Education – The process of receiving or giving systematic instruction, either at a school or university.

Parents in the UAE (Dubai & Abu Dhabi) are going on a borrowing spree (Personal Loans) to fund their kids education; costing over USD $10,000 – 20,000 a year. That makes the place most expensive behind Australia & the US (in education).

Is this essential spending? Or a necessary spending” or a Want Spending?

Value # (is not equal to) what one pays. Stocks, Bonds, Home or Education – all the same.

An interesting fact which Dr. Duvvuri Subba Rao mentions in his book, 'Who moved my Interest Rate' - The only RBI Governor who calibrated the Interest Rates for 23 times (Raising the rates 13 times & reducing them 10 times) during his tenure, between 2008 - 13.

Having appointed as the RBI Governor, just a week into the peak of the 2008 Global Financial Crisis, he mentions that, 'Unprecedented Times required Unprecedented Actions'.

I would have been happy to keep a track of every analyst's estimate on the interest rate movement during his tenure. It would have been a factual eye opener on, how bad can their 'calls' go.

And imagine what if, an Investor 'Churned / Re-balanced' his portfolio 23 times during the same period of 5 years 😳, reacting to every move by the Governor. The result - An "Absolute Portfolio Disaster".

He signs off a chapter saying, 'I hope no other Governor faces such a challenging time'. It was not in his hands, he had to (pro)react to the Global world.

Thankfully, an Investor 'Need Not' react to the Domestic & Global scenarios as many times as he ever had to.

And Unprecedented Times require Unprecedented Actions from an Investor, too. Yes 🙂, but in the form of BUYING & not SELLING.

The above table is the ‘current value (2014) of USD $1000 of Berkshire stock purchased in a given year’ (Source – Business Insider). I tried to go on a fact finding mission from the table & here are the results…

$1000 invested in 1964 with Warren Buffet is now (2014) valued at $11.64 Million. That is 50 years of compounding at 21.6% CAGR vs 9.9% on the S&P 500.

The tonnes of money was made between the holding period years 30 - 50 😀. That is what compounding is. It will not deliver anything in 3, 5 & 10 years or more. Berkshire never paid out any Dividends. Everything it delivered was 'Growth'. The stock lost more than 50% of its value 3 times in the 50 year period. And countless times between 25 - 30% or more. Imagine someone selling it off, every time it fell 😂.

The best CAGR returns were made by investors who gave him money during 1964 & 1975 & still holding onto him.(20.15% - 23.29%). The worst time to invest would have been between 1997 & 2006. An investor would have earned a single digit CAGR, until 2014. The in-between year investors (1975 - 1997) earned anywhere between a lower double digit to a higher double digit (10.13% - 19.81%).

2004 - 14, he delivered 9.7% vs 5.8% for the S&P 500....He still outperformed 😀. The average American inflation for this 50 year period was 3.98%.

So, the next time; a neighbor, a colleague, a friend, a fund manager, a banker, a wealth manager, a financial adviser or one's cook - claim to have delivered a CAGR of 20% ........then, one would have discovered the 'Next Warren Buffet' 🙂

This is what is CAGR (Compounded Annual Growth Rate). A 'stealth total return' and the only return that an investor ever needs to bother about. The world's best investor makes 21.6% CAGR for 50 years. Can we do better ???

Core of Education - 3 R s of an early learning phase...

Reading, Writing & Arithmetic

&

Core of Investing - 3 P s of an investor...

Philosophy (asset allocation), Patience & Persistence

Govt. outstanding borrowing to the GDP of a country. The only 2 countries coming down on this parameter are Germany & India (marked in yellow). And India’s current figure is almost at an all time historical low. Note – This is only Govt Debt. The debt what Corporates & Individuals owe is a different matter (Source – Trading Economics)

Summer Olympics – started in 1896 @ Athens, Greece. The games did not take place in 1916, 1940 & 1944 due to the World Wars. All time medals tally is led by the USA – 2520 medals (gold, silver & bronze), from 27 Olympics it participated. India has 28 medals from 24 Olympics. That works out to 93.33 medals per Olympics for the USA & 1.16 medals for India.

No wonder, the USA has the largest Equity Market Capitalization with the best ‘Compounding Medals’ (Russia / USSR, comes next with 1584 medals) & we are the best investors into Fixed Deposits, Gold, NSCs, KVPs etc…

India has eroded its Purchasing Power, whereas the US has created an unbreachable Compounding Effect of Medals.

Invest Wise. 
Invest Right. 
Invest for Compounding.

If medals are to be won at Tokyo Olympics (2020), works should have started during Beijing Olympics (2008).

If, ‘Adequate Cash Flows’ are to be won during ‘Retirement’, work should have started during the first 5 years of working life. 

Aim for a Consistent, Sustainable & a Peaceful Retirement.

The person who takes a medicine, must recover twice. Once from the disease & once from the medicine - Dr. William Osler (MD).

An investor who saves 'only' in a 'fixed return' option must recover twice. Once from the 'Purchasing Power' & once from the 'Taxes Paid' on the returns 🙂.

Well, a patient can recover from a medicine & a disease, but, a fixed return investor can never recover from either getting his purchasing power back or taxes paid 😟

Thankfully, Investors need not wait for 70 years to earn one's 'Individual Returns'. It will be a phenomenal compounding gold mine.

(Pusarla Venkata Sindhu, wins the 1st individual silver medal, after India's  Independence).

Olympics 2016 ⛳ - The Chief Medical Officer of the Indian Olympic Contingent is a 'Radiologist' 😳. His backup is also a 'Radiologist' (Reason - son & relation of Indian Olympic Association members). The universal medication recommended to any athlete is a pain killer; so much so that one of them is now nick named 'Mr. Combiflam' 😀

It's like anyone walking into a financial institution or meeting an independent financial adviser; and the recommended medication is a universal 'Money Back or an alike, Insurance Plan' 😱

Specialist Sports Doctors are needed, for the athletes. Specialist 'Money Back' schemes are avoided, for a long term Money Life.

I've recently shared via an email, the Indian Equity Market's performance, in 'absolute returns', since Jan 2011. Now, let 

me share similar fact findings under a Monthly SIP (systematic investment plan) format of investing -

Tenor - Dec 2010 until 1 Aug 2016 (5 years & 9 months). Investing on the 1st of every month. 2 Indices chosen - BSE Sensex & the wider BSE 500. CAGR - Compounded Annual Growth Rate, is calculated - BSE Sensex - 9.29% & BSE 500 - 11.89%

Deductions:

Systematic route prevails over One Time investments (in the medium & long run)

The difference between a pure large cap index & a more diversified index is 2.7% p.a. (Over this period)

Tactical Allocations work, when the 'Timing' is appropriate (most investors don't get this timing).

Strategic Allocations work, irrespective of the 'Timing'.

All the 'Gyan Sessions' on which category of stocks / mutual funds to invest 🤐

I've not compared the 'Additional Returns' delivered by mutual funds, as an investment vehicle. The value add is a 'writing on the wall' 🙂....but investor beware, there are more than 3000 schemes to choose from 😀

Leander Paes - competing in his 7th Olympics 😳😟 (1992 - 2016 &....). No wonder we don't get medals. We don't develop talent. We crush new, raw talent.

Narayana Murthy (Infosys), says - 'Indians have the highest ego per unit of achievement' 😱 .....Maybe, we might have to check his, in "tonnes". The reason for he saying this statement - when he was advising the Thai govt, a decade back, they used to make notes and revert back to "HIM" on the progress. Whereas, Indian officials don't do that 😳😳😳

Both these achievers teach us, 'What Not To Do & Say, more than, what to do & say'.

We need to have an 'Investment tenure' as good as Leander's Olympic participation (26 years).

We need to probably have a good temperament as Late Sri A P J Abdul Kalam, and not as NRN.

Choose the appropriate Idols & Choose the appropriate Investment tools.

E = mc 2 (mc squared) ---  meaning - energy equals mass multiplied by speed of light squared - Albert Einstein 🙏🏼

Let's interpret this a little differently 🙂

(E)motion = (M)istakes × @ a (C)ompounding (2) rate

Emotion in Investing leads one to compound their mistakes.

OR

mc 2 = E

(M)istakes × @ a (C)ompounding (2) rate = (E)motional stress

Mistakes made while Investing lead to a terrible Emotional state.

Life or Investing -

Keep out Emotion (minimize)

Keep out mistakes (minimize) Compound Returns (optimize)

Financial Independence = Current Personal Wealth, generating enough Income over one's Expenditures to cover the basic necessities & lifestyle.

Financial Freedom = Is beyond basic necessities & lifestyle. It is primarily, 'what one wants to do with one's Money'.

Financial Independence # (does not equal) Financial Freedom

Income > Expenses = Asset Creator ➡ 'Master of Assets'

Expenses > Income = Liability Creator ➡ 'Master of Slavery'

Assets create more Assets.

Liabilities kill Income & create more Liabilities.

"Financial Independence + Financial Freedom = A happy & a fulfilling Money Life."

Note: Expenses include any recurring tied up payments (EMIs, Unnecessary Insurance Premiums etc...).

Michael Phelps - 22 individual Olympic medals & 26 in total. Going strong and more to come in a couple of days 🙂

Everyone calls him the Greatest Olympian - Yes, in terms of medals, undoubtedly.

Let's dig in a bit of data points -

There are 17 Disciplines (17 golds or be won) in an Olympic Swimming event (next only to athletics).

All his medals have come in from 'freestyle', 'butterfly' & 'medley' styles of swimming.

All in 100 & 200 meters of swimming, only. Including the team events where he had to swim for a maximum of 200 mts

He is an Olympic swimmer since 2004.

We don't need tonnes of Investment Options in a portfolio to make money.

We just need limited, simple options delivering more than ordinary results, consistently & over a longer time frame.

Participating in 17 events was not necessary for Phelps to earn the 'Greatest Olympian' title or 26 +++ medals.

A small portion of a portfolio delivering superlative results is the only requirement for a 'Greatest Portfolio Medal'.

Phelps never had to swim for more than 200 mts to win a medal, but an investor definitely has to swim in a 'Portfolio Pool' for a long time before earning Golds 🙂

Golds - for Consistent, Simple yet Effective long term options.

A couple of assets which present the greatest challenges in succession planning are, 'Real Estate & Business Ownership'.

If clarity of thought can be achieved, Business Ownership succession might not be difficult to manage; but, the Real Estate demon is too big an issue.

Issues of -

Partition (in a suitable way) - we can't split an apartment by giving one bedroom to a successor & the other to the 2nd 😳

Dispute Resolution (within family).

Litigation (external forces).

Regulatory (govt related).

Documentation (😱).

Liquidity (we can't sell one room in an apartment, we have to sell the whole piece).

Illiquidity (we can't sell, when we want to sell).

Cash Components (Parallel Market).

Probate Costs.

Lawyer / Attorney Fees.

Illegal occupation of the property by miscreants.

Rental issues.

Overall Management issues.

& on transmission -

New problems to a successor - 'what should i do with this piece of land / apartment?'

Development?

Sell?

Maintain status quo?

If so, how long can I keep it? Should I keep it?

If selling is an option -

What is the right market price? Can I get all money into a bank? How will I take this money out (NRI)?

Am I getting a good price?

Above all - Own (more than required), Operate, Maintain, Sell or Transmit - TAXES are inevitable in this Asset Class, at each & every stage 🙂....No respite, there.

Real Estate or Reel Estate - having a plan is necessary ⛳

Olympics - 2016

Novak Djokovic – losing in the 1^st round

Willian Sisters – Losing early in their doubles match

Abhinav Bindra – Losing a medal by a whisker

Archery team – losing by a point

Gymnastics – Athletes breaking their legs while competing, and still smiling after.

When medals are decided by a ‘decimal point’ in shooting & by an arrow in ‘archery’…there is nothing to look back at. It’s the best one could do against all odds.

In reality, it may be their bad luck on that day. Else, all of them are great sportsmen / women, competing at the highest level in their chosen sport.

At the end, some don’t get a second chance to win a medal; but their sporting journey in itself a great ‘Life Medal’.

But, or investing journey is not so ruthless. It provides us with some enormous opportunities all thorough one’s life. We just need to pick the right, ‘Medal of Opportunity’.

A decimal point or 1 point in differential returns will not let us down for life. We will still be quite good at Money Life as long as we choose the appropriate ‘Medal of Opportunity’.

It’s only that, most focus on a decimal point & miss the broad target completely.

If we focus on the target, decimal points don’t matter.

Ken Fisher in his book, ‘How to Smell a Rat’, shares some valuable insights for investors –

“The regulators didn’t catch these swindlers earlier is a pretty good indication that you cant count on them to protect you. Only, ‘YOU’, can protect you.” – Buyer Beware, Investor Beware.

“Friends make nice dinner companions & give a good shoulder to cry on. But a tip from a friend – no matter how smart or sophisticated that friend – is never sufficient due diligence. Friends, don’t let friends in the middle of decision making.” -Do your due diligence before drawing conclusions.

“Fancy offices, expensive toys, and corporate & personal binds are a red flag. If they aren’t meant to distract you, at the very least they distract the adviser.” – Differentiate between what is needed & what is an appendix.

“Exclusivity might make sense for a social club, but it doesn’t for financial advisers. Be suspicious of claims on ‘exclusivity’ from your money manager.” – Simple solutions lead to exclusive results & not vice versa.

“Having reasonable expectations helps set a proper strategy, but also helps you identify & avoid potential financial fraud.” – Too good to be true is definitely a red flag.

“A strategy isn’t a collection of tools or product. You may have the world’s best saw & power sander, but without a Blueprint, you won’t get anything significant built.” – A nice blueprint shows the way for a better execution & an even better result.

"Everyone wants great returns with no downside. But the truth is, big returns with no down years aren’t possible.” – Time, Time & Time in the market only counts.

Happy Money Life J

Rio 2016 – Opening Ceremony

7 years was not enough for the country to have a realistic financial plan, at least for the opening ceremony L; forget the rest.

The Brazilian Govt stepped in 48 hrs. before the opening ceremony to fund millions of Reals…breaking its promise to their people that, ‘the govt will not fund the Olympics’.

The bid was won by Brazil during its commodity boom days.

A straight extrapolation of the country’s ‘Money Life’ then, got them into a bottomless pit today.

Today’s Money Life is ‘NOT’ Tomorrow’s Money Life.

Money Life Planning is not based on futuristic excel sheets.

It is based on ‘Dynamic Real Time Adjustments’ to the reality ‘in sight’.

Having a plan is good, but, being prepared for the worst is even better.

Summer Olympics – Rio 2016 – “A New World”

The 5 rings in the Olympic flag represent the 5 inhabited regions of the world (Africa, Asia, America, Oceania & Europe) and their colors; Blue, Yellow, Black, Green & Red were chosen because every nation had at least one of them in its national flag.

5 Rings for an investor –

Holding Period

Liquidity Needs

Returns

Risk

Asset Allocation

&

The 5 colors of a good investor

Patience

Strong Emotional Control

Well Defined Strategies

Focused & Disciplined

Persistent & Learning from their mistakes

Sport, ‘For a New Investor’ – ‘Investing’ is a passionate game.

Don’t invest for the sake of playing; play passionately for the sake of beating ‘Inflation’.

Losses happen only when a player quits the field. Not when he / she stands on the field & continues to play to strength.

Winning is just a matter of time.

Happy Olympics, Happy Investing J

R K Lakshman’s ‘Common Man’ walks into an electronics showroom, today.

Common Man: I want to buy an AC

Salesman: this is the model, Sir. Just, Rs.30, 000/-

Common Man: Oh!, has the price not dropped ?

Salesman: Why? NO

Common Man: GST Bill was passed yesterday. All TV Channels & newspapers said, ACs will be cheaper. Is it not?

For a Common Man – is there a victory in GST? Let’s look at it –

Mobile bills – go up

Internet bills – go up

Restaurant bills – go up

Insurance Premium Payments – go up

Loan servicing costs – go up

Hair cut at premium saloons – go up

Bottom-line, anyplace where there is a ‘Service Tax’ loaded, it is going to be more ‘Expensive’.

So, who is benefiting? Businesses.

When the ease of doing business & their input costs come down, due to a simpler tax regime, the possibility of them making ‘More Money’ increases.

Should I say, the Asset Class to park our money J

Common Man continues to pay common taxes (direct & indirect taxes).

Common Businesses might start making Uncommon Profits.

By the way, GST rates will be decided by a panel headed by the Finance Minister, Shri. Arun Jaitley.

Rajya Sabha unanimously passes the GST Constitutional Amendment Bill J

Well, nothing changes for us tomorrow. Life Continues.

Down the lane, for Service Providers, tax moves from the current 15%, to the band of GST L