Portfolio Strategy : December 30th, 2014 : Banks!

Continuing with my bet on the interest rates coming down in 2015, I would expect rate sensitive sectors to benefit the most from the imminent reduction.  The most obvious rate sensitive sector is financials like banks.  Now I do believe there are other sectors too like NBFCs, housing finance companies, auto and auto ancillaries, etc.  But with my limited knowledge in those domains, I am sticking with banks for now.  The bulk of my exposure to banks is through the Reliance Banking fund.  This MF allows me to pick up an exposure to banks in general and hopefully tracks the BANK NIFTY quite closely.  Another way to achieve this is by investing in GOLDMAN SACHS BANK BEES, which is an ETF that tracks the CNX Bank Index.  I haven't been investing in GS Bank Bees so far this year, but will probably do so in 2015.  

Assuming you agree with me that RBI will indeed start reducing interest rates, what other methods are you using to benefit from it?  Are there specific investment strategies that you can recommend, and we can all learn from?

Portfolio Strategy : December 22nd, 2014

With the markets swinging wildly over the last couple of weeks due to the rapidly falling oil prices, and the concerns in the Russian and emerging markets, here is the strategy I am going with.  I am counting on a reduction in interest rates from the RBI (even though inflation may not go down quickly enough, and there is concern that money will move out of the Indian debt markets if interest rates are reduced) Lower interest rates will mean bond yields will come down, and existing long term bonds will sell at a premium.  With this in mind, I am investing in long term GILT funds at the moment, to hopefully profit from an imminent rate cut, and the corresponding capital gains from the GILT fund.  The specific fund I am investing in is HDFC Long Term GILT fund.  

I am also expecting rate sensitive sectors like banks to do well as rate cuts happen, so I am also invested in banks through the Reliance Banking Fund.  

Hopefully the RBI governor of India, Dr Raghuram Rajan, will do me a favor and cut interest rates sometime between now and Feb 2015.  Here is hoping for the best.

How much do I need to Retire in India ?

How much money do you need to have saved up to retire in India?  Well that is the million dollar question isn't it!  

Or rather the crore rupee question.  Probably the single most difficult question to answer for anyone planning to retire.  Knowing if you have saved up enough, before taking the plunge is critical to give you the confidence to kickback and retire from your daily grind.  But how do you go about figuring this out? How can you know for sure that you have got enough? There are so many factors that can impact this magic number, and you just cannot afford to go wrong on this one.  In this article, I explore some thoughts on how to estimate the retirement corpus or portfolio that you would need today, to be able to successfully retire.  I will share a simple method to estimate the retirement corpus, and also explain any assumptions I have made in my calculations.

Analysis Paralysis

I suffer from a serious case of Analysis Paralysis. There!  I have come out and said it!  However in recent times I have noticed that the financial industry tends to amplify my inability to take a decision and execute to it.  With the myriad of options available for any financial product, it becomes very difficult to review the features of each product, compare against other similar offerings, and decide on the best course of action for my particular situation.  The inconsistent, many times inaccurate, and almost always needlessly complicated financial jargon, makes it practically impossible to decipher the pros and cons of the different products in a rational manner, and come to a critical decision.

Tax free bonds : A must for any retirement portfolio

Tax free bonds have been coming out in droves over the last year.  The Indian government empowered multiple companies to issue tax free bonds to help generate working capital.  This has given a unique opportunity for retail investors to lock in an almost risk free guaranteed rate of return for long periods of time.  For early retirement enthusiasts like myself, tax free bonds provide a much needed route to invest a part of the portfolio to generate risk free returns.  There are three big concerns for any early retiree, that he or she has to solve to enable a successful exit from the usual salary based working environment.  Tax free bonds solve two of these concerns in the most efficient manner possible.  This makes tax free bonds a no brainer key component of each and every early retirement portfolio.

SENSEX fails to deliver: Six Sideways Years

The last few years have been rather disappointing for most avid stock market investors, when compared to the boom period that we experienced earlier.  The India shining story seems to have been put on hold, as we struggle with rising inflation and slowing growth.  Political inaction, which was always a concern, has morphed into political paralysis, with the government seemingly unable to take any action at all, let alone the right economic actions.

In this scenario, it is instructive to take a look at the last 6 years from a stock market perspective, and see how the benchmark SENSEX index has performed, and what strategies we could or should have used to build on our investments.  I did not necessarily follow some of these principles myself, which has led to my sub-par portfolio results.  However, this exercise is useful to figure out what actions I should take in the future to keep my portfolio moving at the right pace in the right direction to hit my financial goals.

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!!