PPF Limit Increase : Duh!

I had written a series of articles in November 2011 about the change in the PPF rate of interest and its general economic implications.  I got some pretty interesting comments based on that series like the one here.  (Are PPFs really that risky) I seem to have gotten so carried away by that series, that I completely missed the fact that the PPF Limit was also increased at the same time.  Effective December 1st, 2011, the limit per year for PPF investment has been increased from Rs70,000 to Rs1,00,000 per annum.  (Yes, that's 1Lakh Rupees per year) This means for the current financial year, if you had already maxed out your PPF contribution of the year for Rs70,000, you can now go in and add an additional Rs30,000 before March31, 2012.  Starting next financial year, you can invest upto Rs1,00,000 into the PPF account.  This sounds like a good deal to me.  Now as long as the finance minister could also increase the 80C limit, we would all be in good shape!!

Personal Finance News : MCX IPO

The MCX IPO opened yesterday February 22nd, 2012.  MCX is the commodities exchange in India, and will be the first publicly traded exchange.  I have seen good reviews about this IPO at all major financial sites, and most reputed financial advisors seem to be recommending this IPO.  I figured I should apply for it as well, and did so yesterday morning.  Interestingly I seemed to have forgotten that retail investors can now invest upto Rs 2Lakh in an IPO.  Earlier the limit used to be Rs 1Lakh.  Was checking out the Business Standard early this morning, and it claims that the MCX IPO was subscribed 91% on the first day with 1.5X in the retail category (clearly I will not get full allocation), 0.16X in HNI (this is very surprising;  does the HNI community know something that I don't?) and QIB portion 0.74X (again not hitting the limit)  In any case, the deed is now done, and we shall see how the allocation works out!

Early Retirement in India : Extreme Style

Previously I had published a blog entry about one of my role models Jacob Lund Fisker.  Jacob is the driving force behind Early Retirement Extreme, a philosophy of living in general that espouses the concepts of simple living, aggressive savings, and an overarching desire to become financially independent as quickly as possible.  Jacob's also published a book about his early retirement experience that is a must read, if you can get your hands on it.  Now a lot of the examples that Jacob cites in his book are relevant only in the US, and would sound very out-of-place in India.  So I always looked upon his thoughts as more of a vision and guidance, than as specific steps to follow to reach my own financial independence and subsequent early retirement.  For example, Jacob suggests that instead of using a dryer to dry your laundry, you could "air-dry" your clothes after washing, to save on electricity.  Well guess what! none of us in India can benefit from this wisdom, since we all hang our clothes out to dry in the sun anyways.  There are several other examples like this one, which led me to believe that there isn't really much that we can takeaway here in India from Jacob's lifestyle and early retirement experiment.  However, recently I had some time to review several of his blog posts on Early Retirement Extreme, and here is something thought-provoking that I came up with.

I made a mistake : Fixed returns can lead to Early Retirement

Several months ago, I had stated to my wife, quite brashly if I may add, that debt-like returns would not find any place in our retirement portfolio.  I have been in a tearing hurry to grow our retirement corpus and I thought that the slower growth rate of debt-like investments, when compared to equity based investments, was something I could not tolerate.  In fact I was so convinced about my logic, that I even posted a blog entry justifying my position.  I could not have been more WRONG!!  However, like all good things, ones financial strategy is also never 100% right, and there is always room for improvement.  I have now realized my mistake, and made room for some more fixed income into our retirement portfolio.  There is one key recent investment opportunity though that triggered my change of heart.  If you are a keen follower of personal finance, then you already know what I am talking about!  Yes, I am of course talking about ...

Stock Market Index in India (Part II)

We reviewed the origins of the Bombay Stock Exchange, in my previous post.  Established in 1986, the BSE SENSEX is the key barometer of the Indian Stock Markets and is widely quoted as a proxy for the overall Indian Equity markets.  When it was first established in 1986, the SENSEX comprised of stocks that were representative of the then pre-dominant companies and sectors.  Over the years the Indian economy has successfully completed its transition from a manufacturing basis, to a service oriented economy and now more recently biased towards a knowledge economy.  Several of the companies that were considered the bellwethers of the old economy are no longer part of the index, since the economy and concurrently their fortunes have changed in a large way.  A historical review of these changing times is critical to understand the fickle nature of individual stock investments, while learning to appreciate the stability offered by the index in itself.

Stock Market Index in India (Part I)

My early retirement plans are heavily reliant on a strategy that involves significant investments in equity linked products.  The bulk of my portfolio is invested in stocks and equity MFs, with the fundamental belief that in the long run, equity based investments will outpace all other forms of investment.  However, over the last few days I have realised that I have never really tried to understand the basics of the Indian stock markets.  I do not have an appreciation for the history of the stock exchanges, and some time spent researching on this front, will stand me in good stead while picking my future investment strategies.

PPF interest rate increase. Ponzi Alert! Like Social Security? (Part IV)

I started off this series of posts, in response to the change in rules governing the PPF scheme.  The interest rate for the next financial year has been raised to 8.6% from the current 8% for the PPF scheme.  I believe any defined benefit scheme that promises returns well in excess of market rates is no different from a Ponzi Scheme.  This is because no scheme can maintain a pre-defined level of returns which are not linked in any way to market returns.  Just because the scheme is backed by a government does not make it viable!  The government backing may ensure safety today, but in the long run the scheme cannot maintain itself.  We are already seeing this in the US with social security benefits.  The social security scheme in the US is also in some sense a defined benefits scheme, wherein you are guaranteed to get a certain payout when you retire that is linked to your prior years income and investment into the Social Security Scheme.  However, the payout from social security is not necessarily linked to market returns.  Hence, the scheme is under tremendous pressure to fulfil its obligations to payout to the millions of Americans from the baby boomer generation, as they retire.