Saturday, 14 February 2015

What is Early Retirement? How many years before I retire?

I routinely get asked by readers of my blog, about my age, how many years I have been saving, and when do I plan to retire.  There are others who write me asking about my definition of early retirement.  Would retiring at the age of 50 be called "early retirement"?  How about if you took a Voluntary Retirement option from your company, and then took up another less demanding job?  Does that meet the definition of early retirement? And so on and on.  Here is how I look at it, and it has nothing to do with your or my age, if you can believe it!!

Saturday, 7 February 2015

Portfolio Strategy: Feb 7th, 2015: Banks Underperform

I have been putting my bets on financials for some time now, specifically focusing on banks.  I had written about this earlier in Dec 2014, and again in Jan 2015.  Banks have done very well over the past year as shown in the performance of the BANK NIFTY in the graph below.

Just in the last 6 months as shown in the picture, the BANK NIFTY has given returns of ~25%

How much should I save before I retire?

The critical question for all retirees is "Have I saved up enough money to last the remainder of my lifetime?"

I had written earlier, about how to calculate the corpus you need to be able to retire financially independent.  The amount you need depends on only 2 factors, your estimated annual expenses, and the number of years you need to live in retirement.  

Tuesday, 6 January 2015

Portfolio Strategy: January 6th, 2015: Markets tank 3%

Happy New Year, and we get pummeled by a 3% drop in the market which was pretty broad based. The SENSEX, CNX NIFTY and BANK NIFTY are all down 3% today, in what can only be described as a sheer bloodbath on Dalal Street.  It is on days like this that your conviction to stay invested in the market takes a beating.  All of the recent volatility is attributed to global uncertainty with the continual drop in OIL prices and the EURO crisis focused on the Greece debacle.

Since I have been focusing on financials and banks in particular, my overall portfolio certainly took a large hit today.  However, I did use this opportunity to rustle up some free cash, and invest in the GOLDMAN SACHS BANK BEES ETF, that I had mentioned a few days earlier.  I am still a believer in the overall India growth story, and feel this pullback is a good investment opportunity.  I know I am effectively timing the market here, which is never a good strategy, but this is money that I should have had in the market in the first place, so what better time than now to put it in.

Here is hoping that the Greece crisis blows over, and things settle down on the global front! 

Tuesday, 30 December 2014

Portfolio Strategy : December 30th, 2014 : Banks!

Continuing with my bet on the interest rates coming down in 2015, I would expect rate sensitive sectors to benefit the most from the imminent reduction.  The most obvious rate sensitive sector is financials like banks.  Now I do believe there are other sectors too like NBFCs, housing finance companies, auto and auto ancillaries, etc.  But with my limited knowledge in those domains, I am sticking with banks for now.  The bulk of my exposure to banks is through the Reliance Banking fund.  This MF allows me to pick up an exposure to banks in general and hopefully tracks the BANK NIFTY quite closely.  Another way to achieve this is by investing in GOLDMAN SACHS BANK BEES, which is an ETF that tracks the CNX Bank Index.  I haven't been investing in GS Bank Bees so far this year, but will probably do so in 2015.  

Assuming you agree with me that RBI will indeed start reducing interest rates, what other methods are you using to benefit from it?  Are there specific investment strategies that you can recommend, and we can all learn from?

Tuesday, 23 December 2014

Portfolio Strategy : December 22nd, 2014

With the markets swinging wildly over the last couple of weeks due to the rapidly falling oil prices, and the concerns in the Russian and emerging markets, here is the strategy I am going with.  I am counting on a reduction in interest rates from the RBI (even though inflation may not go down quickly enough, and there is concern that money will move out of the Indian debt markets if interest rates are reduced) Lower interest rates will mean bond yields will come down, and existing long term bonds will sell at a premium.  With this in mind, I am investing in long term GILT funds at the moment, to hopefully profit from an imminent rate cut, and the corresponding capital gains from the GILT fund.  The specific fund I am investing in is HDFC Long Term GILT fund.  

I am also expecting rate sensitive sectors like banks to do well as rate cuts happen, so I am also invested in banks through the Reliance Banking Fund.  

Hopefully the RBI governor of India, Dr Raghuram Rajan, will do me a favor and cut interest rates sometime between now and Feb 2015.  Here is hoping for the best.

Sunday, 14 December 2014

How much do I need to Retire in India ?

How much money do you need to have saved up to retire in India?  Well that is the million dollar question isn't it!  
Or rather the crore rupee question.  Probably the single most difficult question to answer for anyone planning to retire.  Knowing if you have saved up enough, before taking the plunge is critical to give you the confidence to kickback and retire from your daily grind.  But how do you go about figuring this out? How can you know for sure that you have got enough? There are so many factors that can impact this magic number, and you just cannot afford to go wrong on this one.  In this article, I explore some thoughts on how to estimate the retirement corpus or portfolio that you would need today, to be able to successfully retire.  I will share a simple method to estimate the retirement corpus, and also explain any assumptions I have made in my calculations.