Travel to the Konkan coast – the logistics

In the last post I had outlined the way I arrived at the plan and the route for our Konkan vacation. Once this phase is over, the next tasks are to look at the bookings. In general you will need to book for transportation and accommodation. Of course, there is the issue about local conveyance as well but we normally deal with that when we reach our destinations – it is easier this way as you have greater options.

As I said in the previous post we were fine with the dates and did not need a fixed itinerary. As such I started with the air bookings. Let me take you through a step by step process so that others would be able to follow it easily:-

  • I started by checking any 6 day range where the morning flight to Goa and an evening flight back to Hyderabad were reasonably priced. You can do this through many websites. http://www.makemytrip.com  and http://www.easemytrip.com are normally the ones I choose to look at.
  • In the first one you have a convenience fee of 300 Rs per ticket which is not there in the other one. However, the first App lets me get some cashback on the tickets as long as the charges are 6000 Rs plus.
  • In this case the cashback was not working out so I booked the EaseMyTrip deal.
  • We got a really early flight to Goa which will leave us enough time for reaching Madgaon station. Similarly, we got an evening flight from Goa.
  • Ideally one should book about 60 days in advance to get the best rates but we started plans a little late for this trip. Even then the overall cost for the two of us came to about 10000 Rs which was reasonable.

Before booking the ticket I had checked the accommodation availability for those dates – 3 nights in Tarkarli and 2 nights in Ganpatipule. I chose the Maharashtra tourism properties as they had the best location and normally these places are tourist friendly. You can do only booking at the Maharashtra tourism website. This proved to be quite a bit expensive based on what rooms we chose. Unfortunately, the GST rate reduction had not happened by then so that was a double whammy. The total accommodation costs came to about 16500 Rs. Of course there were cheaper options in these properties and you can also look at other staying alternatives. However, these places and the rooms were aligned well to what we were looking for in a vacation, so it was all right.

The final part was the train bookings. We booked a chair car from Madgaon to Kudal and a Vistadome coach seats from Ratnagiri to Madgaon. I had again checked the availability before the other bookings and had been relieved to see that there were enough seats. The First journey was 670 Rs but the other one was rather expensive at 2520 Rs. However, travelling by the Konkan railway has been a long cherished desire and we definitely wanted to try out the Vistadome coach.

What are the other costs that will be associated with the trip. There are quite a few, but the ones I can think of right now are as follows:-

  • Food – both of us love food and we are looking forward to sampling both Maharashtrian and Konkani cuisine. 
  • Transportation from home to airport, Goa airport to Madgaon station and back.
  • Local transportation from Kudal to Tarkarli, sightseeing in Tarkarli, travel to Ganapatipule, sightseeing in Ganpatipule / Ratnagiri etc.
  • Backwater and sea cruises + other water sports.
  • Buying some souvenirs from these places.

While I do not really know what will be the costs here it will be safe to assume a figure of 20000 Rs or so. That will bring the overall expenses to the trip at 50000 Rs or so. Is is a tad excessive? Well, it can be done a lot cheaper but that depends on you.

For me, this is an amount I am willing to spend and am looking forward to our trip with great anticipation. I’m almost definite it will be well worth it and will update the readers through a travelogue once we are done.

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A travel plan for Konkan beaches – the conception

People who know me, either personally or through my blog, will be aware that I am an aficionado for travel. Seeing new places and the whole exercise of conceiving and planning for travel really gets me excited. The actual travel is rejuvenating but even the anticipation which starts with the plan is great. Many people have asked me as to how I plan for my travels and in this blog post let me talk about the trip we are planning to undertake in the near future.

While there are several great places to see in India, beaches have always held a great interest for me. India is blessed with a really long coastline, three glorious seas and countless beaches to choose from. Over the years we have covered a lot of beaches starting from Kanyakumari to Digha on the east coast and to Mandvi on the west coast. On the western coast we have done Kerala, Karnataka, Goa and even Diu/Gujarat beaches but not the ones on the Konkan coast. Maharashtra beaches are less visited but they are very highly talked about and I have wanted to go there for a long time. As our anniversary is in late November, it seemed as good a time as any to plan this out.

For making a travel plan, I first read up to gain knowledge about the area in order to decide on the places to visit as well as the activities to engage in. There were some good travel blogs available for Konkan travel as well as great websites with a wealth of information. The Konkan coast stretches from Mumbai to Goa and there are several great beaches along it. However, two major ones are Ganapatipule and Tarkarli and with the time at our disposal being a maximum of 5-6 days, I decided to stick to these two. Based on the blogs I viewed it seemed that 2 nights both in Tarkarli and Ganapatipule would be adequate to cover what we would want to see there.

One the broad plan is there, the next step is to figure out how to reach there and which route to follow. Here again, the blogs and the road maps of Maharashtra were a great help. As trains to those parts from Hyderabad are few and take too much time we were able to rule out that option. The bus was also rejected for the same reason as the journey to Kolhapur by an overnight bus would be an exhausting one. I was quite keen on going by our car as I like driving and we have not gone on a long drive for ages. However, my wife Lipi was not keen on a 9 hour drive to Kolhapur and further to the Konkan coast. It would take 2 days to get there and back and 2 nights stay in Kolhapur too. Also, I saw that the new Vistadome coach has started on Konkan railways and we were keen to try that out. We had a great experience recently in a similar coach when we went from Vizag to Araku valley. Read about the details in this post if you are interested.

For Tarkarli it is convenient to go through Goa, from where you can take a train or car. As the Vistadome was not available easily on the days we searched and the timing was not good, we finalised on the following route:-

  • Travel by air from Hyderabad to Goa on Day 1.
  • Take a train from Madgaon to Kudal on Day 1.
  • Reach Tarkarli from Kudal by car/auto on Day 1.
  • Stay at Tarkarli and do activities / excursions on Day 2 and Day 3.
  • Reach Ganapatipule through Ratnagiri on Day 4 afternoon.
  • Stay at Ganapatipule on Day 4 and Day 5 nights.
  • Travel between Ratnagiri and Madgaon on Day 6 morning in the Vistadome coach.
  • Catch the evening flight from Goa to Hyderabad on Day 6 evening.

The above plan would accomplish all that we had in mind, though it would be a little expensive due to air travel etc. However as it was not a priority issue for us we were able to fix on this plan. Note that the dates were not fixed as they would depend on the bookings etc. Fortunately, I am rather flexible with my time nowadays, so it does not really matter when we start the trip.

We had to take care of the actual travel logistics next in terms of the transport and hotel bookings. Let me write about it in the next post.

How I use Mutual funds for my financial planning

Mutual funds are great instruments, not only because they let you invest in equity with reduced risk, but also due to the flexibility that they offer you in terms of all the aspects of your financial life. You can use them for goal based investments, as backup for goals, as emergency fund and also for regular income.

Over the years, I have probably used in all types of MF for taking care of the different needs in my financial life. I thought it will be a good idea to outline in a post as to what types of MF I have invested in and why. To keep the post short and sweet I will only outline the main issues and not go into the features of the MF types.

  • Equity MF Growth option: I have mainly used these for growing my portfolio. I do not really invest for specific goals, it is more like accumulating a pool of money that can be dipped into, as and when needed for a goal or some other emergency.
  • Equity MF Dividend option: I have invested in these mainly to get some regular tax free income. This forms part of my passive income base, helping my financial independence, without an active income. Most of these are close ended MF I have invested in the last 3-4 years. 
  • Balanced Funds: These provide some hedge against volatility of the markets and can be redeemed if I need money during a poor market situation.
  • Arbitrage Funds: I use this as an Emergency fund as the tax treatment is similar to that of an equity fund. Returns are low but better than FD and tax free.
  • Equity Income Funds: Similar logic as Balanced funds, helps me diversify risks. Can be redeemed if needed in a down cycle of the markets.
  • Monthly Income Plans : I have invested in the Growth option here as I am not depending on regular income from here. At the same time, I can redeem these if needed for some purpose. All of these investments are more than 3 years, so the tax incidence will be minimal.
  • Debt Funds: I have small investment in other Debt funds, mainly to lower the risks.
  • Fixed Maturity Plans: These provide stable returns and I get regular redemption from different schemes every 2-3 months. I use the capital gains as my passive income and reinvest the principal in some debt oriented instrument. With the declining rates Dual Advantage funds have been my choice of late.

As you can see from here, it is possible to invest entirely in different MF types and achieve both passive income as well as growth in your FI state. In my case, I do get some interest from tax free bonds and POMIS but that is strictly not needed. 

Are you using the versatility of different types of MF? If not, it is time you did it. I will do the next few posts on how retirement corpus can be deployed using MF.

Financial plan for the retired – A guest post

This is the first guest post in my blog and I am happy that my friend Biswanath Sengupta has penned down his experiences and thoughts on how he is going to manage his financial life in retirement. Biswanath and I were college mates while doing BE in Computer Science & Engineering at Jadavpur university.

Without further ado, here is Biswanath in his own words :-

My Financial Take – For Retired and Retired hurt People Only.

This is my first tryst with the financial instruments. I formally retired from the corporate services at an age of 55 yrs. Obviously I will be active and earning in the startup world, but at present it’s minuscule compared to the corporate earnings and the future is unknown. I have my set of liabilities as well. With high competition and automation and fast change in business scenarios we are having a significant number of retired hurt cases post 50 yrs in the service industry.
I have consulted many financial experts and did my studies as well . I am a conservative risk averse investor and as per normal life cycle would expect to live for another 25 years. Here are my few takes and learnings.

1. Practical inflation rate is 8 percent plus , irrespective of whatever the govt of the day claims.
2. The cost of living does not decrease significantly after retirement.
3. Cost of healthcare increases at the rate of 12 percent. With high pollution and global warming and junk food, incidence of lifestyle , tropical and cancer increases alarmingly.
4. Except for the Pension Schemes of the Central and State Govt employees , all other pension schemes are useless as they only give an annuity of @6-7 percent which post tax is around 5 – 6 percent.
5. As the economy grows and become global the Fixed deposits rates will come down significantly and likely to settle around 4 – 5 percent per annum meaning post tax rate will be 2 – 3 percent.
6. Most of the investment consultants are fresh or junior MBA’s with no experience of economy and life and are busy selling their products. They are useless. Experienced financial advisers are rare and pricey.
7. For many non pensioned retirees the standard of living deteriorates after 10 years of retirement and they struggle for existence after 15 years.

My learnings on how to live happily for most of your life post retirement.

1. We have to move out from risk averse FD zone unless we are ready for an effective yield taxed at your taxed rate for around 3 – 4 percent.

2. PPF, Post office schemes , Sr citizen FD limit can be exhausted.

3. Have only emergency money in FD .

4. Move 50 percent into debt or MIS schemes . Any standard advisory can support you on the same. You only have to check your portfolio once in three months. The effective post tax yield will be around 7 – 8 percent with low risk and better tax treatment as they come under LTCG after 3 years.

5. You have no choice other than to move 30 – 40 percent of your corpus into equity market to generate return and wealth. You can do this via a good equity mutual fund or thru an experienced portfolio advisory. Please do not venture on your own untill you are an expert. I trusted a portfolio advisory got a CAGR of 30 percent irrespective of the market conditions. This is the only steam of my survival. These days there are good portfolio advisories which starts from an investment of as small as Rs. 5 lakhs.

6. Have a medical insurance ASAP. If your medical insurance is less than 5 lakhs then create a seperate corpus to meet your additional need via debt MF.
7. There is nothing like minimum corpus required . They are all myths. Start courageously with what you have. Let the destiny prevails.

8. You are lucky if you have more than one house as that generates income in terms of rent and reverse mortgages in your winter days.

Enjoy retired life.

Portfolio Management Services – are they good for you?

Over the past few years my equity portfolio has been at a reasonable level. Thanks to my friends, acquaintances, bank people and readers of the blog this is a fairly well known fact too. I have consequently been approached by several individuals as well as Fund Houses with the offer of managing my portfolio for me. Even though I have not gone for any PMS so far, these interactions and my own reading has helped me to get a fairly good idea of this.

So to start with, a PMS is not all that different from a MF at a basic level. In an MF scheme the Fund manager gets money from multiple individuals and creates a portfolio out of those funds. He then runs that portfolio for certain fees and people can continue to invest in the scheme. Returns from the scheme are in terms of dividends and also capital gains from the portfolio. In a PMS most of these are also true, except that the amounts are larger and it is being done for a single individual. Let us review this in a little more depth. I will take a specific example of one PMS I was offered recently, without naming it.

The salient features of the PMS proposed to me is as follows:-

  • Minimum ticket size is 25 lacs. This could be in cash or also in terms of a 25 lac stock portfolio at current market prices.
  • In either case a new Demat account will be opened and all transactions will be in that account after the initial transfer of the shares.
  • You are giving a mandate to the PMS manger to execute trades on your behalf in this portfolio. While you can be involved if you want, that really defeats the whole purpose of having a PMS in the first place.
  • Typical charges are 2-3 % and they are normally upfront. However, there is a lot of scope for discounts and some PMS work primarily on a profit sharing model.
  • Returns on the PMS are obviously not guaranteed but over long term most have managed to give 20 % and above after deducting the PMS expenses.
  • The chances that the PMS will be successful are reasonably high as the manager is dealing with a concentrated portfolio and can take the right kind of calls based on the research available at his disposal.
  • More importantly, the PMS manager is not emotionally invested in the portfolio and therefore is in a better position to take sell and buy calls compared to the investor.

The last point is the most important one. As investors we suffer from an endowment bias working on both the buy and sell sides. For example, I bought Maruti years back and it has grown manifold after that. While that gives me great pleasure, I am not very likely to sell it, even if I realise that in the next year that money can be utilised better elsewhere. A PMS manager will probably sell it at 8000, use the money on a beaten down stock like Yes Bank for a year and then buy it back if needed. This helps him to make more returns than I would. Similarly, I have stocks such as NDTV and RCOM which have gone nowhere and I still have issues about selling them. This is because I want to avoid the pain of loss and admission of a mistake. The PMS manager will have no such considerations.

So is PMS a good idea for you? Well, if your stock portfolio is more than 50 lacs or so then you can look at it. Separate out the stocks which are not doing well and give it to the PMS. Review the performance after a year and check if it makes sense to continue. Remember to really negotiate hard on all costs as the standard costs are quite high, but they are negotiable too. Try to get into the profit sharing model to the extent possible.

Why is the PMS always likely to give better returns than an MF scheme? Well, for one it is a concentrated portfolio with a finite value. This enables the PMS manager to take quick calls, unlike the MF manager who has to deal with much larger amounts. Secondly, in a PMS there are no redemption pressures within the year. Thirdly, constant inflows through SIP forces the MF manager to keep investing, even if the time is not right. This is not the case in a PMS. Fourthly, an MF manager will mostly buy standard company stocks unless there is a very specific mandate to do otherwise. A PMS manager has far more flexibility in this regard and can really create value for the investor. Fifthly, if the markets crash the PMS manager can sell off quickly to limit the damages. This is not really feasible for a MF fund manager having a large AUM.

Remember that your equity journey should start with Mutual funds, then get into stocks and finally graduate to a PMS only after you have a substantial stock portfolio. If you start with putting your first 25 lacs into a PMS, your experience may be a bad one and scar you so badly that you distrust any equity investment thereafter.

Finally, then is the PMS a good idea? On the whole, I will be inclined to agree though I am still trying to make up my mind as to if I should go for it. In case I finalise the PMS, I will do a future post on it.

Should you be selling equity now?

The liquidity driven rally in the indices and several stocks has been the flavor of this festive season. In the beginning of this financial year the opinion of most analysts were that there can be a possible range bound movement and the Nifty would probably settle in the range of 9500 to 9800 over the next few months. Thereafter things would be taken care by the last quarter results. Indeed when the markets started to rally and crossed the 10000 levels with relative ease, the consensus was that the corporate earning would justify the rise.

Now that several companies have declared their results for the second quarter, it can be safely said that the results have been a mixed bag and there is nothing really in them to indicate strongly that the lacklustre showing of corporate results are a thing of the past. In fact while the Auto companies and several banks have shown encouraging results many other sectors have been clearly disappointing – IT, Engineering and Pharma to name a few. So what does this portend for our markets, the Nifty in particular? 

For starters, there are really no immediate triggers left for the markets. Both the GST and the good monsoons have largely been factored in the rally which we have witnessed in the past few months. In any event, the actual impact of these are not being felt in the Q2 results. Given this situation it is kind of tough to see Nifty getting a serious lift from the present levels. Yes, the liquidity factor along with some other good news can push it to near 10500 levels but it will be very difficult for it to sustain it there. In simple terms, I think that there is a far greater case for a Nifty downside to 9500 and below in the next 2 months as opposed to an up move to 11000 levels. In this context, does it make sense for an investor to sell off his equity holdings partially and enter later at lower levels? 

People who are holding a direct stocks portfolio will be familiar with this simple mechanism. You can move out of a stock at a level where you feel there is unlikely to be any more upside in the short run. Over a period of time you can decide at what level would you like to re-enter the stock. At the very least you would try to add to the stock at certain lower levels, even if you do not book profits. Of course, this requires a deeper understanding than just looking at Nifty levels but the rewards can really be stupendous. There are people who sold Maruti at 4600 last year and then bought it back around 3500, to now see it climb back to 4700 again. If you owned even 100 shares of Maruti, this strategy would have given you a cool tax free profit of 1.2 lacs.

What about MF in that case? Most investors who are into SIP are led to believe that they should adopt the Hero Honda strategy of, “fill it, shut it, forget it”. But in reality is this a good idea? Like in the case of Maruti stock, will you be leaving a lot of money in the table if the Nifty really goes down rapidly from here and your MF scheme NAV declines alarmingly. At some level, your fund manager is taking care of this but it will do no harm to take an active stance in this as well. Many investors have investments of 3-5 lacs in an MF scheme. Even a 10 % drop in the Nifty levels will mean significant amounts of money. Remember, this is clearly like a tax free bonanza that you can use for many of your discretionary expenses and even for additional expenses if you so desire.

More importantly, many of us have collected stocks and MF schemes over a long period of time. These do not fit into our current plans very well but we may have been too lazy to sell them or have not found it worthwhile. With the market levels being where they are for all types of indices, it may be a pretty good idea to sell some of these. You can channelise the money into your current portfolio depending on the right market levels. Also, if you are stuck with a long standing SIP in a fund which you do not like any more, this will be the perfect opportunity to get out of it lock, stock and barrel.

Is there a risk that Nifty can just go up unidirectional and well past 11000? I do not think so and even if it does, it will come down at some point. Remember you will be holding cash and that is also an asset.

In the next post, I will outline how I want to adopt this strategy for my own investments.

Indices at life time highs – good idea to sell your MF ?

Yesterday all of our relevant indices have hit their life time highs. In fact, with the issues in North Korea and the impact on crude oil prices, there is a chance of some correction in the immediate future. This is probably the reason why I have got a lot of messages asking me as to whether it will be a good idea to sell the entire MF portfolio, be in cash and again buy the MFs once the markets seem to have finished the correction.

Is it possible that you will make money in the short run through this approach? The answer to that is “yes”. Is it therefore a good idea? The answer to this is clearly a “no”. in order to understand why this is so, you need to understand how MF works in the first place. The fund manager has a certain amount of money available and he is buying stocks with it. These set of stocks for a particular scheme will keep changing. The fund manager is doing these changes and you pay him for that very reason. Now if the markets are going down the fund manager may selectively sell some stocks and buy others. As such the scheme you sell and the one you buy are fundamentally different. If you are in the scheme as part of your long term goals then it makes absolutely no sense to sell off the schemes when the markets are at highs. For all you know your fund manager is taking the appropriate decisions by selling some stocks at their highs and buying others which still have a lot of value in them. Do not try to second guess a person who is professionally trained and does this for a living. Just because you can play around with spreadsheets and calculators does not make you competent to take such decisions.

Now what if these funds are not part of your long term portfolio? Well, if you are to sell them anyway then you might as well sell when they are at their highest or near it. In that case my recommendation would be to sell NOW. Yes Nifty can still go to 10500 plus this year and maybe even 11000, but those are fraught with uncertainties. You might as well sell off now and wait for a 5 % drop or more to buy funds that you want to be in for the long term. As I said before with the same fund it does not make sense to change but if you are changing your fund you might as well look at a better entry point.

What if your investments are in Regular schemes and you want to shift to Direct schemes? The same logic will hold – sell NOW and buy after a while.

Over the years I have invested in several schemes and have now reduced it to 5 only. The current market gives me a great chance to clean up my portfolio. How do I intend to do it? Read the next post to find out.