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Saturday, 14 December 2013

Tax free bonds : A must for any retirement portfolio

Tax free bonds have been coming out in droves over the last year.  The Indian government empowered multiple companies to issue tax free bonds to help generate working capital.  This has given a unique opportunity for retail investors to lock in an almost risk free guaranteed rate of return for long periods of time.  For early retirement enthusiasts like myself, tax free bonds provide a much needed route to invest a part of the portfolio to generate risk free returns.  There are three big concerns for any early retiree, that he or she has to solve to enable a successful exit from the usual salary based working environment.  Tax free bonds solve two of these concerns in the most efficient manner possible.  This makes tax free bonds a no brainer key component of each and every early retirement portfolio.

Tuesday, 26 November 2013

SENSEX fails to deliver: Six Sideways Years

The last few years have been rather disappointing for most avid stock market investors, when compared to the boom period that we experienced earlier.  The India shining story seems to have been put on hold, as we struggle with rising inflation and slowing growth.  Political inaction, which was always a concern, has morphed into political paralysis, with the government seemingly unable to take any action at all, let alone the right economic actions.

In this scenario, it is instructive to take a look at the last 6 years from a stock market perspective, and see how the benchmark SENSEX index has performed, and what strategies we could or should have used to build on our investments.  I did not necessarily follow some of these principles myself, which has led to my sub-par portfolio results.  However, this exercise is useful to figure out what actions I should take in the future to keep my portfolio moving at the right pace in the right direction to hit my financial goals.

Friday, 24 February 2012

PPF Limit Increase : Duh!

I had written a series of articles in November 2011 about the change in the PPF rate of interest and its general economic implications.  I got some pretty interesting comments based on that series like the one here.  (Are PPFs really that risky) I seem to have gotten so carried away by that series, that I completely missed the fact that the PPF Limit was also increased at the same time.  Effective December 1st, 2011, the limit per year for PPF investment has been increased from Rs70,000 to Rs1,00,000 per annum.  (Yes, that's 1Lakh Rupees per year) This means for the current financial year, if you had already maxed out your PPF contribution of the year for Rs70,000, you can now go in and add an additional Rs30,000 before March31, 2012.  Starting next financial year, you can invest upto Rs1,00,000 into the PPF account.  This sounds like a good deal to me.  Now as long as the finance minister could also increase the 80C limit, we would all be in good shape!!

Thursday, 23 February 2012

Personal Finance News : MCX IPO

The MCX IPO opened yesterday February 22nd, 2012.  MCX is the commodities exchange in India, and will be the first publicly traded exchange.  I have seen good reviews about this IPO at all major financial sites, and most reputed financial advisors seem to be recommending this IPO.  I figured I should apply for it as well, and did so yesterday morning.  Interestingly I seemed to have forgotten that retail investors can now invest upto Rs 2Lakh in an IPO.  Earlier the limit used to be Rs 1Lakh.  Was checking out the Business Standard early this morning, and it claims that the MCX IPO was subscribed 91% on the first day with 1.5X in the retail category (clearly I will not get full allocation), 0.16X in HNI (this is very surprising;  does the HNI community know something that I don't?) and QIB portion 0.74X (again not hitting the limit)  In any case, the deed is now done, and we shall see how the allocation works out!

Tuesday, 21 February 2012

Early Retirement in India : Extreme Style

Previously I had published a blog entry about one of my role models Jacob Lund Fisker.  Jacob is the driving force behind Early Retirement Extreme, a philosophy of living in general that espouses the concepts of simple living, aggressive savings, and an overarching desire to become financially independent as quickly as possible.  Jacob's also published a book about his early retirement experience that is a must read, if you can get your hands on it.  Now a lot of the examples that Jacob cites in his book are relevant only in the US, and would sound very out-of-place in India.  So I always looked upon his thoughts as more of a vision and guidance, than as specific steps to follow to reach my own financial independence and subsequent early retirement.  For example, Jacob suggests that instead of using a dryer to dry your laundry, you could "air-dry" your clothes after washing, to save on electricity.  Well guess what! none of us in India can benefit from this wisdom, since we all hang our clothes out to dry in the sun anyways.  There are several other examples like this one, which led me to believe that there isn't really much that we can takeaway here in India from Jacob's lifestyle and early retirement experiment.  However, recently I had some time to review several of his blog posts on Early Retirement Extreme, and here is something thought-provoking that I came up with.

Sunday, 19 February 2012

I made a mistake : Fixed returns can lead to Early Retirement

Several months ago, I had stated to my wife, quite brashly if I may add, that debt-like returns would not find any place in our retirement portfolio.  I have been in a tearing hurry to grow our retirement corpus and I thought that the slower growth rate of debt-like investments, when compared to equity based investments, was something I could not tolerate.  In fact I was so convinced about my logic, that I even posted a blog entry justifying my position.  I could not have been more WRONG!!  However, like all good things, ones financial strategy is also never 100% right, and there is always room for improvement.  I have now realized my mistake, and made room for some more fixed income into our retirement portfolio.  There is one key recent investment opportunity though that triggered my change of heart.  If you are a keen follower of personal finance, then you already know what I am talking about!  Yes, I am of course talking about ...

Tuesday, 6 December 2011

Stock Market Index in India (Part II)

We reviewed the origins of the Bombay Stock Exchange, in my previous post.  Established in 1986, the BSE SENSEX is the key barometer of the Indian Stock Markets and is widely quoted as a proxy for the overall Indian Equity markets.  When it was first established in 1986, the SENSEX comprised of stocks that were representative of the then pre-dominant companies and sectors.  Over the years the Indian economy has successfully completed its transition from a manufacturing basis, to a service oriented economy and now more recently biased towards a knowledge economy.  Several of the companies that were considered the bellwethers of the old economy are no longer part of the index, since the economy and concurrently their fortunes have changed in a large way.  A historical review of these changing times is critical to understand the fickle nature of individual stock investments, while learning to appreciate the stability offered by the index in itself.