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. 

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

The Public Provident Fund Scheme, or PPF is arguably the most popular savings scheme currently available for small investors in India.  Literally millions of Indians, participate in this government backed scheme with the full confidence that their money is safe, and will grow over the years.  There are several detailed articles that you can find on the web, describing the benefits of the scheme, how to invest in it, and the rules and fine print for deposits and withdrawals.  You will also find every financial planner, first checking if you have a PPF account, and if not, encouraging you to open one, not just for yourself, but also for your spouse and minor children.  It is almost automatic today, for every earning adult (and in fact their minor children as well) to have a PPF account with money being stashed away dutifully every year, just like our parents did before us. 

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

Here is a picture of Charles Ponzi, carrying a gold handled cane and a diamond stickpin from August 1920 in New England, USA.  In my earlier post, I had shared with you the story of Mr. Charles Ponzi, who started as a small time con artist, and grew to become one of the most notorious, and certainly the earliest large scale swindler of all time. 

By the late 1920's, Charles was living the big life, with his business scheme seemingly unstoppable as more and more investors poured in their money to participate in his highly profitable business activities.  However, the banking authorities were beginning to get suspicious about this time, about the nature of his business, particularly since he seemed to spend very little time managing his business, and almost all of his energy talking about it and advertising it in the local newspapers. 

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

Charles Ponzi was born Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi on the 3rd of March, 1882 in Lugo, Italy.  He grew up in Italy and came over to the US in 1903.  He started off by doing odd jobs, including working as a dishwasher in a restaurant and later waiting tables.  He then went to Montreal, Canada and worked in a bank for a while as a teller.  Here he got his first taste of handling other peoples money, until the bank failed and the bank promoter ran away to Mexico.  Penniless, Charles was soon driven to frustration, and he forged a cheque, was promptly arrested, and ended up spending a few years in prison.  It was here in prison, that he met his role model, Charles Morse, a wealthy wall street businessman with a penchant for swindling his clients. 

Wait a minute, you might ask!  What does this biography about Mr. Ponzi, have to do with the PPF rate increase in India?  And where does the Social Security angle come in to play?  Well read on my dear friend, and soon all will be clear. 

LBYM : Dining out, A Luxury? In India !!

If there is one thing that I like to splurge on, it is food.  Both my wife and I like to sample different cuisines, and between us we have a wide range of foods that we enjoy dining on.  However, one constant source of disagreement that comes up at home is regarding how often we get to eat out.  I think we don't eat out often enough, while my wife feels that eating out is too expensive and she'd rather experiment with home cooking to expand her already wide portfolio of tasty recipes.  I usually disagree, and feel that it is too much effort to slave away in the kitchen day in and day out, and eating out twice or even thrice a week is completely justified.  Given that my wife works as well, I think it is only fair that we reduce as much work at home, while spending on something that we both enjoy, i.e. dining out.  Something happened this Friday though, that has made me re-think my stance on how often we should be going out to fancy lunches and dinners.