_*My Estate, Assets, Beneficiaries - Is this document in place?*_

  

       

All our life, we strive to convert our _*"Time into Money / Estate"*_, but then, most falter at the crucial point of a _*'responsible handover'*_ for an even more purposeful future (not ours)

What is this _'responsible handover of Assets / Liabilities / Estate?_ It’s having a _*"succession plan" - a plan to handover whatever is 'material in nature'*_ 😀

But, is it just 'quantifiable material stuff'?..... Personally, I wouldn't think of it that way. _*If the appropriate "Value System" is not transmitted over a time period to those beneficiaries of the estate, the 'responsible handover' is not done in complete sense*_

The assets / estate might only erode over a period of time with no benefits accruing to the larger society of which, we are all a part of.     

Some people have a question - _Why should I be bothered on, 'whats going to happen, after I pass it on & when I'm no more in this world?'_. Yes, good point, but in which case; what's the point of just toiling all life to create the estate in the first place. For one's own pleasure only? 🤔

_*Why should we create it? What is the purpose of spending about 75 - 80% of one's life on this futile exercise? Maybe, it works better to just walk away into the Himalayas at the very early stage of life & give up everything*_

_When we create something, We should also be responsible enough to hand it over in the right way & to possibly the right value system_.  

What is an appropriate value system? That’s a fact finding story in itself.

 Maybe, some other time.    

But, for the time - build a _*"Responsible Succession Plan"*_

      

_Water, Air, Fire, Earth & Clouds; keep moving from pace to place & are not static_. If they remain at  place, then, _*"Life becomes unsustainable"*_

 

_*Wealth is No Different, if it is not generously moved from generation to generation*_

_*Fall, Rise & ???*_

It took about 66 days for the main indices to hit a bottom from this year's peak.

And then, 66 days until today, to _rise back_ with some sanity. Pls don't ask me why? Many reasons and not so many reasons 🤔

_*How long will they take to hit the earlier yearly high & How long to go for it?*_

The above excel captures this data 👆🏼

Pls do check it in a landscape format

_*Savings, Investments & the difference*_

_*Saving for a rainy day, is so very different from, Investing for the future*_

The mishaps happen when savings & investments are confused between themselves 🤔

_*Investors, Risk & Behaviour*_

The illustration depicts a simple behavioral aspect on *risk*; for majority of investors Vs a few good asset allocating investors

For the majority, their risk taking ability (perceptive & not the reality) is dynamic along with the market movement. _*It goes up as market goes up & plummets when the market goes down*_

For a few good minority investors, their risk taking ability (perceptive & real risk) is stable under any kind of a market movement. They just _*fine tune*_ their portfolios as the markets keep fluctuating.

Who Wins & Who Loses?.....is just a matter of time

*_Half of our lives & ???_*

_Half our lives get vapourised in proving others Wrong_ 👉🏼

_The other half is gone by proving ourselves Right_ 👈🏼

On one front, we need _Introspection_ & on the other _Empathy_

_*How is this related to Money & Investments?*_ 🤔

😂 That's not too difficult with statements like these 👇🏼

_*Look, I've told you not to Invest there*_.....see your sate of investment today 👉🏼, it's gone down so bad 🤷🏼‍♂️

_*See, my call on this stock A is superlative & it's going to make tonnes of money*_...after a month, a statement comes out this way -  _*I told you to invest, but you didn't...the stock price is up by 50%*_ 🤷🏼‍♂️

We encounter both these statements from our near & dear....always & ever 😀

Bottomline...

_Let's not waste our lives & money listening to these futile statements_😇

_*Earn your money well, but Manage it better_

_*Chess, Money & The Game is on*_

I tried to draw some parallels from this beautiful ancient Indian origin game of Chess 🙂

The illustration I depicted above, showcase  *the Known Assets & the Unknown Variables* 👆🏼

The _*Unknown Variables*_ are the _black pieces_ & _*the known variables*_ are our own good white pieces.

White pieces make the first move against the established rank of the unknown black pieces.

_*Objective of the game is to win....else, at best, to end it as a draw*_
      
The game starts with the opening of our  _*Earnings & savings Pawn*_'….oh yes, the rule says, we can make the first move with the _*Real Estate Knight*_ as well, but what's the plan, here? 🤔

_*Earnings & Savings Pawns move, One Step at a time*_, but create a phenomenal opening space for the movement of the stronger pieces, behind - Lets start with the pawns 😊

The _*Golden Rook(s)*_ Asset of Gold, moves horizontally, Inflation adjusted or has sometimes has a growth oriented upside move... up the 'files' (column) on the money board. It's quite powerful & potent in many parameters of an Asset Holding (free liquidity to move, strategically positioned on the board corners, has a direct emotional connect with the King (self) via a mode called, Castling  ☺️
      
The _*Real Estate Knight(s)*_ keeps jumping forward & backward (over other assets as well 😀), but always within a restricted “L” shaped movement. The only asset to play with 'leverage' but is also severely constrained in movement as it can never move more than 3 squares at a time. _The doom happens when its 'landing squares are blocked' - Liquidity is vapourised and the piece is lost_

The _*Fixed income Bishop(s)*_, also come with restrictions, but a combination of tax free (EPF/PPF) & taxable (all other options), makes them a nice option to have a smooth ride on the board. _Both the bishops combined can be a wonderful liquidity weapon to have in hand_.

The _*Equity Queen*_, is considered the most important piece on the Asset Board, after the King. Can move in any direction. Strategically, maybe the last to make a move, but the most efficient resource on the Money Life board. _When it makes the definitive move, it does deliver quite a statement. Works as the main protector of the King against Inflation, Interest Rates down spiral etc. It's only focus - destroy as much as the enemy lines, protect the king in the long haul_

The _*Money Life King*_; alas, _*we can Never Ever lose him*_. If so, the game Is lost. _When we get into a _*check position*_ _by the 'unknown variables', all our other assets ensure that the King will be out of this position, even by sacrificing themselves for saving the king_

The ultimate aim is to _*not get checkmated*_; that's losing the Money & Life game. _*If we can’t win, at least end up with a ‘draw’ and salvage something on the board. We’ll still be standing*_

Well, there is a possibility that _the King can get checkmated with all his Assets in place_, but; _*are they in order to not get the king into such a messy situation? PLAN WELL ON THE ASSET MOVES*_ 😀👍🏼

The _*Unknown Variables*_ are never known in advance except that, we need to _make a thorough study of the historical perspectives under which these variables made their moves. If this was the situation?, how did they move or which square did they move to?----that is the _*historical memory*_ we need to build & be ready with, though; *Every time its different*; but, the underlying moves will most likely be similar_

The best thing is..... _*Enjoy playing the game & it's better to be safe than be sorry*_

_*STAY ON THE BOARD*_

*_Economists, Investing & are they ever related*_

I pen this down after listening to, reading over & watching tonnes of content for over the last two & a half decades 🥱

I wish to put a rest to this theory of _listening to Economists & investing based on what is said by them_

I'm open to anyone who can educate me on.... _*names of some economists who have made riches in the Investment game; purely, due to their theories blabbered in classrooms, books written for Royalties & ofcourse their own dream fantasies*_

I do have immense respect for Economists, but only when they just stick to their core competencies 😊

An Economist predicting securities market cycles is like a friendly barber trying to wire an entire electrical circuit system for my home 🤦🏼‍♂️

I can't afford to let that happen 🙂

_Listening to Economists & basing our Investment decisions on those theories_..... I can only say, *Amen* 🙏🏼 to the portfolio 🤷🏼‍♂️

And I repeat the wordings of a sentence I penned down a week ago......

_*Many people have "a" view, but none has "a" clue*_

_*Perception, Reality & Objectivity*_

The illustration is quite self explanatory 👆🏼😊

Bottomline....

We'll always & ever have trouble with the _realities in money & life_, unless we aim to achieve the self actualisation stage where the _*Perception = Reality*_

That's a very very difficult stage to achieve 😌

But...let's keep trying 🤠

_*Words, More Words & Most Words*_

The most hurried up word, _*INVEST NOW*_

The most misunderstood word, _*RISK*_

The most satisfying word(s), _*INTEREST / PROFIT / GAIN*_

The most abused word with the highest expectations, _*RETURNS*_ (notional or real, doesn't matter 🙂)

The most fearful word, _*LOSS*_ (notional or real - doesn't matter 😔)

The most missed word, everytime & anytime, _*LIQUIDITY*_ 😌

The most used but rarely executed word, _*HOLDING PERIOD*_

The most underestimated word in a sustainable wealth creation journey, _*SPENDING*_

The most easily used words for wealth, _*EQUITY & REAL ESTATE*_

The most 'perceptive safe' words, _*FIXED INCOME & GOLD*_

The most replaced word for Investments, _*INSURANCE*_ 🤦🏼‍♂️

The most concerned word, _*GOAL*_

The most talked about word but rarely planned for, _*RETIREMENT*_

The most needed but the least executed word, _*SUCCESSION PLANNING*_

The most unintended word(s), _*I DON'T KNOW*_

The most prominently used, _*I / WE, SAID SO*_

But, the ultimate truth.....

_*The NEVER understood words are both, MONEY & LIFE*_ 🙏🏼

_*6 Year Rolling Returns (from each year end), S&P BSE Sensex, How does it fare?*_

😀 Well, it's not a complicated chart 

Let me just break it up

_Absolute & CAGR returns for a 6 year holding period...if one invested at the end of each year and held it for the next 6 years_

Why did I choose a 6 year period? 😀😎....we've just gone through an anniversary of 6 year (itch?)....oops, maybe 🙄, maybe not 🤔

Bottomline....

_*Outliers*_ - less than 5% CAGR & more than 30% CAGR on a 6 year term - probability is low

Of the 4 instances giving a 30% + CAGR....3 have come in the '90s decade - _*so, let's forget about those kinds of returns on a 6 year basis (at an index level)*_

5 of the 6 times that delivers less than 5% CAGR came in the last 2 decades...again an outlier because 3 of those instances came during the 2000-2003 period

The best part...

5 - 10% CAGR for about 14.71% (ok kinds)

_*about 56.06% historical probability that one ended with between 10% to 30% CAGR*_

That's quite a nice way to end with, for holding 6 years plus on the equity index 😀👆🏼...the sweet spot of returns

Bottomline, _*if one quits the board game in the middle, there's nothing left to win for*_

_*stay to the end, stay the course*_

_*6 year report card, if stock market is an indicator of performance*_

The table says it all for the exact 6 year period....the CAGR returns delivered 🙄

But since there is a pandemic in place...let's take an _objective view_ of the peak performance achieved until Jan 2020; about 5.5 yrs of the performance

The CAGRs there as well, are way below the historical averages 😔

Bottom line....

_*In Absolute returns the BSE Sensex delivered about 28.92% in 6 yrs & about 73.92% for until the peak in Jan 2020*_

Even if we take the peak performance, we're no where near the historical returns on a 6 yr basis 

_*Equity as an Asset Class has this historical pattern that, most returns accrue in under a few periods*_

*We just need to stay put on the board*

Let's keep the hope, up

_*these are POINT to POINT returns only*_

Investor returns vary widely from these points based on a # of variables

_*Golden Sunday, Gold & Historical facts*_

*Source - macro trends

👆🏼 for a _*Golden Sunday*_

A 100 yr old Gold Price chart in USD $ terms

The beauty of this chart is...

_*the GREY LINES are all the RECESSION PERIODS*_

The possible conclusion we can draw from this historical evidence......

_*Gold price goes up just before a  recession start & rarely goes up during the period of recessions*_

Pls check the blue line against the backdrop of the grey lines

_*history teaches us a lot, if & only, we are ready to learn from it*_

The 2 big spikes of blue lines you notice are the periods between...

1972 to 1981 

2000 to 2012

_And the gap between 1981 peak to the next peak in 2012 is about 31 years_ 😀

_The price didn't touch the 1980 peak, right until about 2007.....a full 27 years_

I'll also share an INR vs USD price chart on Gold, soon

You'll know how much impact this global price & INR depreciation have on it

*Source - Gold Hub

USD $ is the Purple line

INR ₹ is the Green line

_*Do they move in tandem? Yes....most of the times*_

*Except when, INR Depreciates faster against the USD, than the movement in price of Gold*

Pls notice the 2013 green spike & the last one year's super green spike ...up, up & up

The truth in having common money with an uncommon sense is.....

 _*Gold is good to hold as much as we need*_

_*Real Estate is good to hold as much as we need*_

_*Equities are good to hold as much as we need*_

_*Fixed Income are good to hold as much as we need*_

Bottomline....

I've been getting too many emails on the beauty of buying into gold via the Sovereign Gold Bonds, Gold themed Mutual Funds, Gold ETFs.....

History teaches me again on this....

_the more the emails on an asset class, the lesser is the probability that it can deliver over the bound returns for the future_ ....... This is the Ultimate Truth ☺️

_*Middle Class, Dasavatar & the epitome of a nation?*_

The majority of middle class are forever, *contributors to the building of the nation* in the various forms of Dasavatara of Lord Vishnu.....

_*Matsya (the fish)* - forever keep pulling the country to rescue from one Yugam (crisis) to another (tax paying, ultimate bailouts for banks, corporates, corporations, underprivileged etc...)_

_*Kurma (the tortoise)* - Hold the mountain of nation on it's back & keeping it afloat during the churning of the ocean benefits (never ever receiving the benefits)_

_*Varaha (the boar)* - Saviours of mother earth from all other unresourceful demons, by holding her on their tusks_ 

_*Narasimha (hybrid & aggressive)* - Fortunately, we never see the middle class in this Avatar & hope to never see them. Glimpses come during some election times_ 🙂

_*Vamana (the dwarf)* - They only need 3 small foot meals a day & a shelter on the head but, most times they are not even entitled to get it - maybe they have to increase their size 🤔_

_*Parasurama (the warrior)* - a warrior for the nation's benefit via paying taxes, hardworking, disciplined, focussing on their work etc.... hope not to see the 2 nd phase ( destructive),  of this Avatar from them_

_*Rama (the ultimate human)* - devouted, calm, taking all the pain in life with a smile on his face. What to say here? So many common grounds, even to sacrifice their own good for the nation_

_*Krishna (the smart human)* - I don't think we'll ever see the middle class in this Avatar ever, but maybe during some election times 🤔 😊_

_*Buddha (the enlightened)* - well, the enlightened souls with all the patience in the world to tolerate anything & everything.... from top down or from bottom up (we soak up all the pains, like a sponge 🤦🏼‍♂️)_

_*Kalki (yet to come through)* - they'll never get to ride the horse with a sword. Will remain a dream avatar; as even the lord has not taken this Avatar till date 🤷🏼‍♂️_

Bottomline.... _the Middle Income Group_ takes up every possible peaceful Avatar in some form or the other & keep moving forward in the nation's interest, taking up every thing in their stride. 

Lord Vishnu is.....

_Omnipresent (present everywhere)_

_Omnipotent (has unlimited power)_

_Omniscient (knows everything)_

But the middle class has only one quality here.....

 _Omnipresent_  😊

The other two..................... Maybe an illitlion to always live with 🤷🏼‍♂️

_*Reality of Life, Opinions & Judgements*_

As I understand the _*reality*_ of life...

_*No one has a clue but, everyone has a view*_ 

Add, the spices of _*opinions*_  &  _*judgements*_ ; the dish of Life gets cooked to be,  _*full of magical illusions*_

Financial Markets & or Relationships (family or otherwise)....all work on the same philosophy 🤷🏼‍♂️

_*INR movement to USD $ since 1975*_

1975 - ₹ 7.794 to 1 USD $

2 May 2020 - that ends up above 10 times @ around ₹ 75.74 

In 46 years, we had about 11 years of ₹ appreciating against the $

The good part is....of the 11 years,  7 years came during the last 17 yrs 🙂

One big fall in 1992 twisted the whole story of depreciation....INR fell about 58.97% that year

About 5.2% CAGR depreciation if we consider that one big fall due to the crisis in India

Else, the fall is about 3.5% CAGR

That's probably a ballpark figure to consider for $ goals in the long run for all, but, one bad incident on the ₹ can devastate all plans

Let's hope, we never go there and hopefully have a decent future appreciation.

Is that wishful thinking, with the current scenario?

Maybe 😀

But, let's hope & pray that it atleast doesn't fall over the average depreciation 🤷🏼‍♂️

The good part..... Indian equities outperform $ equity (US) over the 15 years period 😀..in USD $ terms

_*Cash (In) Flow is King & not Cash is King*_

👆🏼 yesterday's news

₹ 14,000 cr in depsoits & 8 to 9 tonnes of gold.....but, NO CASH TO PAY SALARIES

_*ASSET RICH, BUT, CASH MANAGEMENT ISSUES*_

Be it the management in a Temple, Govt, Company, Family or an Individual....

_*Yes, Cash is King*_

But, I'll prefer to follow...

_*CASH (IN) FLOW IS KING*_

Having Tonnes of Assets is of NO USE, if one can't generate enough Cash Income from them, for survival or needs

One month of people not visiting the richest temple and this is the situation?

_*Compounding ON Investments or FOR Loan payment...your Money Movement*_

This illustration I did, depicts the movement of one's money over a time period....

_*How many times will one either EARN or PAY UP?*_

_Compounding_ works both ways....

For the investor _CASH GROWS_

For the borrower _CASH GOES_

Pls look at the # of times one will end up paying on a borrowred amount over a 25 & 30 year period

This 25 & 30 year periods are primarily home loans /// or I would say, anyone who keeps on borrowing and repaying perpetually also faces the same situation.

_*Either work for oneself or for the lender / banker*_

The choice is pretty simple 🙂

Some people have this phenomenal idea that *all real estate* grows...

_*NO*_

Not all real estate goes the same way

Btw...one breaks even in such a deal in 30 yrs, if and only the value of the property goes up over 13.26 times

That's just the breakeven point

So, how much should the price go up to make 9% return on it, post taxes and other expenses over the 30 yr period

Anybody's guess 😀

_*Virus, Markets & Damage*_

SARS virus mysteriously disappeared & we don't know why?

Let's pray & hope that this too shall 🙂🙏🏼

_Virus is unpredictable_

_Capital markets are unpredictable_

Both are contagious globally & cause damage when they attack 😀

_*EPFO Interest Rates, Stealth Wealth or ?*_

_An illustration I culled out on the historical Interest Rates offered by EPFO...since 1952_ 👆🏼

EPFO Interest rate started at about 3% in FY 1952 & peaked out in 1989 @ 12%

It stayed that way for untill FY 2000 (11 years of high rate)

From 2001… the rates started coming down from 12% to about 8.65% as of last year

Bottomline....

_*Did it create stealth wealth for many middle & upper middle group?*_

_*YES, IT DID*_

Should we contribute more than the minimum of what is required?

_*I doubt so*_

_Imagine a 30 or a 35 year compounding impact on the safest possible option in India with that kind of a EEE tax impact (exempt on contribution, exempt in interest earned & exempt on maturity)_

Untill now.... _*Yes, it did possibly create stealth wealth for the majority to atleast survive_*

Will it do so, in the future?

Very difficult to answer, but, maybe the minimum contributions should continue to go in there...

Btw....the differential parity inbetween NPS (new pension scheme) & EPFO will for sure get plugged some day in the future

One might possibly be forced to buy an annuity plan on a certain portion of EPFO maturity proceeds as well, like the NPS. 

Untill then...keep moving ahead and keep contributing atleast the minimum required as part of long term asset allocation.

_*Gold Prices, Demand & Supply and Perceptions*_

The argument that I've been hearing for ages.....

_*Gold prices are decided by Demand & Supply in India*_

I DON'T THINK SO & probably the worst perception in people's mind which all media & advisors keep driving.

Let me clarify this to all - 

Indian Gold prices are dependent on 3 critical factors.....

_*Global Gold Price*_

_*USD Vs INR Exchange Rate*_

_*Govt Import Duty Rate on Gold Imports*_

India consumes about 800 to 900 tonnes of Gold every year, of which about 750 tonnes is imported.

_That's about 83.33% (on the lower end) to 93.75% (on the higher end)_ of Gold Imports

So, how on earth is the Indian demand impacting the gold price in India??? (Import quantity is based on demand, though, but probably controlled to. large extent)...we have seen earlier that the govt imposed higher duties just to safe guard the INR against a large outflow of precious foreign currency on Gold Imports.

Yes, Indian gold prices will be impacted to a certain extent because of Indian demand in such a case that........

_*Gold imports have reduced substantially or vapoursied for a prolonged time period & the majority of Indians have decided to exchange their currency for Gold*_

And let me close this out by a data point....

A Troy ounce of gold peaked to about $ 1920 in 2012 & Indian gold price then peaked about ₹ 32,000 for 10 gms 24 carat (if I'm not wrong)

Today....

A Troy ounce of gold is still about $ 1704.....about 11.25% lesser than its 2012 peak

And in India, it's about ₹ 45,511 for 10 gms of 24 carat (approx)

_Why did this difference come in?_ 

Only one factor

_INR Depreciates against USD_

And I'll prove it with data

In 2012...USD to INR was about 51.16 (yr end closure)

In 2020...USD to INR is about 75.5 (today)

_*CAGR of INR depreciation is 4.98%*_

Now....

In 2012... INR price of Gold was about 32,000 (yr end was about 31k odd)

In 2020.... INR price of Gold is ₹ 45,511 (today)

_*CAGR of Gold price in India is about 4.5%*_

🙂😀

Some people say.....what matters to me is the Indian price only and my growth in India

It's like saying ...what matters to me is a 8% Fd rate in India when the $ Fd rate is about 0.5%......... and completely forgetting about the *real rate of return adjusted for inflation*

Good....

_*Having gold or buying gold is not a crime, but, any other argument on this is absolute absurdity_*

_*Warren Buffet + Charlie Munger Vs All the doomsayers of the world*_

Berkshire Meeting yesterday....

My take, what ever said by anyone else....

_*Warren Buffett has approx 80 years of Investing Experience & made all his money only one way....Investing into Companies_*

So, if I need to take a side between....

_*Jim Rogers + Nouriel Roubini + Marc Faber + all other doom sayers of the world*_

Vs

_*Warren Buffet + Charlie Munger*_

I'll comfortably take the side of  the above 2 men, anyday. Their _*time spent, invested into the market*_  is an enough indicator. Forget every other reason.

And he said....

_*NEVER BET AGAINST AMERICA*_ 😀

_*Stock Market recovery & Economic Recovery*_

_*Stock Market recovery is very different to an Economic Recovery*_

I'm sure many investors are sure to think that equities are a dead asset class and we'll be going down to zero very soon.

Especially since, Maruti and TVS have sold Zero vehicles in April 2020

There is something called *recency bias* (for recent events getting extrapolated into the future) & *confirmation bias* (tend to believe only what we already believe in)

_time will answer both these questions_

Will we be the same way for the next 10 yrs 🙄🤔???

_*Gold, Glittering, Gold*_

Here comes one more data which I just compiled 👆🏼

_The Glittering Gold_

About 56 years of gold price in India (INR terms)

_Price_

_Price change from previous year_

_% Price change from previous year_

_CAGR from that year untill 2 May 2020 Price_ 

Some stats which I derived....

_16 instances when the price of gold moved beyond 20% from the previous year (year end closing fig only) I.E. about 28.57% hit rate_

_56 years CAGR in INR is 12.47%_

_42 years CAGR is 9.93%_

_30 years CAGR is 9.25%_

_20 years CAGR is 11.97%_

_10 years CAGR is 9.42%_

_6 years CAGR is 8.43%_

_3 years CAGR is 15.34%_

_2 years CAGR is 20.34%_

_About 1 year return is 29.26%_

These are 24 carat gold prices

 _I will prefer not to get into the ornamental gold price because 🤦🏼‍♂️🤦🏼‍♂️🤦🏼‍♂️.....we loose tonnes of money there when we try to buy or sell it back_

Bottomline.....

_EVERYTHING SHOULD RETURN TO A   MEAN PRICE IN THE LONG RUN_

_GOLD GLITTERS....BUT SHOULDN'T BLIND US (especially now)_

_One should probably hold only as much as one should. Anything in excess is bad & anything which is not held at all, is also bad_

[02/05, 11:10] Rajesh Emani: INR Gold price is derived from 

_$ Gold price_

_INR depreciation / appreciation against the USD $_

_Govt policy on duties etc._

Personally, we have no control on all the above 3 variables 🙂

Btw..... _$ gold price is still lower than its 2012 price_

_Gold is good_

Yes, good only as much as sugar in a coffee.

But, _Did anyone see the comparison with Equity Returns_😀