Markets and returns - Future

With 11.5% correction from the peak, where is market headed. Buying at 40k, vs at 36k does it matter if sensex headed towards 100000. In terms of absolute returns it matters but yes timing is always a luck and not a skill.

For stock market returns 2002 to 2008 is golden period and will do a post with data, even though there was a 60 to 65 % correction in 2008. Why I say golden period is because the % returns you saw in index you will not see it in next 25 to 30 years, unless there is a deep fall followed by a steep rise.

Leave the past, where is this market headed... Experts whom I follow says, we are in midpoint and will double in next 5 years.
Over optimistic right.. I think the pain will be there when Q2 results come and we might be bottom fishing that time and from Q3 it would be handed over to Bulls.

Again, indian market is also reacts to global factors and there will be uncertainties... But certainly it will give inflation beatable returns in the next 3 to 4 years.

Ready to bottom fish and fill your portfolio...

Single Earning Vs Double Earning - Does it matter ??

To acheive a retirement corpus of Ten crores, a family with single earning member vs the family with both working members, Does it really matter ?? Only the power of compounding matters.

If some one asks me how much money is needed for retirement in India, though i say it depends on your life style, expenses and other commitments, but if i am still forced to provide a number.

I will say go for a networth of Ten crores (Dont include the assets that you might inherit). 

Once i say Ten crores people will defend saying for two people working it might be easier and if its a single earning then i have to work life long etc. This is just a mindset and they really underestimate the power of compounding which i have to explain to make them understand. May be we have been taught poorly the power of compouding.

Let us assume both husband and wife are working and they are able to save 11750 each.

Investment per month - 11750

Annual returns - 12%

Investment step up annually  10%

Investment Tenure - 25 years

After 25 years both husband and wife will accumulate 5 crores each so that the networth becomes ten crores.

Let us assume only one works and he or she is able to save 11750 each

Investment per month - 11750

Annual returns - 12%

Investment step up annually 10%

Investment Tenure - 30 years

After 30 years the accumulated corpus would be Ten crores.

So when one member works to achieve ten crores corpus it takes 30 years and when both works it takes 25 years(both working for 25 years) to acheive the same corpus for the same investment amount and step up %.

Both working for 25 years and one person working for 30 years, has pros and cons and i leave it to individual. But the point here is the power of compouding that works beautifully and acheiving 10 crore corpus whether single working or both working does not matter much as far as you are a disciplined investor allowing your money to grow....

In a later post let us see how the 10crore networth can be deployed...

Teachers Day - Lessons from WB

Today is Teachers day, a very important day to remember the ones who have, in many ways, moulded your thought process and taught you a way in life to earn an honest living. In many ways they are the role models and these are not just the acadamic teachers but those who teach life lessons.

For those in the stock market, there is no great inspiring teacher than Warren Buffet. Certainly his quotes will motivate us during this current trouble and confusing times if you have not predicted this.

Buffet's brilliance is in the simplicity of his advice

1. Keep things simple and dont swing for the fences.
2. When promised quick profits, respond with a quick "no".
3. Focus on the future productivity of the asset you are considering. If you dont feel comfortable making a rough estimate of the assets future earnings, just forget and move on.
4. With regards to speculation he says - I am unable to speculate sucessfully, and i am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an exception of profit if he continues to play the game.
5. A real winner of an advice - the fact that a given asset has appreciated in the recent past is never a reason to buy it.
6. For those who value stocks on a day to day basis - when he invested in properties he thought on the long term value, not daily valuations. He puts it so beautifully, "Games are won by players who focus on the playing field - not by those whose eyes are glued on the scoreboard."
7. Rational people dont risk what they have and need for what they dont have and dont need.
8. He says that one should invest based on one's "circle of competence" and make study of business they want to invest in a priority. And for those who do not have this competence, he says, " the goal should not be to pick up winners but rather be to own a cross section of businesses that in aggregate are to do well." This he explains is the "what" of investing.

Slowdown in Growth not a cyclical issue but more structural.

On Friday, we got the news on GDP and also the big bang announcement on merger of PSU banks and you could have seen today how market reacted. Market went down -2% and it clearly shows its worried on growth and not happy on the bank merger announcements.

GDP numbers are more worrisome because its very much lower than all the analysts expectations. GDP was at 5% vs 5.8% previous quarter and GVA was at 4.9% vs 5.7%. The worst hit was the manufacturing which was at 0.6% vs 3.1%.

Well, there have been many things announced over the last 10 days but there is nothing which has been directed straight at pulling up the sagging growth. There has been no BIG bang money spending measures, nothing fiscal.  The announcement on merger and capitalization will strengthen the banks but it will take time; we might see the impact of this only in FY21, depending on the timeline.

The slowdown at 5% means that the economy needs more than all that which the govt has given; a major fiscal push is required. I am not sure if the govt is thinking this as a cyclical issue. If it thinks it as cyclical issue they are sure to screw up the economy further, unless they realize soon its a structural issue and these structural issues needs to be addressed soon. Sentiments are low and that too, to a large extent is keeping the demand on bay. The govt needs to thus announce measures which will push up investor confidence and more than non-fiscal, a good fiscal push is required.

Taking care of the FII and super-rich alone will not help; the govt needs to get down to real reforms. Collapse of the private sector consumption is a very big worry and that is what the govt needs to concentrate on. Manufacturing growth at a meager 0.6% should really get the govt going.

The grim picture we see today is more on account of our own doing and cannot be blamed on the global factors alone. Hope the govt takes this very seriously and gets cracking on pushing reforms which impacts real people and not the mere 1% of the population.