The negatives of conditioned mind and turning into positiveness.

Greetings to readers,

Last week, I had a talk with group of MBA students. The subject was career in finance industry. Among other topics, I had a brief discussion on Genuine Investment Strategy and Conditioned Mind. Post session, there were questions which realized me that lot of knowledge is required on Genuine Financial Planning and not that what is being sold popularly.

However this time, I will start discussion on Conditioning of mind. Psychologists claim that the new born child starts developing acceptance of atmosphere around him. So when he do not speak and do not express, He can observe and store the images in his back of the mind. It is said that 70% of the people’s nature/attitude is built when they attains the age of 7/8 years. That is why when parents ask/shout to the kid to not to do something (say, NO to TV) or to go for studies and he hardly listens it. Instead, he observes that what is being denied to him (to watch TV) is interestingly done by the parents themselves.

So when we say, it is a sanskar, swabhav or habit, in fact, it is a conditioned mind which put a man in to a box.

The conditioned mind is like a strong belief for religion, eating habits, brand consciousness, expression attitudes, argumental nature and lot more.  The conditioned mind put one in to comfortable in favored situations and vice versa. He is comfortable with some people and has discomfort with other set of people. Comfort with particular brand, Food, clothing, perfumes etc. This conditioned mind’s comfort puts one in to exploitation mode. When a person loves a brand lot, he is ready to pay higher price for his comfort. And that is the successes of big brand. With overdose of advertisement, media nuisances, and celebrity endorsements the mass (even a common man from very poor class) develops conditioned mind for the brand. The celebrity claims/endorses for a product (Soap, for example) is mostly an untruth and endorsed for advertisement/financial contract only. (We all know all soaps are more or less made with same material than why so much variation in different brands.)

This conditioned mind applies to various areas too. It may be for medical assistance (for a doctor), for a chocolate, for a filmy hero, for an airline, for toothpaste, for a religious guru or hundreds of areas….

The main point one has to understand that his love towards anything (under conditioned mind) should not lead him to his own exploitation.

If one overcomes the above negatives of the conditioned mind, it is a strong positive also.

A strong belief to own idea leads to a straight success. Those who were considered Paagal or dhooni, etc. have achieved great success. Their inventions with life have shown different ways to the society.

Better is one starts observing own attitudes, find out own conditioned mind and its positives and negatives.

Investors also have their mind conditioned. Many investors see Bank FDs and insurance as only investment options. History says that only those who came out of their box have given exceptional results. One has to think about Mutual Funds, SIP and asset allocation in various investment sectors to get good financial strength through investments.

We only need to think differently and have to stick on it to get out of conventional box thinking.

The danger of Capitalism.

The Danger of Over Capital.

Few years back, I read some points of the book “Dass Capital” of Carl Marx. Since then I am very much aware about the dark side of “Capitalization”

The growth /development Mania is being admired everywhere but it contains needs of lot from people. Earlier, we had small businesses & small businessmen with their street-side shops. Now we have big malls, big retailers being run by big corporate, selling daily consumer items and killing business opportunities & new job opportunities.

So slowly we are entering in an economy of fewer businessmen & fewer entrepreneurs and more managers & more employees.

Where the danger is?

I remember an indicative case.

In Maharashtra, The municipal body of a town was not able to implement clean drinking water project for citizen to free them from clean water scarcity. The reason is that a mafia of that region was running business of water tank. Having turnover of some corers of rupees from his hundreds of water tank trucks running 24x7, He was actively lobbying for not to implement free flow of water to citizens from civic body. This is from single person!!!

Now imagine when corporate (the big size) companies in to picture to finalize the policies to safeguards their businesses, their wasted interest. So the picture would be like this,

The pharmaceutical company is more interested to sell more drugs than to promote good health.

The Auto companies are more interested to sell vehicles than to care for pollution & heavy traffic.

The banks are more interested to sell credit cards & undesirable loans than to care for financial freedom.

The media & entertainment industry is more interested in large number of readership than clear & next thoughtful society.

The schools & colleges wishes more pass outs to fill their seats than to provide educated literate output to the society.

The financial adviser, brokers, corporate banks etc. are more interested in selling revenue generated product than to provide value based financial literacy to investor.

The FMCG industry wishes to bulk more products in to the house of the buyer with free schemes ignoring what he really needs.

& this has no end…

A new wasted interest lobby is being developed. We call it as free economy where corporate growths are important. It comes from hard earned money of the citizens who does not have any vision for short or long term. He is helpless to needs & requirement of his own family members.

An individual cannot fight to this system individually. History says that it is a cycle of capitalism to communism to socialism and back to capitalism

An individual can keep himself away from all this hi-fi temptations and if possible he can jump in to this growth journey by participating / buying of equity faction. This can be possible for him by buying Equity Mutual Funds or starting monthly SIP in Equity MF. The only solution is to give time to investments and keep patience. One has to look for long term wealth creation rather than short term profit booking. Time cycle will turn thousands to lacs and crores in years to come.

Now, one has to decide whether to book profit short term for some thousand rupees or to wait and gain high returns of long term patience becoming some lacs or crores.

Young generation (Part 2), Cricket Mania and 80 / 20 principal.

In India, we have different fever at different time. Currently the cricket fever is on full moon mode back to back. First the world cup winning occasion and second is ongoing IPL season. There are 10 teams and no one is bothered if they win or loose. It is all advertisement game. The stake holders are getting millions from advertisement and sponsorship. And what is the target group of all these millions ruppes expenditure? The young generation.

The young generation wants something thrilling every day. Yahoo chatting box, MSN messenger, Orkut and lastly Facebook are the instruments used by the youths to improve “Social Networking”. Twitter is now on hot seat but who knows how much time it will last. The media is pouring fuel to all this thrill demand. But the sad part is nobody is aware that in all this thrill game the large part of the society is part of the game. As a spectator he is being USED. I am worried for all this wastage of human hours of this energetic young generation.

Recently I was talking to somebody on the 80/20 principal. This applies here also. 80% of the young generation is not aware of what they are doing in the best years of their life and remaining 20% doing something seriously which can help them to build a strong career.

In my investment advisory this is the same observation. This 80/20 principal exists in investment decisions. 80% of the investors are not aware about various factors like inflation, tax, liquidity, expenses, risk and growth potential of their investment. So, the outcome is wrong investment product in the hands of investors and missing best earning opportunities of the prospective time. I do not foresee any improvement in near future. The move by SEBI for certification for investment advisory in Mutual funds and insurance has brought new educated people in this field but they are running and pushing hard various products to complete their revenue targets. Ethics are hardly seen. The asset allocation funds are considered to be the basic to start any investment advice is missing in most discussions.

Why this important part is being ignored? The reply is people are more worried about the figures of their heroes. How many centuries and half centuries of a player, how many runs in how many balls and what is average run rates and what is the latest advertisement contracts etc. etc. But this poor lay man is ignorant of very important figures of his own. He does not know that what amount he needs for better retired life and what will be educational expenses for his kids and what is rate of return expected to meet his goals etc. etc.. Oh! I am shocked to know fact of a recent survey, 35% of a person’s income is spent for children’s education!!!

 

If you will see others, you will have hardly a time to see for yourself. So, I believe now the latest mantra should be “Jago bhai Jago aur kal ke liye socho”

“Games jarur Dekho magar socho apna game na hojaye”

Market of Growth, young genration in India and bit of Union budget 2011-12

I am not sure what should be the correct heading for the blog, “Economy of Size” or “Economy of Growth”! We should not much bothered for words. However, I think, some words make a lot of difference.

The US market is large in size and Equities are traded at higher PE. In India, we have growth but equities are not traded at higher PE. Why US stocks are traded at higher PE when the economy there is sluggish? The reason is many US companies earn profit from their operation outside US. So no matter how US economy performs, companies’ profit from world economy matters to them.

The second question is, why some Indian stocks are available at cheap valuations? I think India is emerging country. The foreign institutional investors allocate some percentage to invest in India. Their confidence has to be built over a period of time. Thus, the first entrants will get benefit of pricing. Even Waren Buffet has decided to enter heavily in India when the market is six times higher than 2003 level.

For investors, success is to find opportunities to visualize more opportunities and to give time to these opportunities to grow. India is country of opportunities. There are lots of points to criticize in India like Indian system, Indian politics, Indian bureaucracy etc. But the real connoisseur will find gems from the stones. So the master stock picker will be front runner. The story of success depends on story of growth. Once in joint meeting, Mr. Sandip Sabharwal said that money will follow growth. So find out growth and not size. Once you have good growth opportunity, everything will follow.

India has largest young population in the world. This generation lives with one mantra “SPEND”. So the word “EMI” is more popular to youngsters than “SIP”. The corporates know it and they always capture every opportunity to be in eyes and minds of young generation whether it is cricket, bollywood or any other means. Today’s young generation who starts working sees high ambitions. On very first month of working they targets car and own a house. After 1 or 2 year when they have adequate capital they get Car loan or home loan in order to achieve their ambitions. Now they pay EMIs every month. I define EMI as Spend today, Pay later and Pay interest. Isn’t it a business of loss? What if the youth starts doing SIP and saves money for 10 years. He can have car with surplus money having earned the interest. I define SIP as Save today, Spend later and Earn interest.

While Son and Daughter are busy in spending, The only option left for the “Poor dad” is to ride the Indian growth story by investing in the equity market with at least little amount using SIP to keep pace with the growing market. Then only the “Poor Dad” will become a “Rich Dad”.

In recent union budget, a major positive impact on mutual fund is now foreign investors with KYC compliance can directly invest in SEBI registered mutual funds. This will still take some time to overcome issue of currency volatility. But it will result in source of funding to India’s account deficit and huge amount for AMCs.

The budget has got some more attractions for those who have taste in Infrastructure bonds / investments. It is proposed in the budget to introduce Rupees 30,000 crore bonds issued by government undertakings which is to encourage domestic investors. On the other hand, to encourage foreign investors and to enhance flow of funds in infrastructure sector, the budget has increased the ceiling limit for FII from 20 Billion US$ to 25 Billion US$ in corporate bonds.

Do not forget to comment your views.

Thank you,

Uttarayan, Inflation and Investment Strategy

Namaste to all the readers,

Greetings to all of you on this festive season of Uttarayan.

Those who have ever seen the crazy mood of people in Ahmedabad will surely drop in to this city without any invitation. The vibrancy of growth is being felt at all level. I remember my childhood days, when I was collecting all the threads of caught kite and trying to retain it for next Uttarayan. These days, the torn kites are thrown and nobody cares to collect the thread. Oh, we are entered in to this consumption phenomenon. This phenomenon creates huge demand and today, this is the psychology of almost as many as 120 Crore Indians. They have led us to the consumption oriented country. We can see over consumption and waste almost everywhere and the effect on economy is Inflation.

The Inflation to a country is like a diabetic to an individual. Both create multilevel negative impact on the sufferer. The inflation puts its effect in following way.

The season of Growth also brings one message. If there is a growth, the growth will be almost everywhere. In some asset class, it is particularly very high. The most victimized investor due to this growth is the person who has invested his money in fixed deposits. The interest income is Taxable, so net income inflow is very low and not sufficient enough to surpass the inflation. As a result, the investor becomes poorer day by day even he has good money on his hand. I think this is high time for all investors to look in to diversification among asset class. All the investors should consider asset allocation before investment. The young investors are required to plan their investment first and then after remaining amount to be spent for their daily living. The day to day increase in expenses and effect of lifestyle improvement will eat out all surplus income if not planned properly.

I am happy that my all weekend is mostly successful to draw investment plan for youngsters. I have seen great enthusiasm in them and I am sure those who have gone through my advice of asset allocation will surely follow it in disciplined way in the years to come.

During the Vibrant Gujarat Summit days, I had British lawyer at my home as a guest to experience the kite flying. I was showing him tricks of controlling the kite in the sky, the control over direction of kite and to manage in low or high winds. There is a great similarity between kite flying (kite control) and control over our greed and fear in our financial decisions.

I can put this phenomenon like this way, when there is a high wind, the kite is rushing itself in the sky and you cannot allow it to go at high sky. You have to keep enough amount of the thread available with you. Also the kite becomes heavy, so you have to see that the fingers remain safe. Similarly in monetary decisions, we are required to take care of our psychological greed. We have to account for the investment surplus available and to see that there should be no extra leverage during this high time.

In case of low wind or no wind, one has to try hard. Constant attempts and balancing will keep kite in air. Similarly in recession, we are required to put our efforts sincerely, continue it constantly and to try hard to be in the air.

So, the learning of kite flying helps in Investing and in any business as well

Indian: Indian Equity Market

Indian: Indian Equity Market: "

Indian Equity Market

Namaste to all the readers!

It is nice to be with you here at the place and time, where it is very important to understand the volatility of equity market. Equity was volatile, is volatile and will be volatile. So many times, I hear from my investors asking me to postpone the investment & wait till the market is Seattle down. The money belongs to the investor, I cannot control his decision, I am his advisor, I am his guide & left with no other option than to follow his instruction.

Sometimes there is openness in discussion, Investors have some ideas. But they do not insist to implement it. Instead they ask my (expert) views. Here, Fair discussion is possible. I can openly express my views & Pros & Cons of Equity market.

So today, when market is volatile, We should learn how to ride it, We should no way escape from it. We cannot us early jumper or late entrant.

I will give you my ideas on how to ride the volatility..

I believe that most of the investors are sensitive to the valuation of their investment. So to start with, Let we discuss conservative approach. First we have some investment schemes available with us which works on valuation of markets. PE (Price earning ratio) is the better tool to consider whether the market is expensive or cheap. The Nifty PE of 10 to 14 is considered to be cheap market & PE of 23+ is considered to be expensive market.

These schemes buy/hold more amount of equity in the portfolio. When the market is cheap (i.e. buy more equity when PE is lesser than 14) and sell equities when market is expensive (i.e. sell when PE is above 23.) so the fund act on simple psychology of selling at high & buying at low. This helps investors as it is a monitoring free investment.

The investor need not to go his agent/advisor to instruct him to sell or buy in market at high or low. The scheme itself takes care. The profit taking is within the fund so it is tax free investment transaction. To investors, In fact it is a best risk/return adjusted investment option. Currently, ICICI Prudential dynamic equity funds, F.T. India Dynamic PE Ratio Fund, Pramerica Dynamic fund are available to investors

Principal Smart Fund is latest entrant in this group.

There is one negative point of this investment & better to be discussed here. During straight upward trend of market, this fund will give comparatively lesser returns than diversified equity fund As it is not heavily invested in equities.

However, it protects investors when market is in silent mode. The actual out performance of this option is available after completion of tone teji /mandi cycle.

An investor should hold appx 15 % of investment in this fund as diversification. Next time we will discuss aggressive approach to ride the volatility. We will also discuss SIP/STP as a tool to ride the volatility.

I hope my first blog on Indian mutual fund market has been helpful to you.