Investor Issues
Restarting investments after a major expense or cash outgo

Major expenses are mostly pre-planned. If they are unplanned, they may cause a deeper hole in our pocket that may be difficult to stitch quickly unless you follow simple and basic principles of investing throughout

A major expense may not only set us back financially but also psychologically. We may feel akin to having swum onshore aboard a sinking ship. There is cheer that a major task may have been accomplished but there is also despair that we may not know how to recoup our financial energy quickly.

Major expenses are mostly pre-planned. If they are unplanned, they may cause a greater hole in our pocket that may be difficult to stitch quickly.

I recently met a well educated (IIM graduate) professional, who had just been through a major medical expense (for his father). He asked me for help in reconstructing his financial future.

I tried my bit in enlightening him to start his investments engine with simple and basic principles. Strangely enough, he was unaware of the majority of following principles:

  • A new beginning: Start saving. We must start spending less than what we earn. Taking leverage to keep ourselves afloat after a major expense can prove to be like getting stuck in a spiraling storm.
  • Active Management: Put our savings to good use. Letting our savings lying idle in the form of money in savings or current account or even as cash at home will cause our recovery to be a long drawn one. Let me illustrate with an example – even if you save Rs10,000 per month and put it in a liquid fund (the least volatile and most liquid type of mutual fund product) vis-à-vis savings account or current account, you end up earning a minimum of Rs4,000 more per annum (over the last 10 years, liquid funds have given average returns of 7-11% per annum vis-à-vis 0% and 4% in current and savings accounts, respectively)
  • Diversification of investments: Invest across investment classes like fixed income, equity, gold, real estate. Due to global and local economic factors like uncertainty, inflation, currency fluctuations, we must look at all possibilities that fall within our risk-return parameters. Consideration of future requirements and time horizon often drives the asset allocation pattern.
  • Post tax returns: Taxation brackets can influence significantly since there are arbitrage opportunities available for capital market products like mutual funds, equities and tax-saving schemes/instruments.
  • Monitoring: When we end up monitoring even the smallest expense, then we must allocate time to monitor our hard-earned money invested. Just one hour per week is sufficient to ensure that we have a complete hold on our investments.
  • Cut out emotions: Emotion is the cause of our investments going awry. We tend to get stuck with our investments because we keep justifying existence of these unproductive investments in our portfolio. Exiting these investments becomes difficult since these erroneous investments tend to make us feel guilty. Even if the decision has been made by us on the recommendation of someone known to us, we must evaluate objectively and exit (even with losses) as soon as we get an opportunity.
  • Re-balancing: Investments are like diet. They need to be re-balanced for getting proper outcomes. Just as a dietary imbalance can cause a health scare, an investment portfolio imbalance can cause a wealth scare. Going excessively on an asset class that we tend to prefer may not be an appropriate strategy for financial planning. Most of us Indians have a fetish for physical assets like Gold and Real-Estate and hence, we tend to get over-board on them. This can prove to be counter-productive in high-growth phases in economy. As seen between the years 2003-2007, equity investments far out-performed Gold and also they are far more liquid than gold.
  • Get an advisor: Last but not the least, one should get a skilled and honest investment advisor and stick with that advisor for a long period of time. He/ she will ensure that most of the above is followed and followed rigorously.


(Akshay Gupta is managing director and chief executive of Peerless MF)


Celebrity chef, author Tarla Dalal no more

Tarla Dalal died of heart attack Wednesday morning at her residence in South Mumbai

Tarla Dalal, known for her popular cookery show and several top selling books on cookery passed away on Wednesday morning following a fatal heart attack in Mumbai. She was 77.


This message was posted on Tarla Dalal's Facebook page by her team:


"We would like to thank all of you for your support and affection through the years of Mrs. Tarla Dalal's career. She is no more with us as she expired in the early hours of this morning. We thank her for all the happiness that her talent has given to us and our families..."


The celebrity chef was also awarded the Padma Shri in 2007.


She started taking cooking classes in Bombay in 1966 and published her first cookbook in 1974. The book was an instant success and went on to become a classic in cookery books and sold over 1.50 lakh copies.




3 years ago


Nifty, Sensex may rebound: Wednesday closing report

Nifty may rebound to the level of 6,260. However, the rally may not sustain

Tuesday’s weakness on bourses continued today as well. Although the benchmark opened Wednesday in the positive, the stock markets struggled to remain in the green. By the end of the session, the indices hit their day’s low and closed almost at the same level. Today was the second consecutive session, when the indices ended in the negative and also near the day’s low. From here we may see the Nifty rebound to the level of 6,260. However, the rally may not sustain.


The Sensex and the Nifty opened at 21,005 and 6,261, respectively. The Sensex moved down from the level of 21,045 to 20,861 while the Nifty moved down to the level of 6,209 from 6,270. The Sensex closed at 20,895 (down 80 points or 0.38%) while the Nifty closed at 6,215 (down 38 points or 0.61%). The National Stock Exchange (NSE) recorded a lower volume of 68.48 crore shares. Of the 1,222 shares on the NSE, 611 advanced, 557 fell while 54 remained unchanged.


Except for IT (up 1.36%); Pharma (up 0.86%); PSE (up 0.21%) and Infra (up 0.08%) all the other indices on the NSE ended in the negative. The top five losers were PSU Bank (3.60%); Realty (1.91%); Bank Nifty (1.79%); Finance (1.72%) and Media (1.40%).


Of the 50 stocks on the Nifty, 14 ended in the green. The top five gainers were N T P C (3.46%); TCS (2.50%); Sun Pharma (2.05%); Ranbaxy (1.55%) and Infosys (1.26%). While the top five losers were State Bank of India (3.47%); Jaiprakash Associates (3.44%); PNB (3.44%); DLF (3.17%) and Ambuja Cements (2.84%).


The Reserve Bank of India (RBI) should start tapering its dollar swap facility for oil companies given it has already been priced in by markets, Bank of America-Merrill Lynch said in a report dated 5th November. The removal of the dollar window could mark a key signal of stability for the rupee, and the RBI has said any such action would be done in a calibrated manner.


US indices ended mostly in the red on Tuesday. Concerns existed US Federal Reserve to reduce stimulus for the US economy earlier than analysts had projected after the US services gauge expanded faster-than-estimated. US service-sector business activity picked up in October, with the Institute for Supply Management's services index up to 55.4 last month despite expectations by economists for a dip to 54. A reading above 50 indicates expansion.


Asian indices had a mixed performance. Nikkei 225 was the top gainer, up 0.79% while Shanghai Composite     was the top loser, down 0.82%.


Indonesia's economy expanded less than 6% last quarter as higher interest rates weighed on consumption and exports fell. Gross domestic product increased 5.62% in the three months ended September from a year earlier, the Central Bureau of Statistics said in Jakarta today. That compares with 5.81% growth for the second quarter.


European indices were trading in the green and the US Futures were also trading sharply higher.


In Europe, the European Union yesterday cut its forecast for euro-area growth next year and raised its unemployment estimate as the economy struggles to regain momentum after a record-long recession.


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