Inflation : Cost Inflation Index

Inflation is a well known "Retirement Killer".  Long term goals like Retirement, Children's Education, Children's Marriage, etc are highly susceptible to the ravages of inflation, since the long term nature allows for massive compounding of the ill effects of high inflation.

Cost Inflation Index is the fancy term that the Indian Income Tax Service uses to quantitatively measure inflation.  This is a reasonably good measure of inflation, since the Indian government effectively chooses to waive any taxes if your investment is growing in line with the CII.  There are many websites you can read up to understand how CII works.  In effect it says that if your investment grew at the same pace as CII, you will not owe any taxes on the growth, since the Indian government acknowledges that your "growth" is only notional and not real.  

Role Models : Financial Samurai

Here is a kindred spirit who blogs about his successful Early Retirement Journey.  The blog is called Financial Samurai and it covers Sam's journey from the financial industry into financial independence, and eventually early retirement.  

The blog again is focused on a US based retirement model, since the author is US based.  However, I still find several of the thoughts and strategy (if not actual tactics) to be relevant in the Indian context.  

It does sound like Sam derives some post-retirement income through work on his website, and royalties from a book that he has written.  However, for all practical purposes he is retired.

Read on, and derive encouragement from his story.  You are not alone!

Portfolio Strategy : Mar 20th, 2015 : Banks Battered

Since the beginning of this year, I have been placing my bets on banks, in the hope that interest rate cuts will help them to improve their balance sheets, resulting in higher earnings, and hopefully increased stock prices.  Unfortunately, after appreciating quite a bit in late January this year, the BANK NIFTY has gone through a period of high volatility, followed by almost daily declines in value over the last couple of weeks.  Here is the chart for BANK NIFTY this year

As you can see, returns have been practically flat for the 3 months of this year, after a torrid rally last year in 2014.  I have not given up hope as yet, but increasingly it looks like we will not see the bull rally of last year repeated this year.  The high volatility is good for SIP investments, if you catch the troughs in the chart for your SIP timelines.  

For now I intend to hang tough and see how things pan out in the rest of the year for the banking sector.

Retire Early : Why?

I occasionally get asked by my readers, Why I want to Retire Early? What is the hurry?  Why the rush?  Why would anyone want to retire early at all?  In my mind it is rather clear and actually obvious why I want to quit the rat race as soon as possible.  It makes perfect sense to me, why I would want to stop working on a regular basis, and spend my time as I deem fit.  However, I have never written a blog entry clearly articulating my reasons for wanting to quit the corporate rat race once and for all.  Recently a reader chimed in with the following: Why should some one retire early if you like the job earn enough, spend wisely and work without any pressure for 35-40 years? I was about to start typing up a furious reply to what I thought was a rather silly question, when I came upon this recent announcement from the Google CFO Patrick Pichette.  On March 11, 2015, Patrick decided to quit his high flying, lucrative CFO job at Google, arguably the best company in the world to work for, and retire for good.  I read through his retirement memo, and realized that he had written from his heart while explaining his difficult decision.  Read on to understand more about why Patrick took this drastic step.

What is Early Retirement? How many years before I retire?

I routinely get asked by readers of my blog, about my age, how many years I have been saving, and when do I plan to retire.  There are others who write me asking about my definition of early retirement.  Would retiring at the age of 50 be called "early retirement"?  How about if you took a Voluntary Retirement option from your company, and then took up another less demanding job?  Does that meet the definition of early retirement? And so on and on.  Here is how I look at it, and it has nothing to do with your or my age, if you can believe it!!

Portfolio Strategy: Feb 7th, 2015: Banks Underperform

I have been putting my bets on financials for some time now, specifically focusing on banks.  I had written about this earlier in Dec 2014, and again in Jan 2015.  Banks have done very well over the past year as shown in the performance of the BANK NIFTY in the graph below.

Just in the last 6 months as shown in the picture, the BANK NIFTY has given returns of ~25%

How much should I save before I retire?

The critical question for all retirees is "Have I saved up enough money to last the remainder of my lifetime?"

I had written earlier, about how to calculate the corpus you need to be able to retire financially independent.  The amount you need depends on only 2 factors, your estimated annual expenses, and the number of years you need to live in retirement.