maybe it’s all dry information, but you can do well to bookmark that post and keep coming back to it. It’s dry, but important for you. Why? Look at the following questions and then decide.

How much do you know about money? Have you learned about the power of compounding? Do you know how the stock market works? What is a bond? Can you tell the difference between an Income Statement, a Balance Sheet, and a Cash Flow Statement? Do you even know why you would want to?

Do you know how to keep a budget? Do you understand how your taxes are used and why we pay them? Do you know what it takes to purchase a house? How much insurance do you need?

Head on to this treasure trove. Even though some posts are US specific, the concepts are useful and important to learn.

Tips on Financial Planning and Budgeting

Getting rich is in your hands, nobody else’s . So get started with working hard or smart (depends on you again), adding to your finance knowledge and generally taking responsibility for yourself. Get Rich Or Die Trying.

If Financial decisions look like rocket science to you and Investing is even more daunting, here are some baby steps for you.

This one is from Deborah Fowles, Guide to Financial Planning in About.com Seems very elementary but I doubt how many people are scoring more than 5/10. Here it goes, the top ten:

1. Get Paid What You’re Worth and Spend Less Than You Earn : Hey, I get less than what I deserve and so do you!! And I’ve not done any budgeting so that I may be sure of the second part.

2. Stick to a Budget : I’m ashamed, no budgeting exercise for myself, not to speak of sticking to one.

3. Pay Off Credit Card Debt: Thank God, I finally get a score on this one. I’ve managed to stay clear though I’ve had to suffer with the agonising interest calculations earlier.

4. Contribute to a Retirement Plan: I do have a pension plan but I’ve never cared to figure out whether it is sufficient! Will give 1/2 for that one to me.

5. Have a Savings Plan: Yeah ,I’ll be partial to myself and give some score here too! I do save about 15% of my income though it’s a recent phenomena. Better late than never!

6. Invest! : Pretty straight forward. But few people manage to find an hour for that in a week. They’ll rather watch TV(Big Boss is on these days!)

7. Maximize Your Employment Benefits : A meeting with your HR guy!! Brace yourself. I have no hope with my guys.

8. Review Your Insurance Coverages: Putting a finger on that is important from the family point of view. Those of you without that responsibility can breathe easy on that count. But I get full marks here!

9. Update Your Will: Never thought about that up till now. Bless Ms Fowles.

10. Keep Good Records: I will, as part of my New Year resolutions. But I’ve yet to get started on that. Next Monday, I promise.

Phew!, I score about 4/10!! So much potential to improve!!

But before I sign off, for guys who suddenly want to get started with their budgeting exercise, here are percentages of major spending categories from the US Bureau of Labor Statistics (2003) Consumer Expenditure Survey. May not apply to you and me but it’s an interesting statistic anyway. Gives you an idea where you stand and where you can increase/decrease your expenses.

Food at home 7.7%
Food away from home 5.4%
Alcoholic beverages 1.0%
Total food and drink 14.1%
Housing 32.9%
Apparel and services 4.0%
Vehicles 9.1%
Gasoline and motor oil 3.3%
Other transportation 6.7%
Healthcare 5.9%
Entertainment 5.0%
Personal care products and services 1.3%
Reading .3%
Education 1.9%
Tobacco products and smoking supplies .7%
Miscellaneous 1.5%
Cash contributions 3.4%
Personal insurance and pensions 9.9%

Work on your Budget sheet for two hours and it’ll tell you a lot about yourself. Look at it as a personality test!!

And yes, Taxquery wonders how any financial planning can be successful without tax planning. He’s dead right. Go to his wonderful blog for tons of info on Taxes

Become a Crorepati in 30 months

Gaurav’s post on the 30 things he wanted to do before he’s 30 was a brave one. I wondered at his bravery and wished him all the best only to land up in trouble myself 🙂 He wants a way to build a Networth of 1 Crore before he’s 30 and now wants me to find it. 😦

Gaurav’s target of becoming a crorepati is brave but also bordering on being foolhardy, I think. To top it, he wants to start with a seed capital of only Rs 2 lacs and a monthly infusion of Rs 20000! This way he will need to grow his money at an outstanding rate of 200% annually!!

Impossible. Or could be there some way? Legal, ofcourse.

Very recently I read a book, The Big Idea, which ends with the following Goethe’s couplet: Whatever you can do, or dream you can, begin it. Boldness has genius, power and magic in it.

Here in this blog I have been talking about Mutual Funds, Real estate, Bonds, ULIPs and ETFs. All of them do not pass muster when it comes to giving a return Gaurav wants. What about stocks? Yes, there are stocks that have given that kind of return in the past. But how to identify those stocks who would do the same in the next 30 months? Nobody knows those stocks. So is there still a way?

Now Gaurav says that he has avery high risk appetite. That should essentially mean that when he has invested in shares that he expects will zoom and those share prices drop 30% soon after he buys them, he will average his cost by buying more. Letus assume that he is willing to take the volatility for the desired growth and he is confident of his decisions.

Moving on that assumption, Stocks can give you that growth. But since we cannot identify the 5-6 stocks that will give a growth of 150-200% over a period of 30 months, we need to ride the waves on the stock market.

The first magic happened today morning when I looked at a blog/site that I had been avoiding (Because I understood little of that). It’s EagleEyeTrade by Rajeev Mundra.

Talking to Rajeev who runs a Technical Trading seminar too, I did some number crunching. Assuming a challenging but realistic goal of 10% growth every month, a starting amount of Rs 6,25,000 will become Rs 1.09 crore after 30 months. Vow!!!

Atleast, theoretically it’s possible. Ofcourse it will take a lot of guts (time & energy too). It depends on Gaurav’s risk appetite. And Rajeev’s expert guidance. If you ask me, the guys can do it. I wish them Good Luck.

For the first time I’m putting a disclaimer. Here it is: Ideas posted on the blog are educative in nature and must not in any way be construed as advice or recommendations. Investing/Trading in financial instruments is risky. This blog cannot be held liable in anyway for losses incurred.

Ride the Stock Market Wave to Grow your Money

I have been following the EagleEyeTrade blog and even though I don’t understand technical analysis, I find this blog very credible. I am delighted that Rajiv found time to answer some of my doubts/questions which have been reproduced below:

Technical analysis is the study of the trading history to attempt to predict future prices. What qualifications make you confident of doing that?

  • The only qualification which works in Stock Markets is real life experience. A college degree, BTech or on MBA all are helpless unless one can think for himself and be able to risk money. The experience does not comes easy and coupled with the fact that normal human “good” qualities and emotions tend to hamper rather than achieve good results in technical trading.
  • Do you have a detailed training kit for beginners. Tell us more about that.

  • We donot have a detailed kit for beginners. What we sometimes do conduct seminars which are for focused traders.The trader should be familiar with markets for sometime and have some trading experience to benefit from our seminar.Our focus in seminar is to establish new lines of thinking or to give the trader new ways of looking at things. We focus on Elliott Wave, Classical technical analysis, risk management and position sizing. All of which are important pillars of technical trading.We also talk a little about using fundamental scanning for swing trading.
  • What is Elliott wave analysis? What benefits it brings?

  • Elliott Wave is a method to analyze market movements. It shows how market movements are related to each other and how here is pattern in chaos.Its a unique theory which gives the user insights which no other technical theory does. Its is vast and deep and any trader wishing to use this needs 1-2 years of experience to be able to use it effectively.
  • Critics of technical analysis include well known fundamental analysts. Warren Buffett has exclaimed, “I realized technical analysis didn’t work when I turned the charts upside down and didn’t get a different answer” What do you say?

  • I am a fan of Warren.Probably Warren is right about Classical technical analysis, I also find it useless.But Elliott wave is a different class and is very useful.Having said that, i would add that technical analysis of any kind are short term tools, while fundamental analysis is much more long term
  • .
    The time and energy required is very high. Dou you agree/disagree? Why

  • Time is required to excel in anything.
  • You provide the knowledge/information/calls. How much time do you expect your clients to put in?

  • We expect clients to read carefully what we write. This may take 15 mins to 30 mins.Also before they take a trade, they should commit to memory the entry exit stops and other things we say about a trade.
  • As an asset class, Equity stocks offer the best returns. But so many of us have burnt our fingers in the process?

  • Equity will offer the best returns always in long term. The simple reason being that it is companies which move the world and it is companies which earn the money which flows into everything else. Thus other asset classes which depends upon money generated by companies cannot outperform the companies itself. Like say you want to buy a gold ring, thus you send gold prices up. But how did you get the money to buy the gold ring?Some company you work for, or your own company made the profit from which you paid for the ring. Thus stocks would always lead by a far margin in long term
  • Greed and fear is the axis around which stock market rotates and its a dangerous axis to rotate around unless well prepared.Action motivated by greed and fear will result in losses always and the way the market works though greed and fear it makes sure most people remain on the loosing side.
  • Unless you’re working full-time in the financial world, you don’t have the skills, tools, information, time or interest in playing the market. Comment.

  • This is not always true. Long term investment is relatively easy. An index fund and term insurance would help most people.The more short term oriented you become, to try to extract the most profits, the more tools you need to make sense of the madness and more is the time consumed.
  • What is the average monthly return an investor can expect from your trade calls?

  • I try to generate 10% returns a month for myself. In this 75% of trades are in cash and 25% in futures and options.While this is a high target to achieve every month, we have done that in most months.
  • I found the answers insightful and reassuring. What do you say? Check out EagleEyeTrade

    Priceless Investment advice by Warren Buffett

    It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price: Warren Buffett

    During the period from 1980 to 2003, the stock portfolio of Berkshire Hathaway beat the S&P 500 index in 20 out of 24 years. During that same period, Berkshire Hathaway’s average annual return from its stock portfolio outperformed the index by 12.24 percentage points. The efficient market theory predicts this is impossible, but the theory is clearly wrong in this case.

    The genius of Warren Buffett lies in his simplicity. See this article in Fool.com

    You can also have an insight into his mind by reading his letters he writes every year to his shareholders. Go to this wonderful investment advice minefield

    But it is easy to intellectualize about his wisdom. Hard to follow them even though they look so simple. The trouble is that we consider investment to be rocket science. Which, it is not.

    Take Responsibility for Your Finances

    Slideshare is a wonderful way of sharing your slides and powerpoint presentations. It is a place to share and discover slideshows. You can embed the slideshows in your blog, tag, comment and have fun.

    I have embedded a presentation I have made on “Taking responsibility for your finances”

    Click here for the slides

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