Earning and Investment

None of my folks ever told me when i was young on how to build wealth and they themselves did very little investment apart from in Fixed deposits and Gold.

In my career, as part of employee welfare, there was never any talks on investment strategy for self.

No one from middle class in India learns how to invest and secure the future.

We give it scant attention in our society yet it is of paramount importance. Specially when the concept of permanant jobs and job security is becoming alien concept even in Asia.

I have dabled in shares even though I didnt have any formal training on how to analysis the fundamentals of stocks. I tried learning reading magazines and news papers. I give credit to myself, keeping finger crossed that I managed to generate a yield of about 6-7%. It is lower than fixed deposite but the intangible that I learnt is priceless.

My portfolio is very skewed towards dept and only recently Im trying to make a plan that would yield higher return.

I have seen bust, boom and bust of stock market over a decade.
I have seen bust and long boom of housing market in India.
I have seen inflation rising and interest rate increasing for savings account and sky rocketting for loans.
I have bought and paid back the loan for a flat in Mumbai.
I have seen experts from international banks making predictions that would be horribly wrong yet they would continue trying making predictions.
I have bought and sold two cars, one in India, another in Philippines.
I have lived in India, Philippines and Thailand.
I have seen the 10 year run of gold.
I have seen Eurozone crisis.

These experiences have taught me lessons. However, Im keenly aware that past is no guarantee of the future for investments.

 The guidelines to building assets:

1. start saving from the day you start earning. Should atleast save 30% of the salary. Whatever the salary, one should learn to live within a budget

2. Dont invest directly in stocks unless you have deep understanding of the market. Invest in mutual funds. Invest in MF of reputed banks having solid track record of double digit returns over a period of 3-5years. Always avoid MFs from small new banks who havent been tested by time. Have a portfolio of 5-10 good MFs and invest in regular basis. Dont ever try to time the market. Have a 5-10year horizon in mind.

3. The moment it is possible, buy an apartment. Doesnt matter if it is a small one on the outskirt of the city. Sooner you start, it s better since apartments will always (mostly apprciate). And why not? Polulation is increasing and land is finite, cities where work can be found is even more numbered, so propoerties will always appreciate in most of the countries over a period of time. If you can, build a portfolio of apartments which can yield appreciating and regular rental income.

4. Debt isnt bad. 30%  of the asset should be in debt. This protects the asset.

5. Invest in Gold ETF. Lifes uncertain and so Gold will appreciate over a period of time.

The distribution of wealth should be:

Apartment: 30%
Equity - 25%
Debt - 30%
Gold - 10%
Cash - 5%

This is for a balanced, medium risk portfolio. Offcourse, as one ages, he should put more bias towards debts.

But currently, my wealth distribution is:

Apartment::26%
Equity: 5%
Debt: 50%
Gold: 3%
Cash: 16%

So, I have major rebalanching to be done.

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