Take stock of your life in the post Covid world

From time to time I get people requesting me to help them in Financial planning or to review their existing portfolios. While this is an important exercise by itself, I have always felt that it is a bit analogous to putting the cart before the horse. Finances support your life decisions and activities by allowing you to do the things you want to do in life. They do not, cannot and should not determine how you lead your life. A lot has changed for the world and India in the last 3 months and life, as we know it, will be very different from now on. In the changed context, my suggestion is that you take stock of your life first and then worry about the finances.

So how do you take stock of your life? Well, there can be several ways to do it and I have one which is my favorite. You need to look at a few important dimensions in order to decide how things are going. In each of these dimensions there are some key questions you need to be asking yourself. These questions will differ from one individual to another but I have given some examples that may help you form your questions. So here is how I would take stock of my life in any new year :-

• My work and profession
  • Is my current work aligned to my overall goals in life?
  • Am I happy with work content, work relationships and benefits?
  • Is my work helping me to create value and is intellectually satisfying?
  • Does it help in letting me lead my life well in terms of work-life balance?
  • Do I really grow every year as a professional and as a person with it?
  • Is there a case for considering a change in my current work or profession?
• My family and friends
  • Am I happy with the situation my family is in today?
  • Are all members clear of their goals in life and working towards it?
  • Am I able to influence and add value to their goal achievement?
  • Do I have the financial bandwidth to cater for their goals?
  • Are relationships within my family functional or dysfunctional?
  • Are we able to spend family time in vacations and other activities?
  • Are we able to achieve the difficult balance between space and togetherness?
  • Are all the members clear about important information in family matters?
  • Each year, is there a sense of progress and optimism?
  • If I repeated these above questions for my close friends how will the answers be?
• My contribution to society
  • Do I have intrinsic value that can be contributed in a positive way to society?
  • Am I doing enough to utilize my value proposition above?
  • Do I contribute to some charities to the extent that I can afford?
  • Am I involved in any community activities in a positive way?
  • Do I donate blood every year and have I predged my organs after my death?
  • Am I a role model to my children for them to become responsible citizens?
  • Do I consciously make an effort to vote in every election?
  • Do I use every public space or utility consciously and leave it in better state?
• Me as a person
  • Am I taking care of my health today to avoid problems of the future?
  • Do I exercise regularly and is there a need to make changes in that?
  • Do I strike a balance between work productivity and leisure time?
  • Am I able to spend time on the things I really enjoy doing?
  • Do I have a clear vision of the short term and medium term future?
  • Do I have long term goals and am I working towards them?

When you are doing this, do not attempt to rush through. Sit with a cup of coffee or whichever drink you prefer, think deeply through the questions and be brutally honest. Remember the questions have binary answers and if it is not a convincing YES then it has to be a NO. Give yourself 1 mark for every YES and 0 for every NO. In the end see how much have you scored out of 30?

What is a good score in this? Well an overall score of 25 or so will indicate that you are doing great in life and things can hardly be better, 20 will mean that there are several areas you need to improve and less than that will mean you have real issues and need to look at serious changes in 2020 and beyond. While you may want to deal with it yourself and many do have the ability, there is no reason to feel awkward about getting support from your family, friends, boss at work etc to make some important changes.

How can I help in this? Well this is an area where I can add value as an individual and have already done it for some people. I do a program called HELP ( Holistic Engagement for Life Planning ) that looks into life situation, changes envisaged and a way to go for them. It does have a financial planning component to ensure that such life choices can be sustainable. In case you are interested, reach out to me. I hope you understand this is a serious and time consuming exercise and is obviously a paid one 🙂

Wishing all my readers a stable 2020, where you must look to survive and sustain. Growth and thriving can honestly wait for another day!!

How the financial planners got it wrong for you?

Over the last one month I have got several messages from readers of this blog and people I know otherwise as to how their financial plan have gone totally wrong just in the space of a few trading sessions. Most people are shell shocked and are wondering how the basic strategy of SIP which was seemingly invincible has shattered so completely. While I agree that the current sell off is something no one could possibly have anticipated, the seeds of such a risky financial planning was sown much earlier through the SIP route.

The last time the stock markets in India went for a roller coaster ride was in the years 2008 through 2010 but not too many of the current investors were investing then. The whole idea of financial planning through SIP was started in full force after the 2008 January market crash. Investment in MF through SIP was touted as a big thing for planning your finances in order to meet long term goals of individuals. In the initial days SIP was promoted by many financial planners as a reverse EMI, only something that helped you build a financial asset as opposed to a home etc. The reason it became a huge success was the secular bull run that our markets had till very recently. Yes, there were many times when short term corrections were there but these were seen as opportunities to invest more in the markets.

Once the markets kept rising after 2010, the early adaptors of SIP saw great gains on their early investments and word of mouth advertisement along with the proliferation of MF agents with aggressive sales tactics ensured that it became the default choice of all the people coming into the workforce. Over the years the myth got propagated that SIP was almost like an investment in a bank FD only with a return of 12 % or more !! The investors lost sight of the risks that are part and parcel of every market. This was almost like an accident waiting to happen and it did, only the scale of it was swift and brutal. The plan of the financial planners was quite a good one, insomuch as investment in equity as an asset class for the long term is quite inevitable in a high inflation economy that we are. The error of judgement on their part is to get overly greedy and recommend that almost all investible surplus be put into equity. Investors not only kept increasing their SIP amounts but some also went into direct equity without knowing a great deal about the market and not having enough time to do adequate research.

The situation could have had a much better outcome had asset allocation been followed properly and people had 40 % of their assets in various debt instruments. Sadly, PPF and other small savings schemes were seen as stodgy and boring and even if some investors did go for debt, their choices were types such as the Credit risk funds etc which had their own problems too. The overall impact today is that the XIRR of a 10 year SIP is lower than those of PPF returns. Yes, this will become better over a period of time but a lot of the gains over the last few years have now been frittered away.

A lot of people who are readers of the blog have wanted me to advice them as to what they should do now? I am happy to answer any specific queries that you have, feel free to send it to me here or in the Facebook group. Some of you have also wanted to know if I can provide my HELP services to them. As I have said before, I do this only for a few people but in the current situation I am happy to take on a few more people. You can read about HELP program here and understand about the work I have done so far here. The people wanting to interact with me can mail me at rajshekhar_roy@yahoo.co.uk

Watch out this space for my next posts which will contain more action plans as to how you can deal with your personal finance issues now.

Personal finance has not seen such tough times before in India

These are very tough times for the whole world and especially for India. Over the last 5 weeks or so, I have been putting off writing any blog posts as I was waiting for the market to stabilize. However, the way things have been going on, that does not look to be anywhere in sight. I have also got several requests from people wanting me to write a few posts and have therefore decided to honor those requests.

To begin with it is important to understand that the situation we see today is unprecedented in the personal finance space. I have been investing for myself over 3 decades now, having started in 1988 when I joined my first job after having finished my MBA from IIM Calcutta. In this long journey there have been several ups and downs that have taken place including years such as 1990, 2001, 2008 – 2010 where the stock markets have gone through a roller coaster ride. In most of the cases the markets have bounced back over a period of time and the maxim that over a medium or long term the markets will mitigate the risks have always worked out well. Even this time many financial planners and MF houses are trying to assure investors with these same words. I am sorry to say otherwise, but the current situation will not see any quick turnaround and people thinking it will be business as usual soon, are clearly not understanding the impact.

Let me try and explain in a few points why I think so :-

• The Covid-19 impact is worldwide and it is long term. Given the current context of losses of lives throughout the globe, the last thing countries are thinking of is business. Any return to normalcy cannot be expected unless the infections cease to occur and that seems to be 3-6 months away even as per the optimistic estimates.
• The current problem in India is on all fronts – with MSME companies, with larger units, with migrant laborers, with exports, with manufacturing, with services etc. In short all aspects of demand and supply are affected adversely in the current situation. Also remember that we were hardly doing very well prior to the lockdown.
• The deep cuts suffered by the indices and all kinds of stocks are actually just the tip of the iceberg. I am convinced there is more pain left in the markets yet and, what is more, I see no real possibility of the markets coming back to February 2020 levels in the next 2 years or so. It will be nice if it happens but chances are remote.
• India will need to spend significantly to counter the effects of the virus, in supporting the jobless people through cash and kind, in providing incentives and support to the industry to be back on its feet. Our production capacity as well as demand has been seriously compromised and even if the virus goes away in the next month, it will take us more than a year to get back where we were. So in effect, the whole financial year is kind of lost to the virus if we are lucky. If we are not lucky then it can well be one more year or even worse.
• I will specifically write about personal finance investments in terms of equity and debt asset classes, but I hope the above has given you an idea about why I feel the situation will not improve in the short run.

A lot of people who are readers of the blog have wanted me to advice them as to what they should do now? I am happy to answer any specific queries that you have, feel free to send it to me here or in the Facebook group. Some of you have also wanted to know if I can provide my HELP services to them. As I have said before, I do this only for a few people but in the current situation I am happy to take on a few more people. You can read about HELP program here and understand about the work I have done so far here. The people wanting to interact with me can mail me at rajshekhar_roy@yahoo.co.uk

Watch out this space for my next posts which will contain more action plans as to how you can deal with your personal finance issues now.

An update on HELP

Over the last two weeks, I have been approached by many people who are interested in the HELP program and want to engage with me. For those of you who are wondering what HELP is, you will need to read my earlier post in the blog. I thought of doing this post to give my readers some idea about what kind of people have approached me, what exactly does HELP cover and finally how you can request an engagement with me.

First things first – while it will not be possible to give the profiles of everyone who has approached me, I am sharing a few of them below. Note that, for reasons of confidentiality, I am only going to use generic terms, avoiding names altogether. Here are 5 of the profiles I found most interesting:-

1. A young professional from an US MNC, earning significantly and wanting to map out his life goals and financial support needed for the same.
2. A mid career software professional currently working in Germany, wanting to take stock of his finances to see if he can indulge in some other options.
3. A mid life professional currently in Sales but finding it difficult to reach management levels, wants to know if there is a possibility of doing things to reach his goal.
4. A software product management professional who is good at this job but wants to explore what else he could possibly be doing.
5. An entrepreneur with a consulting company who is unclear about his life direction and relationships and needs help in sorting some of those out.

While I cannot share any more details, I am working with 2 of these and hope to get engaged with the others by the end of the month. HELP is a very intensive engagement so I can only do it 5 – 7 at a time and each engagement takes about 2 months. It is also unique to each individual so it is not easy to explain what exactly will be covered. To have an overall idea about what each engagement may deal with, see below:-

1. 2-3 discussions to clarify and crystallize your goals in life and the timeline for them. This will include life strategies for achieving them, apart from the financial strategies.
2. A one time critical review of your portfolio in order to see if there are any changes required in the structure as well as the financial instruments that you are invested in currently.
3. Arrive at a clear investment program for the future that are aligned to your goals.
4. Establish future yearly cash flows from now till your expected life duration.
5. Discussions on any critical areas such as career, relationships, health, family where you may need some advice to handle things in a better manner.
6. Decide on a roadmap and plan to effect suitable changes in these areas.
7. Set up a quarterly review for 2020 to see how the plan is progressing. We can extend this further for future years if it is mutually decided to do so.

How much does it cost? Well that depends on which stage of life you are at, what assets do you have and how much thought process and effort need to go in restructuring the same. Again to give you an idea it is likely to be in the range of 40000 to 50000 for the entire program which includes quarterly reviews for the first year.

In case you want to discuss this with me, send a mail expressing your interest to rajshekhar_roy@yahoo.co.uk, we will then have an initial call to discuss further. As I said, I cannot take on too many people so if you are really interested get back to me quickly.

Do you need HELP ?

I have been writing this blog for over 4 years now and one of the most common queries that I get from readers is whether I provide any Financial Planning services. Let me be upfront about this at the start – I do not provide such services in the way they are normally understood, nor am I a SEBI registered Financial Planner. In fact, I have absolutely no intention of being one too as I do not see this as my profession.

However, I do provide a service to select people who approach me directly. I have given the acronym of HELP to it. The expanded form is Holistic Engagement in Life Planning. In this post I will explain about this service and explain as to how interested people can avail of my services for this. As I have explained in several posts of my blog, life planning must precede financial planning. As an individual or as someone responsible for your family well being, you will need to plan the important life events as well as the lifestyle choices you want to maintain. Note that the typical financial planning process assumes that people will by and large plan for typical goals such as children’s education, marriage, own retirement etc. I find this a completely unsuitable way of doing things as the life of each individual is unique and needs to be catered as such.

So what is HELP then? As I said, the starting point is to take stock of your life in terms of where you are today and what are your dreams as a family – individually and collectively. So if you are a family of 4 with two teenaged son and daughter, your dreams could look like this when you are 42 years old :-

• Son wants to take up a career in Bio technology, daughter wants to be a film maker.
• Your wife is 38 and gave up her career for her kids 10 years back – she now wants to open up a boutique of her own in the next 3 years.
• You are interested in starting your Consultancy practice by the time you are 50 and for that you need to be financially independent.
• All of you like travelling and want to take a domestic vacation every year apart from short trips and also an international vacation every alternate year.

The idea of HELP is to bring out these life goals and lifestyle choices clearly, so that it can be determined what kind of financial support these would require and how can that be organized. Yes, the last part will involve financial planning but it will be in a very different way than just how to buy MF through SIP etc. 

As I said, I have provided HELP to several people and all these were people who have approached me after reading my blog. Some examples will make interesting reading:-

• Advised a Colonel in Indian army as to how he could fulfill his dream of migrating to Canada in a teaching role.
• A software professional in Kolkata was worried about longevity of job and worked out an alternate plan should such an event occur.
• Got several people started on building a stock portfolio from scratch.
• Helped a mid career software professional to join a startup as it was more aligned to what he wanted to do in life.
• Motivated a frustrated career CEO to organize his money to become financially free and move on to training people, something he really enjoyed.

Note that in all of these cases, the people already had a financial plan made through a SEBI accredited Financial planner but they were not happy with their life and lifestyle.

The question that will definitely be asked is why am I the right person to do this? Let me start by giving some background of myself :-

• BE in Computer Science & Engg from Jadavpur university, Kolkata in 1986.
• PGDM from IIM Calcutta in 1988, with major in Marketing and Systems.
• Overall experience of 31 years plus, 27 years in regular corporate roles and nearly 4 years now in my Consultancy practice.
• I have worked almost entirely in the software services and BPO space.
• Have worked as a CXO for 15 years plus, nearly half of this in 2 publicly listed companies.
• Lived in Kolkata, Delhi, Chennai and Hyderabad besides having travelled widely all through the world for my work.
• Have been financially independent since 2014 and writing a blog since 2015 June. The blog has had views in excess of 4 lacs till date.
• My daughter is BE from BITS, PGDBM from XLRI and working in a Consultancy firm now. My son is from BITS with  a dual degree – Msc Maths + BE in Computer Science. He is now working in an MNC in Bangalore.
• I am associated with helping students in career counselling for Engineering / MBA.
• Am in the Hyderabad panel for IIMC admissions.

I believe in the Indian context, I am one of the few people who are able to deliver a service such as HELP. This has been proven by the 10 situations where this is done.

So if you are interested in knowing more about this, how do you get started? Well, the first step will be to write to me at rajshekhar_roy@yahoo.co.uk expressing your interest to avail of this. I will then ask a few questions over mail to assess your current situation and then we can have an introductory call. After this I will let you know if I can do this for you and what will it cost.

Typical duration for the complete exercise is 1 month, with 2 interactions over phone per week and costs depend on the individual situation, there is a one time fee for the first year. Yearly reviews after first year will be 25 % of the year 1 costs.

If you reach out to me, do not get offended on my inability to take you up ( if that happens ). I am doing this to add real value to the lives of the people and therefore cannot spread myself too thin.

Look forward to hearing from some of you – believe me, your life will undergo a serious transformation once you go through this exercise.

My cash flows and investment plans for 2020

The start of a new year is always full of excitement and hope. There are new opportunities to explore and you hope for a lot of significant events to take place in the year, irrespective of what may have happened in the earlier one. In my previous posts I had outlined how 2019 was a fairly poor one both for my own active income generation as well as for the markets. In this post let me talk about my plans for 2020.

One must always start with the cash flow outlook for the year. Fortunately, with both my children becoming financially independent of me now, courtesy their careers, my major head of cash outflow is gone now. Currently their college education fees are all done and even though Ronju may get into a B school sometime in the future, we can always look at it through Education loans. On the flip side our expenses on travel are ever increasing due to the number of trips as well as the way we travel. Last year we had 3 vacations outside India, 2 full vacations in India as well as several shorter trips for leisure or family issues. 2020 looks similar as we already have a planned to visit somewhere out of India in March. Our daughter is fortunately staying with us now and our son is closeby in Bangalore. Based on all these I am looking at cash outflow in these terms :-

• Regular household expenditure likely to be in the range of 6 lacs
• Travel expenses can be estimated at 6 lacs to be on the safe side.
• Family support will be in the region of 2 lacs.
• Rent for our Hyderabad apartment is around 3.5 lacs.
• So overall cash flows required will be in the range of 17.5 lacs

Against these the cash inflows I am expecting in 2019 are as follows :-

• Interest from Tax free bonds, InvIT funds and POMIS will be about 4 lacs
• Dividends from Stocks and Equity MF schemes will be about 3 lacs
• Capital gains from FMP redemption will be about 2 lacs
• Rental income from our Chennai apartment  will be about 4 lacs
• Income from Debt funds and stock trading will be about 1 lac
• Repayment of an earlier loan will be about 3.5 lacs

The above looks good but what if the markets continue to do badly and the dividends dry up? The first line of defense will of course be my active income generation through my Consulting practice and Mentoring services. Additionally, as a backup plan I have the PPF accounts of both me and my wife. At present it earns about 5 lacs in interest per year and I can dip into it if needed. Another way could be to redeem some of my Debt MF schemes, to the extent I need the money. A final option will be to sell some stock that is doing really well but I do not feel this will be needed.

What about investments then? Well, in my present stage of life I am not looking at too much investment obviously. Even then, I had started a secondary stock portfolio in 2018 and have invested about 11 lacs in it so far. My idea is to let this portfolio grow and also do selective trading in it, something I have wanted to do for a long time. I do not want to do this on my primary stock portfolio where the plan is to have it for the really long term. Based on all of these the new investments I plan to do in 2020 are as follows :-

• 3 lacs in the two PPF accounts that we have.
• Put all FMP redemption money in Hybrid funds – this will be about 10 lacs in the year 2019. Part of this may also be used in my secondary stock portfolio.
• Build the Secondary stock portfolio to at least 14 lacs by putting in a minimum of 3 lacs in this year.
• Look at any interesting NFO themes as they become available.
• Keep adding to my Primary stock portfolio based on available money.

Where will the money for this come from? Well, what ever income I have from my Consultancy practice and Mentoring services will all be invested in above avenues as my passive income is adequate to take care of my cash flow needs.

So things look rather good right now, hoping that the markets will recover this year !!

Where should you be putting your money in 2020?

To begin with let me wish all my readers a very happy and prosperous 2020. I wish this year is a good one for you in your life as well as the financial space. Though I have not written much lately, I saw that yesterday’s post was my 500th one in the blog and that gave me a lot of satisfaction, especially as many readers have told me from time to time that they have found several of my posts quite helpful in their financial journey.

So what does 2020 have in store for us? At a fundamental level one has to realize that the situation in India is a study in contrasts right now. We have a government seemingly under siege but yet acting as though they are in a hurry to get contentious issues pushed through, an opposition that was in disarray but have now got a fresh lease of life due to the controversial decisions of the government, stock markets at a lifetime high yet several stocks are languishing rather badly, big plans on investments in infrastructure and other areas but employment situation and IIP/GDP numbers are poor. In very simple terms we are poised for great growth as a country but the risks that are associated with such growth possibilities are also substantial. The good thing is 2020 will give us a very clear direction as to which way we are going and that will set th tone for the decade.

Where should you be putting your money in 2020? This can be answered depending on whether you are an optimist or a pessimist about the India story. For a long time now the stock markets have been pining to see earning growth for companies and this year will be a make or break year in that regard. Corporate governance and banking regulations have been in the news for all the wrong reasons and the current steps taken for getting these corrected will also come to fruition this year. At the present point in time both debt and equity markets do not inspire a great deal of confidence, real estate is good only in pockets and that is not a good idea for most investors, commodities have their own risk and though Gold has shown good performance it is not a mainline investment choice. So this is the situation you must navigate through to bring your financial ship ashore. Let us see what are the basic strategies you can have in the year, depending on which stage of life you are. I am only discussing strategies here, will do a separate post on product types that you can invest in soon.

• For people in their twenties who have just joined the workforce and are yet to have responsibilities of family etc, this is the time to take risks. You need to understand the long term benefits of equity investing and put a fair bit of your money there. Do not get into direct stocks unless you are interested in the markets and have time for it. There are several MF schemes that have good performance and portfolio, choose a set of them and invest through SIP. At the same time you should open a PPF account or an NPS account, depending on your inclination. The PF account of the workplace is there by default and you need to keep it going at full contribution. You can look at the idea of buying a house if you are likely to stay in a place for 5 years or so, do not do it otherwise.
• For people in their thirties who have been working for 8-10 years, family responsibilities would have kicked in, they are likely to be married with 1 or 2 children. Much of the investment choices will be as above with two important differences. Firstly, with the MF SIPs having run for some time now, you need to institute an annual review in order to weed out the non-performers. Secondly, based on the goals coming up in the next decade, plan your debt portfolio in such a way that it acts as a hedge against equity doing badly for a few years. This will also be a good time to buy a house if you will get to stay there for some years.
• For people in their forties, the chldren would have grown up and either in high school or getting ready for college. While the investment pattern remains the same, redeeming the correct investments for the goals is critical. Normally these will be from your MF SIPs but if the markets have done poorly 2-3 years prior to your goal year then you must look at alternatives. Try to use your Debt portfolio or look at other options such as educational loan etc.
• For people in their fifties, the children are in college or have graduated from there. Given that you are now in an FI state and may be retiring soon, it is important to create a passive income stream that takes care of your regular expenses. Keep your equity MF portfolio going you need it for beating inflation over the long retirement years.However, you must have easy access to the next 5 years expenditure at all times without having to do a distress sell in equity.
• For people in their sixties and above continue with the above strategy and keep the equity portfolio going for as long as you can.

People wanting to contact me with any questions or for HELP can write to me at rajshekhar_roy@yahoo.co.uk