Behaviour

A man had to go on a long journey.

Before embarking on his journey, the man walked up to God and sought his blessings.

God offered him a choice.

“Take along with you 5 litres of water or 10 litres of ice”.

Greed nudged the man to choose the latter(10 litres of ice).

The journey commenced. The weather was cold. The man walked on and on with an air of contentment and joy that emerged from his choice; the 10 litres of ice that he had chosen.

Soon he grew thirsty. He looked at the ice block. It was rock solid.

He walked on with the conviction that the weather would soon them warmer and the ice block would start melting and he would be able to quench this thirst.

But the weather wouldn’t relent and the ice wouldn’t melt.

His thirst by now grew by gigantic proportions and he felt miserable and grew desperate.

His 10 litres of ice which had once made him feel comfortable was now seeming like a hard rock of solid weight ; a white elephant which instead of providing comfort was causing him severe stress.

How now wished he had chosen the 5 litres of water instead.

Realisation soon dawned upon him that although ice and water both had the same chemical formula they were not same.

What mattered most was the state of their matter ( liquid vs solid)

This story is the story of scores of people who have amassed huge amount of real estate and who believe they are wealthy.

But the fact is quite the contrary. Their wealth is just a mirage ; a state of mind and a false belief. Their wealth is like the ice that wouldn’t melt.

Unless and until you can liquidate the asset by converting its form into liquid cash what our the purpose of that wealth which you believe belongs to you?

If your asset cannot meet your immediate need of security, education, health, holiday, etc etc then what is its purpose?

Real estate is largely like this. It is illiquid.

Try selling your house in an emergency and you will realise how difficult it is to find a willing buyer.

By the time you can sell your house more often than not it is a little too late and your need would by then have transformed into a lost opportunity.

How to Retire Peacefully?

We all invest for some objective, but are the investment baskets the right avenue to invest?

Will it yield the required corpus in a particular time frame?

The image is based on true & live story of the happenings around.

I pray this should not be your case.

Educate yourself while Investing.

Keep right approach while Investing & stick to it.

Kaustubh Deole

Fixed Deposit = MASK

Friends

Last week i visited a prospective client through a reference. He shared his idea of saving & preserving money. He shared his details & my goodness; he is sitting on worth 30 lacs in Fixed Deposit!

The emotion of preserving money is great but the question is is it increasing as compared to inflation?

Obviously not.

People still think FD as a superior option to preserve money. I would rather say, the person who has invested in FD is an utter loser.

FD should ideally contain only the amount which can be used in emergency situation.

Kaustubh Deole

New Mis-Selling Strategies

As a regular writer & educator on different aspects of Investing, last week i received a call from my old client.

Being a lady, she had concern for her nephew, who was having business & was requiring immediate loan for business purposes.

The nephew had received a call from a reputed lending company & were insisting to buy traditional life insurance policy for getting the loan.

She asked for my help.

Friends, i regularly educate through various forums & blogs.

These revenue greedy companies go at any level for promoting their products. They are least bothered about client & his family as insurance is a contract signed by the client to pay premium for the complete term.

If any death occurs, the death claim or at maturity, the maturity amount is paid to the assignee i.e the lending company.

Analyse, you have taken a loan of 5 lakhs without any financial documents, you don’t have to pay EMI, just pay insurance premium of 60000/- every year for next 10 years.

At maturity after 15 years, the lending company, who is the holder of insurance policy will receive the maturity amount which will not be paid to you.

This is a viscous circle of mis-selling of life insurance policies.

Purpose of Insurance:- “Insurance is a means of protecting financial loss”

Small business owners, new businesses, vendors, housewife’s, salaried employees with additional business are soft targets of these companies.

My advise– Stay away from such offers, invest wisely.

PS: I have complete recording of the above mentioned sales call. If anyone needs to check it, pls comment.

Kaustubh Deole

Weekend Reading

The Porcupine Story

The story goes that it was a particularly harrowing time in porcupine land. The winter was severe and the porcupines were finding survival difficult. They were freezing to death.

That’s when they held a meeting to decide on a course of action. As they got together to discuss their survival strategy, they discovered that just by being in close proximity with each other they were able to feel warmer and protect each other.

Being closeted together meant that their bodies generated heat which helped keep everybody warm. So they found they could survive the cold by just staying together!

But there was a problem.

As they moved closer, they found each other’s quills to be a bother—they poked and hurt.

Feeling the discomfort, some porcupines decided to avoid the pain from the quill pokes and moved away.

And as they ventured out on their own, the cold got them and they died.

Soon better sense prevailed and the porcupines realized it was better to stay together and survive rather than go out on their own and die.

Getting poked by the quills of porcupines that were close to them seemed like a small price to pay for survival.

This story has a great lesson for investors.

1) Investors afraid of market volatility redeem their investment because volatility seems to hurt them. Only if they could tolerate a little volatility their lives would be much better off in due course but their fear gets the better of them and they hurl themselves into a bigger crisis.

2) Another lesson investors can draw from this story is of leaving their Advisors and practicing self advisory or self medication whatever one may like to call it because the small fee that they have dispense seems to hurt them. They eventually venture out on their own and with no Advisor to manage their irrational and emotional behaviour, they too fall prey to greed and fear and lose their way.

#learningneverstops

Kaustubh Deole

Weekend Reading

Have a Proper Investment Plan

Boris Becker had it all — six grand-slam tennis titles, models hanging off his arm and luxury houses all over the world.

At the height of his career, the German ace had amassed a reported $63 million in prize money and sponsorships, but now the man once known as “Boom Boom” for his ferocious serve has gone from boom boom to bust.

Now 49, Becker was declared bankrupt by a British court, capping a fall-from-grace story that saw the one-time wild child go from Wimbledon champ to walking headline by blowing through money, women and business ventures in retirement.

His lawyer pleaded for more time and “one more chance” to make good on debts he has racked up in retirement.

But the judge said, regretfully, the man she had once watched dominating center court has already had plenty of chances.

“One has the impression of a man with his head in the sand,” Registrar Christine Derrett said.

The above news of Boris Becker, Six times grand slam winner and one of the most successful tennis player, becoming bankrupt sends one of the most powerful message to all the youngsters of today.

“Success is never permanent . Plan well when the sun is shining coz failing to plan is planning to fail. “

Financial management is most crucial lesson one should learn in these uncertain times.

Have a great weekend.

Kaustubh Deole

Use the Magic word & be Rich

Today, every single product is positioned as need based solution. Can you deny the need to save for child’s education, self retirement, safeguard family’s health & build wealth in long term? It is difficult to see the advantages of any investment when approached by a good salesman.

The world has evolved to a global state & so do any company or salesman. I would rather term them all as HAWKERS. They position the product so well that customers fall for sales pitch & buy it.

Game plan of HAWKERS: IF you have child, you require Child Plan. If you have family, you must have medical insurance. You also need Retirement Plan.

Result: You buy costly child Ulips & guaranteed plans, complex medical policies, inflexible pension plans. They push you to diversify across Stocks, gold, property, bonds, bank FD, PPF & other complex options. If you can’t afford a new home, bigger car, or foreign holiday, they will get you to leverage on future income.

You take a home loan, a car loan, a personal loan & you also collect few credit cards in bargain. This is sure shot recipe for financial worries. Use the magic word to safeguard your finances against such perils, make you rich & protect you from friends offering free advice, wealth managers, money quacks, banks, insurance companies, bank relationship managers, insurance agents who are trying to sell you something or other.

Magic word: No, Nahi, Nako, Na, Venda, Nahim, Illa, Illai.

NO’ is a very powerful word. Use it ruthlessly. Say ‘NO’ to the relative who wants to sell you an endowment insurance policy. Turn down bank executive who is pushing a pension plan. Refuse the offer of free add-on card from Credit Card Company. Don’t agree to buy child plan that costs a bomb.

Action Plan: Keep your financial life as simple as possible.

  • One term insurance plan to cover your life risk.
  • SIP’s in 4-5 well chosen diversified equity funds & debt.
  • A simple no frills medical insurance for your family.

Kaustubh Deole

IDIOT BOX

Akbar once put a question to his court that left everyone puzzled.

As they all tried to figure out the answer, Birbal walked and asked what the matter was. And so they told him the question.

‘How many crows are there in the city?’

Birbal immediately smiled, went up to Akbar and announced that the answer to his questions was twenty-one thousand five hundred and twenty-three.

When asked how he knew the answer, Birbal replied, ‘Ask your men to count the number of crows.

If there are more, then the crows’ relatives from outside the city are visiting them.

If there are fewer, then the crows are visiting their relatives outside the city.’

Pleased with the answer, Akbar presented Birbal with a ruby and pearl chain.

This is the kind of stories being dished out of business news channels day in a day out.

For example: take the question “Market kya bolta hai (What’s the market saying)” or

Where will the index be by in 5 years?

And haven’t you heard very intelligent and learned people saying that the index could triple in 5 years.

The use of the word ‘COULD’ is like Birbal’s answer.

Again we hear things like the market will rise provided “MONSOONS” are good, provided “FISCAL” situation improves but there are risks also like outcome of various “ELECTIONS”

Thus the media and experts are always ready with BIRBAL answers and like Birbal’s earned Ruby and Pearls the media earns huge advertising revenue by aggregating fools who sit in front the idiot box.

Kaustubh Deole

Over Diversification – Advisor Zaroori Hai

The image says,

Investing in different schemes or funds is futile.

Stick to few schemes.

Diversification is necessity; Over Diversification can be hazardous for your portfolio.

Kaustubh Deole

Home Buyers, Beware of Festive Offers

A company manufacturing dog food was having a brainstorming session with the entire team of Management, CEO, Sales Director, Marketing Director, Advertising Head on how to revive the falling sales of their product.

The usual blame game started with the Sales pointing finger at Marketing, and Marketing doing the same at Sales. Both together blaming the Advertising and vice-versa.

Suddenly the Assistant of the MD, got up, called a dog, placed the food at the dog. The dog sniffed at the food, and walked away without even touching it.

Well the reality was the end consumer was not willing to bite and there in lied the problem.

Similarly for the Developers and the Real Estate Sector, you can have tremendous debates, blame demonetisation or interest rates, RBI for poor sales of their home units.

The fact is the prices of the houses are beyond the reach of the end users and the end users are not willing to bite.

Time to get the message straight.

You can fool some people all the times, all people some times,

But you Cannot Fool All the people, All the time.

Happy Gudi Padva to All & Happy New Year