Wednesday, January 30, 2013

How do we start the wealth journey – here is one good example:

He was from a middle class business family from UP. He completed BBA in his home town and worked for some time in his family business before coming to Bangalore to get an MBA from Christ University Institute of Management.

Like most MBA’s in the institute, he landed a good job – and started working from May 2012.

He had a monthly take home salary of about 35 K. As he lived alone, his expenses were limited and he could easily save. He also did not have any liabilities like education loans. So he started his wealth journey in earnest by investing time to learn about mutual funds and real estate investments

For his expense tracking, he used an android application called Expense tracker – he found it easy to use and he could export the data to the financial planning sheet in his laptop.

It took him six months to be confident enough to take an investment decision. What I like about him is that he took a decision and then came to me to validate his decision (most students come to me asking for advice about where to invest – he asked me if his MF pick was correct –and it was correct).

His monthly savings now automatically go into three MF’s through the systematic investment plan - he invests in UTI Opportunities fund, SBI Magnum Emerging Businesses Fund and Birla Sun Life GenNext Fund.  Each of these funds has a great track record for the past three years, have beaten the sensex and have been ranked well by the industry. 

He also took a term insurance from Bharati Axa for Rs 1 crore cover – he took it online (that is cheaper) and that too for 45 years term – How much is the premium? Well you guess - there are premium calculators on the websites -go ahead and surprise yourself.

He did not stop there. He applied for a home loan from HDFC and got one in a few months. He started to look at properties in his hometown (as he was not sure if he will be in Bangalore for long) – identified a top builder and a new flat complex that was in the outskirts of his town – there was a new large hospital coming up in the neighbourhood as well. He took loan from his parents for the 20% advance and signed up for a 2 BHK flat for about Rs 35 lacs. The rates in the locality have since appreciated by 20% - the emi’s will start soon and he has the ability to pay the emi’s. The flat will be ready by mid 2014 and will hopefully start getting a rental income by end 2014.

What did he do right –Tracking the expenses, investing time and effort in educating himself about the opportunities available, starting  SIP’s in three good funds,  taking term insurance for a 45 year term,  getting a home loan approved, taking loan from his family for the down payment for the flat, identifying a good builder, identifying a good location and then signing up.

What he could have done better – well I can’t find one area where he could have done better. If you have any suggestions on what he could have done better - please tell me in the comments column below

Thursday, January 24, 2013

The first chapter of my book - "Welcome to the wealth journey"

Welcome aboard – and thank you for joining me on this “wealth journey”.

We all started our wealth journey the day we were born and this journey will continue with us throughout our life.

As of now, we are co travellers. Through this book I want to help you reach your wealth destination faster. As we travel together, I hope to share with you some ideas that have worked for me and for others, who have been successful in reaching their wealth destination.

Unlike other journeys, in wealth journey, we all start at different starting points and we all travel different distances during our lifetime.

Those born rich start this wealth journey ahead of others.

And those who travel a greater distance end up amassing greater amount of wealth than others.

Needless to say, we all want to travel a greater distance – we all want to “get rich”.

This book is about “you” getting rich.  

As we start our journey together, I would like to start by posing two very basic questions to you:

·       Can you define your destination in this wealth journey?

All of us recognise the fact that without a destination, you may reach nowhere.

You do not start from your home saying “I am not sure where I am going - but I am going somewhere”.

When you leave your home, you normally have a clear destination in mind. For example, you may say “I want to go to my office which is located at the following address:____ .”

However, in the case of our wealth journey, most of us define our destination as “becoming rich”.

But do we have a clear definition of this word “rich”?

No. We all have some idea of what “rich” is – but as you will find out in this book, our definition of rich is not clear enough. It is hazy at best.

It is like saying “I want to go to my office – and I know the general locality where the office is, but I do not have the exact address”.

Most of us take this wealth journey without a precise definition of this concept called “rich”.

·       Once you have clarity about the destination (becoming rich) – do you have a plan on how you will reach this destination?

If you need to be in your office by 9 am, you tell yourself - “I would need to leave my home by 8.15 am latest as the driving time is 35 minutes and I need to have a 10 minute buffer for any unforeseen issues”.

If you are not driving but are walking or going by a cycle, you will need to plan for more travel time. May be there is a different walking or cycling route that you will take.

Same way, in your wealth journey, once you have decided your destination and the timeline of reaching it, you will need to figure out the “most suitable means”.  You could reach the destination of “getting rich” by earning more, or by saving more or by investing in fixed deposits or PPF or company deposits or by investing through stocks or mutual funds etc.  There are many options to get to your destination and if you chose the wrong option, you may not reach your destination at all.

We inherently know the power of a good plan.  But most of us do not make a “financial plan to get rich” because we do not know how to make one. Actually it is not the financial planning that is difficult; we do not know how to get rich. In this book, I will share my ideas on how you can make a long term financial plan that will guide you to become rich.

A major part of this book is devoted to the various paths (investment options) you can take to get rich – it will help you understand the advantages and disadvantages of these investment options. Some investment options would make sense to you more than others. Chose whichever options you are more comfortable with to reach your destination.

You can go to your office by car or by cycle or by walk – the effort and time taken may be different – but you can choose what suits you.

All the rich people that I know of, have figured out their personal answers to the two questions listed above. The day you figure out your answers to these questions, you will be well on your way to getting rich.

Getting rich is not all that difficult.

Getting rich is a result of you clearly defining what rich means to you, making a financial plan for getting rich, figuring out the investment options that suit you, implementing the plan and finally reaching the destination.

As you go through this book, you will see that the rich do things differently from the rest and if you can understand these differences, you will start attracting and amassing wealth.

You will also see that wealth building is a “long term game played daily”.  You do not go to a gym for a week and expect to be fit for the rest of your life. If you want to be fit for the rest of your life, you need to exercise daily.

Same way, you do not become rich with a seven day “get rich” program – getting rich is a lifelong affair. To get rich, you need to make a 20-40 year financial plan and stay on course. You need to change the way you think about wealth. In that sense, through this book, we will be co passengers for a real long time.

So welcome aboard again and I wish you a great journey ahead.

Monday, January 14, 2013

Investing in gold through gold saving schemes offered by jewellers

This is a short note on the ROI that one gets when you invest through the gold saving schemes offered by jewellers.


The scheme works as follows:

·       You pay 11 monthly instalments of any amount in multiples of Rs 500

·       The jeweller pays the 12th instalment

·       You can redeem the total amount (12 instalments) and take a jewel for the amount.


What is not visible is the price of gold at which the sale will happen?

It is the price that is prevailing on the day of redemption (12 months into the future).

As the price of gold is expected to go up in India as long as India is a developing country, you do not get any advantage of this increase in gold prices  (for more details, please see my book where I have shared how to predict gold prices in future).

Plus you do not get any interest on the money deposited by you for the 11 months.

So is it a good ROI or a bad ROI?
You decide.

Tuesday, January 8, 2013

Why this book - "How to get rich and retire early"

Before I started writing this book, I went around to do a market survey – wanted to know what kind of books existed in wealth management space in India. I went to many book shops, searched internet portals - bought about 20 books and read them and browsed through many more in the books shops  in Bangalore.

Some of the books that I liked and surely recommend to my readers are:

·       One up on wall street – by Peter Lynch – this is an amazing book – Peter Lynch, a very known money manager in the US, has explained in very easy terms how to pick up stocks

·       The little book that build’s wealth –by Pat Dorsey – this is also a very easy to read book and can be a primer to stock selection.

·       Buffetology – by Mary Buffet – another good & easy to understand book - explains the thought process of Warren Buffet while evaluating stocks – this is a must read for those who want to know more about investing in stocks.

As you can see, most books did not go beyond stocks. When it came to Indian authors, either they were a compendium of information ( like the Savings and Investment year book – published by Value research) or they were general advisory, motivational  type of books (How to become a multi millionaire –by Subhash Lakhotia).

There was no single “good book” that went beyond stocks and I did not find a single book that shared tips on financial planning for long term

 I would like to mention one book that is a must read for all my readers  - “Rich Dad, Poor Dad" by Robert Kiyosaki – I had read this book years back and I re-read it atleast once an year – this is a book that changed me and I think it would change you too.

Having seen the kind of books available, I realised that there is no single book that covers the all the topics. The topics that I believe needed to be covered are:

1.   How do you define the word Rich – this is the starting point of the wealth journey

2.   How do you do a long term financial plan – a plan for 20 years? How do you visualise what would be your cash inflows and cash outflows 10 years down the line?

3.   How do you reach your definition of rich through financial planning? What investment actions do you need to take today and in the future to get rich?

4.   What the various investment options available for us in India?  How does one evaluate a Kisan Vikas Patrika? What about stocks and mutual funds? When do you invest in Gold? How does insurance fit into the overall scheme? And what about real estate? Overall how does one get rich in India?

So keeping these questions in mind, I split the book into chapters and then wrote it over a period of 4-5 months.

This book has a completely practical approach to this question – “How to get rich and retire early”. Every tip that is there in this book has been practiced by someone I know who has become rich.

This book addresses all the investment avenues - not just stocks.

The book uses Indian examples -for example, I have shared data on real estate prices since 2008 for about 20 Indian cities to discuss the price movement of real estate in urban India.

This book will hopefully change the way you will think about wealth. And therein lies the secret of getting rich – change the way you think about money and money will come to you. You will surely get rich and retire early.