Time Time Ki Baat Hai – Part 4

Harish : I don’t know where is my life going these days !! I am just running around all the time. Not getting time for myself or family.


Niraj : Ohh…that’s something serious. Take a deep breath and tell me what happened ?


Harish : I get up in the morning , go through all the whatsapp discussions that happened during the night, watch business channel to listen to the experts and then leave for my office.

On my way to office, on the red signal, I put some trades in the market. After reaching office, I get busy with my work. During my lunch break, I again check markets and whatsapp discussions about markets. During my work, I keep checking market levels and my stock prices.

On my way back, I am exhausted. I reach home, crash on the sofa and watch business channel to see what happened in markets all day. Before sleeping, I again check the discussions and recommendations made by my friends in the whatsapp and FB groups about investments. And while reading, I get late to sleep (around 12.30 -1 am).


Niraj : Wow !! You run a super busy day !! You must be making huge money by doing all this !!


Harish : I wish !! But hardly any !! Neither am making any money nor getting time !! Don’t know why this is happening ?? I wish day was 48 hours long instead of 24. Can you help me please ?


Niraj : Well, I will try. Do you know what is your problem ?


Harish : I guess not.


Niraj : You are not able to prioritise your tasks. You need to list down things which mandatorily need to be done by you and get other things done by someone who can do it better.


Harish : You sound logical. Kindly elaborate.


Niraj : In your office, can your core job be done by anyone else ? That you need to do yourself. At your home, can someone else spend quality time with your family ? That you need to do yourself. But other things, like driving your car, doing research on your investments etc , you can hire someone who does it for you. That ways you will get more time so that you can spend quality time with your family.


Harish : Well, I forgot to tell you. I do spend quality time with my family. Every weekend we go to a mall, watch a movie, go to game-zone , have dinner and come back. So that’s taken care I guess.


Niraj : Let me guess some finer details. When you watch the movie, you ask your child to keep quiet and watch the movie. In the game-zone, when your child is playing, your wife is clicking his pics and sending them to friends and relatives on whatsapp and FB , and all this while you are still busy discussing stocks on your FB and whatsapp groups.

While you all go for dinner, by the time the order comes, you give your other mobile to your child so that he can play games on it, your wife is checking on her phone – how many likes have come on FB and you are still busy discussing stocks and investments on your FB and whatsapp groups.


Harish : O my God !! Every word that you said was absolutely right !! How did you know that ?? Were you following us ??


Niraj : I don’t need to follow you. This is what we observe around us most of the times. We think and pretend that we are spending quality time with the family. But the fact is, we are not really WITH each other.


Harish : Then, in your opinion, what should I do ?


Niraj : I think, when you get up in the morning, chuck the mobile and TV. Spend 20-30 minutes doing exercise. If possible , wake up your child too and do exercise with him. This way both of you will spend some time together and also improve your health.

Rather than driving yourself to office, take a cab / public transport. On your way, you can either read up or listen to some music which will keep you energised.

During lunch time, have healthy discussion with colleagues (if possible, slightly different discussion than work). This will actually give you some break.

Once you reach home, spend time with your family. Ask them how was their day, what they did etc. On weekends, play some outdoor / indoor game with your child. This will strengthen your bond with the family and give you relaxation.

Time Time Ki Baat Hai - Part 4


Harish : Wow !! Sounds like a dream day. But what about my investments ?? How Will I manage them?

Niraj : As mentioned by you, anyways you are not able to make lot of money by doing all this hardwork. Why not hire a professional advisor who manages it for you ?


Harish : I had thought about that. But finding an advisor is not an easy job. Doesn’t that eat up my time as well ? Also, I will have to sit with him to review my portfolio every month.


Niraj : I will answer your question in 2 parts

  1. Finding a good advisor isn’t easy, but its worth it. So if it takes some time, spend that. Coz that time will save you lot of time later.
  2. Portfolio review is to be done only once a year. So take out 2 hours once in whole year to sit with the advisor and review it. For rest of the time, let the expert do his job, and you enjoy your life.


Harish : That sounds great. But I remember my father telling me, that we should do our work ourselves. Also, an advisor fees would be an additional cost for me.


Niraj : Your father was right during his times Harish. But you would agree that he didn’t spend so much time on watching TV and mobile as you did. In those days, time was ample. Thus, doing everything on your own was possible. These days, the rarest resource is time. You yourself said that a day should be 48 hours long. I bet your father never said that.

All of us are born with different access to different resources. Some are born with strong financial background, some with weak. But there is one thing that we have all got in equal proportion, that is 24 hours in a day. Those who are successful, manage their 24 hours well. They only do what requires their own expertise. Other things, they get it done. The price you pay for getting things done, is far lower than the value you get by doing important things in that much time.


Harish : Thank you so much for opening my eyes Niraj. You are absolutely right. Times have changed. And we need to change with times.


We look forward to your feedback and comments on the above article.


The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP, CIA, AFGP) is CEO with Nidhi Investments, Mumbai. His articles have a readership from 78 Countries across the Globe. He may be contacted on CEO@nidhiinvestments.com if you have any questions.


(The views mentioned in the article are personal opinion of the author. The characters used in the article are imaginary).






Are we asking the right Questions?

Hemant : My life is so messed up these days that even Google is not able to answer my question.

Niraj : Why, what Happened Hemant ?

Hemant : Arre yaar, When I am confused about a question, I try asking it to Google, it gives so many answers, I get further confused.

Niraj : Ok. May be you aren’t asking the right questions to it Hemant.

Hemant : How can a question be wrong or right ??? I thought only answers could be wrong or right.


Niraj: Let me explain to you, how Google actually works. Google works on the principle of “string matching”

So for example, if you are asking a factual question like “In which year Akbar was born?”, Google is most likely to come up with the accurate answer.

But if we ask a question which involves an opinion or judgement, for example “Was Akbar a Great King?”, do you think Google will have a clear answer ??

It will throw various opinions of people about your question. Now based on those opinions, you will have to take a call what is the right answer to your question.

Another example, if you ask Google, “What is the GDP of India?”, it can give you an accurate answer. But if you ask it, “what are the important constituents which will make Indian GDP 5 Trillion USD by 2025?”, will Google be able to answer on its own? It will come up with some statements from different economists which may have diverse answers.

The bottom-line is, if you ask the right question, i.e. a fact-seeking or data-seeking question, you are more likely to get a crystal-clear accurate answer.

But if you ask a wrong question i.e. an opinion seeking question, you will get a plethora of opinions. You might not get a clear answer unless you do an in-depth study of the opinions, the background of the people having those opinions and so on.

By the way, what question you were asking to Google?

Hemant: Actually I had some spare amount to invest. And I wanted to grow this amount. So I asked google, which are the next Multibaggers. I got several answers from different brokerage houses and I got confused.

Then I asked Google, “Which are the best funds to invest?” It again threw so many names from different newspapers and news channels that I got confused.

Do you think I asked the wrong question?

Niraj: Yes, you did. What you asked Google, was not a fact-seeking or a data-seeking question. If you had asked, what was the Sensex level on 1st Mar 2013, it’s a data seeking question. Google would accurately answer it.

But if you ask, which is the best fund or next multibagger, obviously it’s not Google’s business to research them. It will do a string matching and throw up links which have used this phrase “Best Fund” or “Next Multibagger”.

What you are actually getting is opinions of people who might be from a brokerage house or a newspaper company or a news-channel. Now first thing is to understand is, these are not “Google’s Opinions”. Second is to understand that these opinions need careful evaluation and can’t be trusted blindly.

Hemant: So what should I do if I want to do my own research on next multibaggers or best funds to invest?

Niraj : Now that’s a good question. You may have to pick up a company and do in-depth research about it.

Start with its products, then how is the demand of its products, whether it has a competitive advantage, whether it has pricing power, how well it is received by customers and so on.

Then move on to its Financials, Debt/equity ratio, Interest coverage ratio, Liquidity ratio, ROA, ROE etc

Are we asking the Right Questions_


Hemant: Stop Stop Stop !! O My God !! So much research?? And all this I have to do for how many companies??

Niraj: Well, there are some 6500-7000 listed companies listed on both the exchanges. So ideally all of them. Or if you want, you can pick up the top 500 companies and do all this research for them.

Hemant: Dude, I just want to invest small amount. Let’s say Rs. 15,000-20,000 a month. If I keep doing all this research, then when will I do my job? I will be thrown out from my company. I will also incur a cost in doing this much research.  Please suggest me an easier way.

Niraj: Easier way is to have someone do it for you. You can hire a professional who does all this for you for a fees.

Hemant: But isn’t this professional fees an additional cost for me?

Niraj: You have 3 choices.

  1. Keep asking “opinion-seeking” question to Google and get random opinions.
  2. Do all the research yourself.
  3. Hire a professional

First 2 choices don’t have a direct cost, but indirectly they may prove more costly. Random opinions might lead to wrong investment choice which will lose you money. Doing own research will consume too much time and Money. Still you can’t be sure if your research was truly “in-depth”

Third choice has a direct cost, but will benefit you by saving lot of time, getting professional research and a face to talk if you have some specific queries. In investments, we many a times feel fearful and concerned. Do you think Google will be able to address that?

Hemant: You are absolutely right Niraj. I was actually asking the wrong questions. We need to keep Google search restricted to data and information. When it comes to Knowledge and Wisdom, we need to have a trusted human advisor on our side. Thanks for clearing my thoughts.

We look forward to your feedback and comments on the above article.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP, CIA, AFGP) is CEO with Nidhi Investments, Mumbai. His articles have a readership from 78 Countries across the Globe. He may be contacted on CEO@nidhiinvestments.com if you have any questions.

(The views mentioned in the article are personal opinion of the author. The characters used in the article are imaginary).







Are We “Robbing Peter and Paying Paul”?

Niraj : Hey Anurag, why do you look so tensed and depressed ? Is everything alright?

Anurag : What to say Niraj !! There is no humanity left in this world.

Niraj : Really ?? Why do you say so ?

Anurag : As you know we are approaching March end, my Banker approached me to buy some insurance policies from him. I don’t trust him, so I called up a friend who is a financial advisor. I asked him if I should buy these policies. He said that I should not buy them.

Niraj : I think he is right.

Anurag : Yes, I know he is right. But then my banker started forcing me to buy at least some good mutual funds from him. I again called that friend and told him the situation. I asked him to suggest me some good mutual funds. He refused to do so. How selfish is that !!

Niraj : Why is that selfish, If I may ask ?

Robbing Peter To Pay Paul _

Anurag : My Financial Advisor friend is saying that I always seek free advice from him, and give the business to Banker. Thus, he wont give me advice now.

Niraj : Oh !! So you have already done this earlier ??

Anurag : Yes, I have been doing this from last 2-3 years. I ask him names of some good funds and then invest through the banker.

Niraj : Aren’t you “Robbing Peter and Paying Paul” ?

Anurag : I didn’t get you. Can you please explain ?

Niraj : Why don’t you take advice from your banker ?

Anurag : No Way !! These bank RMs change every 2-3 years. Who will trust them ?? I don’t have an iota of trust on him.

Niraj : And why do you take advice from your financial advisor ?

Anurag : I know him from a very long time. He has been in this profession from quite some time. He is well qualified and a very trusted person.

Niraj : Well well !! Then don’t you think you should be giving business to your financial advisor friend.

Anurag : I never thought that ways. But even if I want to, I need to give business to my banker to “maintain relations”.

Niraj : Great. And why do you have to “maintain these relations”? Do you have / need any loan from the bank??

Anurag : No-no. In fact I keep getting calls if I want to take a personal loan / Car loan from the bank.

Niraj : Then why do you need to maintain relations with him ?

Anurag : As humanity , as a gesture.

Niraj : And what about the person, who has been showing this humanity to you from last 3 years ??

Anurag : But he refused me this time.

Niraj : Yes, because he might have got tired of showing this “humanity” to someone who is taking him for granted.

Anurag : So in your opinion, what should I do ?

Niraj : In my opinion, we should be very careful if our actions depict “Robbing Peter and Paying Paul”. This means, we take for granted a person who helps us, and unnecessarily favour a person who is only looking to exploit us.

So let’s reverse the equation. Let’s identify and acknowledge the person who is helping us and ensure that he gets incentivised for his good act. At the same time, let’s chuck the person out of our life, who doesn’t have our interests on priority, who is only looking to exploit us to fulfil his targets.

Anurag : Thank you so much Niraj for making me realise my mistake. I will ask the banker not to disturb me now. I will only do business with someone I fully trust.


We look forward to your feedback and comments on the above article.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. His articles have a readership from 78 Countries across the Globe. He may be contacted on CEO@nidhiinvestments.com if you have any questions.

(The views mentioned in the article are personal opinion of the author. The characters used in the article are real with names changed).







PowerBank and Retirement Planning

Akshay : Oh Come on Niraj, you always keep talking about retirement planning. My Grandparents, Parents never planned their retirement and they managed decently. Why is that I should be required to plan for my retirement ?

Niraj (Smiles) : Ok. So do you use a PowerBank Akshay ?

Akshay : Yes, of course. It’s a must-have. One cannot manage without it.

Niraj : Really ? How long you have been using a mobile phone ?

Akshay : Almost 10-12 years I guess.

Niraj : And are you using a PowerBank from 10-12 years ?

Akshay : No. But that’s because there were no SmartPhones those days. The basic keypad phones would run 2-3 days without charging. But these Smartphone batteries don’t even last one full day. Thus, I need to carry a PowerBank

Niraj : So why don’t you switch back to the basic keypad phones ? You wont be required to use a PowerBank.

Akshay : What are you saying Niraj ? Now that’s not possible. I am so used to all these cool apps, features etc. I can’t go back to the basic keypad phones.

Niraj : Exactly. So your grandparents’ and parents’ life was somewhat like that basic keypad phone. They would manage with tap water, but you require bottled water. For them, summer vacation would mean a trip to Dadi house or Nani house. At the most, once in 4-5 years, they would take a trip to a religious place and would happily stay at a dharamshala. But just ask yourself if you can even imagine that. You and Your family compulsorily requires a trip to a good destination every year. Once in 2 years, it has to be a foreign destination. The hotel necessarily has to be a 3-4-5 star property with swimming pool. So things have changed a lot. Isnt it ?

PowerBank and Retirement Planning

Akshay : You are making sense. But am I doing anything wrong by living a good life? In those days, there were not too many facilities. Thus, my grandparents didn’t use it. But I should use it right ?

Niraj : Undoubtedly, you should use it. But at your retirement, would you suddenly like to go back to the Basic Keypad phone life ? If not, then you need a powerbank.

The way you necessarily need a powerbank to take full use of your Smartphone; Similarly, you need a good retirement amount so that you can continue the same lifestyle as you are having right now.

When you have electric supply available, you don’t only charge your smartphone, but you also charge your powerbank. You do this, so that when there is no electric supply available, this powerbank comes to your rescue.

Similarly, during your earning years, don’t just fulfil your needs for today, but also save and invest some amount for your retirement. This will ensure that when you have no electric supply (regular income) available, this powerbank (retirement wealth) will keep you going.

Akshay : You have drawn an amazing analogy between Powerbank and Retirement Planning. I will start planning for my retirement today and also charge my powerbank.

We look forward to your feedback and comments on the above article.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP, CIA, AFGP) is CEO with Nidhi Investments, Mumbai. His articles have a readership from 78 Countries across the Globe. He may be contacted on CEO@nidhiinvestments.com if you have any questions.

(The views mentioned in the article are personal opinion of the author. The characters used in the article are imaginary).







6 Mistakes to avoid while selecting a Mutual Fund

Vaibhav : Yaar Niraj, you had said that “Mutual Funds Sahi Hai”. But I am incurring losses in my Mutual Fund Investments. How does that happen?

Niraj : That’s surprising. How did you select the mutual funds?

Vaibhav : Very Simple. I went to this popular xyz website and saw the list of highly rated mutual funds and invested in them. Also, some mutual funds were told by my banker as they were available at Rs. 10 NAV. So I invested in them.

Niraj : There you are. I now understand why are you making losses. Your selection process itself is wrong. Let me tell you the 6 mistakes to avoid while selecting a mutual Fund.

Mistake 1 : Looking at Past returns as the only parameter for selection

Most of us just look at the past returns and invest in the fund. This is like driving the car forward by looking at the rear view mirror. We must research and understand the future potential and not chase past performance. Remember, the mutual funds themselves say “Past Performance may not be sustained in future”


Mistake 2 : Looking at Star Ratings given by websites.

This mistake is almost similar to 1st mistake. This is because the ratings are mainly given based on past performance. So if you don’t look at past performance but go by star ratings, it will be like saying, “Doctor has advised me to stay away from Water Melon, that’s why I am having Water Melon juice”

6 Mistakes To Avoid While Selecting a Mutual Fund

Mistake 3 : Getting Carried Away by Fancy names

Some investors get carried away by Fancy names. When a fund is launched with fancy names and fancy taglines like “Make In India theme” or “Ujjwal Bharat Theme” or likewise, investors think that these funds are going to be the only beneficiaries of the government schemes.

There are some investors who think that if they want to invest for the good future of their children, the fund should have the word “Children” in its name.

This is like saying, for treating malaria , the medicine should have name like “Malaria-Go”;  only then it can cure malaria.



Mistake 4 : Getting trapped in the Rs. 10 NAV

This happens mostly when there are number of NFOs coming up. All of them offer the units at Rs. 10. As a result, investors think that they are getting it very cheap and they will get more units if they invest in NFO.

This is like saying, when you withdraw money from bank, the banker asks you, should I give you Rs. 100 notes or Rs. 10 notes, and you say, please give me Rs. 10 notes as I will get more notes and I will have more money.

In most general cases, going with an established fund could be a better idea than an NFO. In fact, the NAV has no role to play in wealth creation. If the underlying portfolio grows, the NAV will grow. If a Rs. 10 NAV can become Rs. 20, then a Rs. 100 NAV can become Rs. 200 in the same time frame.


Mistake 5 : Selecting the fund looking at the monthly dividend “promise”

There are some funds which are (wrongly) promising an unrealistic and unsustainable monthly dividend of say 1% and investors (including senior citizens) are falling for it.

Lets understand that, an equity oriented mutual fund has a “potential” to generate a return of 12-15% in the long term. But such promises of “monthly dividend” will turn sour, the moment market turns around in the short term. Lets not fall prey to such fooling commitments.


Mistake 6 : Not following asset allocation.

There are times when a particular asset class does well and other asset classes do poor or average. Investors get tempted to move “ALL” their money in the performing asset class. Lets remember, if bananas become cheap in a particular year, will we only have only bananas in our meal ? Or will we still continue to have a balanced diet.

Similarly, your fund selection has to be in line with your risk profile, goals and asset allocation. Some people will see that Gold is giving only 5% return and Debt is giving only 8% return whereas small cap has given 20% returns, and they will move all their money to small cap. As a result they run a high risk of incurring losses in the short to medium term.


Vaibhav : Wow yaar. I never thought about all this in detail. I thought mutual fund selection is a very simple process.

Niraj : Well, I would say, it is simple for someone who gives lot of time and does the in-depth research. But people who don’t have so much time and expertise, should always go for a professional advisor who can help them. The fees would be far lower than the losses we could incur by making these mistakes.

Vaibhav : Ohh yes , that’s why I keep hearing, “Mutual Funds Sahi Hai, Par Advisor Zaruri Hai”

We look forward to your feedback and comments on the above article.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. His articles have a readership from 78 Countries across the Globe. He may be contacted on CEO@nidhiinvestments.com if you have any questions.

(The views mentioned in the article are personal opinion of the author. The characters used in the article are real with names changed).







Are We Being ‘Penny Wise and Pound Foolish’?

Story 1:

Year 1998 – Mr Alok Sharma had borrowed Rs. 4 Lakhs from Mr. Dinesh Patnayak. He promised to return it in 2 years and also promised to pay 12% interest p.a. on the same.

However, Mr Sharma refused to pay after 2 years and after negotiating for 2 more years, Mr Patnayak decided to approach a lawyer to file a civil case against Mr Sharma.

Year 2002 – Mr. Patnayak approached Adv. Khatri who asked for a base fee of Rs. 5,000 and a success fee equal to 10% of the total amount in case of winning. He also assured Mr Patnayak that he will try his best to recover this success fee from Mr Sharma in the court proceeding.

Mr Patnayak found this fees pretty hefty. He approached another lawyer, Adv. Deshmukh who agreed to fight this case for Rs. 1500. Mr Patnayak found this deal attractive. He hired Adv Deshmukh for fighting this case.

Year 2017 – The Case is still in court. Adv. Deshmukh thinks he has delivered enough service by fighting a case for 15 years for a meagre Rs. 1500. Thus, he is not putting lot of time in this case. He more than often sends his assistant to be present on the hearing date and prolong the case.

The ultimate loser in this story is Mr Patnayak who is retired now. He is regretting that if he had agreed to Adv. Khatri’s success fee style, he would have had brighter chances of winning the case long back (because the advocate would be actively involved in it). He would have grown his money into more than Rs. 21 Lakhs by doing good investments. He doesn’t know whether he will get this money in his lifetime. And his sons are too busy to fight this case.

To save Rs. 3500 as upfront fees and Rs. 40,000 – Rs. 50,000 as success fee (which was anyways not to be paid from his pocket), he is losing almost Rs. 16-17 Lakhs.


Story 2:

Year 2012 – Mr Vivek Dasgupta (A 65 Years old retired individual) has a 5 Acre land in the outskirts of a tier 2 City. He is expecting a price of Rs. 60 Lakhs per acre. He approaches a real estate broker Mr Shah who came to see this land. Mr Shah has a big NRI client Mr Parekh who has full trust on Mr Shah, so much so that he is ready to buy the land only on Mr Shah’s words.

Mr Shah quotes a price of Rs. 65 Lakh per acre to Mr Parekh on phone, to which Mr Parekh agreed happily. Unfortunately, this phone call discussion happened in presence of Mr. Dasgupta.

Mr Dasgupta was unhappy about the price quoted by Mr Shah. He said that Mr Shah should have quoted only Rs. 60 Lakhs per acre and should be happy with his brokerage of 1-2%. According to Mr Dasgupta, Mr Shah has not done anything so great that he deserves to get Rs 5 Lakh per acre in the deal.

As a result, Mr Dasgupta said that he doesn’t want to deal with Mr Shah for this property. He decided to approach other real estate brokers for his property.

Mr Shah was hurt with this behaviour. He shared this story with his real estate brokers network and requested them not to entertain Mr Dasgupta.

Year 2017 – Mr Dasgupta is still not able to sell the property. Forget about getting price appreciation, he is not even able to find a buyer. He has turned 70 years old now. He has exhausted all his energy and almost all other liquid investments. If he is not able to sell this property now, he will be in a tough situation to even run his household.

Had he agreed to sell the property at Rs. 3 Crores in 2012 (Rs. 60 Lakhs x 5 Acre = Rs. 3 Crore), even a safety oriented product would have grown this amount to around Rs. 4.40 Crores. This could have easily generated a monthly cashflow of more than Rs. 2-2.25 Lakhs.

Only to prevent Mr Shah from making Rs. 25 Lakhs (which was not really going from his pocket as he was getting his full expected price), he not only made a loss of Rs. 1.4 Crores to himself, but he has risked his remaining life on the mercy of others.

Price is What You PayValue is What you Get.- Warren Buffet


In Both the stories above, we have some lessons to be learnt. Most of us only focus on the price and not on the value.

As Warren Buffet Says, “Price is What you Pay and Value is What you Get”

When we focus too much on price, we miss out on the value we are getting. We are more concerned about, what the other person is making, than looking at what is our benefit in availing his / her services.

We need to accept that we are not Super-humans who can do everything on our own. When we accept this, we will automatically acknowledge the professional expertise of others. We are definitely good at something, but not good at everything.

So whatever WE are good at, should be OUR business / profession ; And for other things, we need to be willing to hire the professional expertise which proves to be a better deal as we get more value than the price we pay.

To save the professional cost, if we hire a lower expertise professional, it can prove to be a costly affair as we might lose out big time on “value”.

Best example would be to look at your own business / profession and ask yourself these 3 questions,

“Am I doing something valuable for my client?”

“Am I doing something which the client wont be able to do with as much expertise as I am doing?”

“Do I deserve this much fees / compensation for the services I am providing?”

If the answer to all 3 questions is Yes, then lets understand that for fields outside our expertise, we would also need the help of experts. And thus, we need to be willing to pay for the same.

If we look at it, Global Giants like Google, Microsoft, MasterCard are headed by Indian CEOs. But we have not been able to produce a Google, Microsoft or MasterCard in India. The reason being, the promoters of these companies have been able to hire people who are smarter than them. When it comes to us, we hate to admit that someone else is smarter than us. Thus, we would only like to pay a mediocre compensation and mediocre talent stays with us.

If we want to make it big, we need to have smarter guys in our team.

Lets not be penny wise and pound foolish and learn to respect expertise.

We look forward to your feedback and comments on the above article.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. His articles have a readership from 78 Countries across the Globe. He may be contacted on CEO@nidhiinvestments.com if you have any questions.

(The views mentioned in the article are personal opinion of the author. The characters used in the article are real with names changed).








Things You Didn’t Know About NPS

“I am done with my 80C and 80D tax savings for the year. But still paying lot of tax.” Said Monisha, a 31 years old Software professional to her colleagues Akshay and Neha.

Neha: Me too !! Is there a way out ??

Monisha: Of course NPS !! I have heard from many people that it is the best tax saving option beyond 80C. It is covered under a separate limit of Rs. 50,000 u/s 80CCD. Isn’t that right Akshay ?

Akshay (smiling): Well not really. I would prefer not going for NPS. Are you aware of a few things about NPS ??

Neha (Curiously): Like??

Akshay: First of all, it is not a tax saving scheme. It is more of a tax deferment scheme.

Monisha: What’s a tax deferment scheme now? Please explain in simple terms. We are not finance experts.

Akshay: I will explain with a simple example. Suppose you make an FD of Rs. 1 Lakh with 7% interest for one year. How much income will be taxable after 1 year?

Monisha: This is easy. I will pay tax on Rs. 7000 which is the interest earned on my original 1 Lakh.

Akshay : How would you like to pay a tax on entire Rs. 1.07 Lakh ?

Why I will Not Invest in NPS _

Monisha : That would be so unfair. I should be taxed only on the income. If possible, that income should also be tax free.

Akshay: Correct. But unfortunately, in an NPS, you have to pay tax on the withdrawal amount (not on gains). Suppose you invest Rs. 50,000 in NPS for lets say 20 years, you have total Rs. 10 Lakhs accumulated as your contribution.

Lets assume, this amount grows to around Rs. 17 Lakhs (assumption as there is no fixed return defined in NPS), only 40% is tax free that too if withdrawn after the age of 60.

So in this case, only Rs. 6.80 lakhs can be withdrawn as tax free. Remaining amount needs to be used to purchase annuity. Also, the returns coming from this annuity are poor and also taxable.

So, if you wish to withdraw entire Rs. 17 Lakhs, you have only Rs. 6.8 lakhs tax free. Out of the remaining Rs. 3.20 Lakhs which was your principle, is also taxable. So you are not really “saving tax”. You are just deferring it by few years.

Neha: Oh No !! That’s really bad. I would toh want my returns also tax free. Who will pay tax on principle also!!

Monisha : But tell me something !! Isn’t “deferring tax” a good idea ? At least I am not required to pay tax today.

Akshay: That depends on your perspective. The way I would look at it, today I am earning. So I can still afford to pay tax. At my retirement, my earning would stop. So paying a big tax at that time would be a bad idea for me.

Neha: Apart from this, are there any other reasons for you not to invest in NPS ?

Akshay : Yes, few more actually. One major reason is passive fund management. NPS doesn’t have an active fund manager like an ELSS or diversified mutual fund. It replicates an index. I believe that in India, we still have lot of potential for higher returns through active fund management. I would not like to go for passive fund management.

Moreover, it has a highest equity exposure of 50% even if you go for an active choice. Now, if my time horizon is more than 15 years, why should I have such a low equity exposure?

Another reason is liquidity. If I need money in midway, I can withdraw only 25% of my contribution (not total fund value). That too is subject to following conditions:

  • The Partial withdrawal shall be allowed for specific purposes such as higher education of children, marriage of children, purchase or construction of residential house or for treatment of specified diseases.

  • Individual should have subscribed to NPS for at least 10 years.

  • Maximum of 3 withdrawals during the entire tenure are allowed.

  • Minimum gap of 5 years is required between the two withdrawals. However, this condition shall not apply in case of withdrawal for treatment of specified illness.

Neha : Indeed. These don’t really sound great.

Monisha: No No!! This is wrong!! NPS amount can be withdrawn freely.

Akshay : What you are talking about is Tier 2 Account of NPS. It has relaxations on contributions and withdrawals. But then, contribution to Tier 2 are also not eligible for “tax saving” u/s 80CCD.

Only Tier 1 Contributions qualify u/s 80CCD and there are all the above restrictions applicable on them.

Neha : What’s the use then ? Tier 2 is like any other non-tax-saving investment.

Akshay : Lastly, its not a big reason, but one of the negative factors which I dislike about NPS is compulsory contribution. I have to mandatorily contribute Rs. 6000 p.a. to NPS once I open it. That’s not a very big amount, but still that compulsion doesn’t look too comfortable to me.

Neha : Right. So if we do not invest in NPS, we have to pay tax on that income. That would be worth it?

Akshay : Lets look at the whole thing in totality. If we are in a 20% tax slab, we would “save” Rs. 10,000 as tax by putting Rs. 50,000 in NPS today.

Ultimately, we will have to pay tax on it during our retirement.

Also, this amount will have lower growth as it has lower equity allocation and passive fund management.

Plus, I have lot of restrictions on withdrawals and compulsions on contributions.

I would rather pay Rs. 10,000 as tax and invest Rs. 40,000 in an actively managed diversified equity fund, which would give me higher returns, tax free and plus no compulsions to pay every year. Also, in case I want, I can withdraw the entire fund value.

Over a 20 years period, I am expected to get at least Rs. 6-7 lakhs more by investing in a diversified mutual fund (even after paying the tax).

Over a 30 years period, this difference can increase upto the extent of Rs. 20 lakhs even if I am in the 30% tax slab (ie even after paying Rs. 15000 as tax for 30 years).

Neha : Oh My God !! I have more than 30 years to retire. For me the difference will be even more than Rs. 20 Lakhs if I go with diversified equity MF instead of NPS.

Monisha : Sounds Logical. So none of us should invest in NPS right?

Akshay: Well Neha, Monisha, I am not an expert to be giving you any opinion for you. Whatever, I have told you is what I have been discussing with my financial advisor. What is right for me, may not be exactly right for you. Monisha is 31, married and has one child. Neha is 27 and single. So the planning for all of us could differ. The best would be take professional help without any delay.

Neha, Monisha: Thanks for the useful info Akshay. Our doubts about NPS are also clear. And now we also understand that tax planning works best when we look at it in totality and it is in line with our financial planning.

We look forward to your feedback and comments on the above article.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. His articles have a readership from 78 Countries across the Globe. He may be contacted on CEO@nidhiinvestments.com if you have any questions.

(The views mentioned in the article are personal opinion of the author. The characters used in the article are hypothetical).







8 Steps to Investment Planning for the New Financial Year

There could be a natural question, “Why Investment planning in new Financial year?”

Well, rather than doing only tax planning in the last moment, its better to plan your investments from the beginning, so that it also takes care of your tax planning.

The Changes in tax rules apply from 1st April and thus, you may be required to fine tune your planning in line with the same.


  1. No More Home Loans merely for tax saving

There is a substantial population who keep taking home loans thinking that it helps them to save tax. Largely, this is the salaried class who thinks they have very limited options to save tax and thus make use of every option without detailed understanding.

Till last FY, you could take a home loan to invest in a second house, put it on rent and offset all the interest paid against the rent received.

From the current FY, this exemption on interest is limited to Rs. 2 Lakhs only (in line with Self Occupied property). Thus, if you buy a second house on loan, and put it on rent, the post-tax returns are going to be very low (especially if the property is fetching you rent of more than Rs. 2 Lakhs p.a.) The balance “loss” can be carried forward, but is practically speaking a dead loss.

So, you can still take a home loan to buy a second home. But if the objective was mainly tax saving, you got to rework your strategy again.


  1. Make judicious use of plastic money

Last FY, there was a mega event of “demonetisation” which (maybe forcefully) trained many of us to increase the use of Credit Cards / Debit Cards etc.

While this could be a desirable move from the government point of view (as this enables them to mop up more taxes from us), from our point of view, it comes with a word of caution.

Those of us who are not very used to plastic money, may forget to repay the credit card bills on time and thus may end up paying late fees, interest etc.

Also, for some of us, the physical touch of money, psychologically puts pressure not to splurge. (When you count notes to pay Rs. 10,000 towards a restaurant bill, you can actually feel the pain of money leaving you). But with plastic money, that pain isn’t immediate. It comes later and by that time, money has gone. This might take a hit in the savings.

At the end of the day, what creates wealth is “How much you save and how well you invest?” and not “How much you earn”.

plastic money


  1. Boost up your investments in line with growth in income

This budget hasn’t given too many tax sops to have more money in our hand. However, we need to take a care of ourselves rather than keep expecting and complaining.

Mr. Suresh had started investing Rs. 10,000 a month when his salary was Rs. 50,000 p.m. in 2012. Today his salary is almost Rs. 1.25 Lakhs p.m. but his investments are the same. Why? Because the 80C limit has not increased too much? This can’t be a logical reason to increase your investments. If he were to maintain his ratio, his investments should become almost Rs. 25,000 p.m.


  1. Revisit your Life cover and Health cover

A similar story is visible with Mr. Rahul who had taken a life cover of Rs. 50 Lakhs and Health cover of Rs. 3 Lakhs in 2013.

Today, he is married and has a small kid. His annual income has grown from Rs. 5 Lakhs p.a. to Rs. 11 Lakhs p.a. And along with all this, the health care inflation has grown significantly.

He needs to enhance his life cover to almost Rs. 1 Crore and Health cover to at least Rs. 10 Lakhs considering the inflation.


  1. Clean up Unnecessary Junk

Many of us have those “bad apples” still sitting in our portfolio for example endowment policies , ULIPs, Co-operative bank FDs, Chit Fund RDs , penny stocks etc which we are holding on just because of our ego. Yes, you read it right. It is ego. We can’t handle the fact that we made a wrong decision. We keep justifying that it is a good investment and cling on to it.

Its high time, we remove all this junk and channelize the proceeds to some good investments.


  1. Don’t Over-commit yourself in a non-flexible product

For those, who take an insurance policy or a home loan, not for need, but just for tax saving, have a big lesson to be learnt now.

You are over-committing yourself to a product which asks you to keep paying every year, despite of whether or not you get a tax benefit in future.

For example, Mr. Jatin took an insurance-cum-investment policy with Rs. 1 Lakh premium in Mar 2014. Today his PF deduction itself amounts to Rs. 96,000. Balance he wishes to invest in ELSS for growth. But he is stuck with this policy. It is neither giving him good returns, nor it is giving him tax benefit.

Had he invested the same amount in a more flexible or non-commitment products like ELSS or PPF, he would have had more flexibility today.


  1. Move beyond fixed interest instruments.

The New FY also comes with lower interest rates on Bank FDs, PPF, Post Office Schemes etc. As the country develops, we may see a further lower interest rate regime (Developed countries have interest rates in the range of 1-3%. Some have 0% interest rates too).

Thus, relying on the older generation advice of putting money in fixed interest instruments is not going to help you. You need to hunt for better avenues. If you cant find on your own, getting professional help could always help.


  1. Make investment planning a part of your life Planning

It is unfortunate to see many investors still worried about only “tax planning” to save tax. Yes, you can only get a tax deduction for investments made upto Rs. 1.50 Lakhs u/s 80C. But that does not mean you have to stop there.

If your goals require you to invest more and your income allows you to do that, please do that. Remember, your retirement is not government’s headache. If you fall short of money in your retirement years, you cant just blame the government for not increasing tax saving limits (even if you blame, it is not going to help you). The government also did not stop you from investing more for your own sake.

So Plan your investments such that your life is better planned.

We look forward to your valuable comments and feedback.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. His articles have a readership from 65 Countries across the Globe. He may be contacted on CEO@nidhiinvestments.com if you have any questions.

(The views mentioned in the article are personal opinion of the author)







Your Truth and My Truth !!

Mr. Mehta : XYZ is a fantastic fund. It has given me 21% returns p.a.

Mr. Khanna : What are you saying ? I have the same fund, but it has given me only 5% returns. Bank Recurring Deposit (RD) would have been better.

Mehta : How long have you been invested in it ?

Khanna : I invested in it 5 months back.

Mehta : So 5% in 5 months is almost 12% annualised Dude.

Khanna : What is the meaning of annualised return ?

Mehta : For example, you have 2 products A and B. A gives you 8% return in 6 months and B gives 10% returns in 12 months. Which is better ?

Khanna : Obviously A.

Mehta : Why so ?

Khanna : Because if A has given 8% return in 6 months , after 12 months the return would be around 16%.

Mehta : Great. So basically what you have done is standardized the return period to 12 months for both the products, so that you can compare. This is what we call annualised return.


Khanna : Wow. Thanks. Now I understand it better. 12% looks good. But it is still less than 21% as you say. Whats that about.

Mehta : Have you done a lumpsum investment or doing a monthly SIP ?

Khanna : I am investing some amount every month since last 5 months ?

Mehta : So that makes your average holding period only 2.5 Months.

Khanna  (Confused) : Whats this “Average Holding Period” now ?

Mehta : When you started your SIP 5 months back, your first instalment got 5 months time to grow, your second instalment got 4 months and so on. Your last instalment is not even a month old now.

Khanna : Correct.

Mehta : So if you take an average, your total investment has an approximate holding period of 2.5 Months.  Now, when you annualise it, it becomes almost 24% p.a.

Khanna : Wow, Finally I have beaten you.

Mehta (Smiling ) : See this is the problem. Before some time, the fund was bad as your returns were “appearing” to be lower than mine. Now, that your returns are proved to be higher than mine, then the fund is not great. Its you who have beaten me.

Khanna : I was just kidding.

Mehta : I know. My Point was, we say that we want to know the truth. But we don’t really take some efforts to understand the truth. We take things the way they are presented to us. This is where your truth becomes different than my truth.

Khanna : But truth is still a truth right.

Mehta : This is like a half glass water story. You say its half full, I say its half empty. Whats the truth ? Both are truth. Its how we look at it. In this example, we had same fund but still the different perception about returns gave us different opinion about it. There could be cases, wherein 2 people invest in same fund but with different mindset and profile, may  get different returns. It is very person specific.

Khanna : One last question. How do you really calculate all this average holding period, annualised returns etc when your portfolio grows large ? Its difficult, time consuming and cant be sure of being correct.

Mehta : My Financial Advisor does it for me. And now I have even stopped bothering too much about the annualised returns also. I know in short term it can fluctuate. But in the long term, if it helps me achieve my goals, how does the short term fluctuations matter ?

We look forward to your valuable comments and feedback.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. He may be contacted on CEO@nidhiinvestments.com if you have any questions.

(The views mentioned in the article are personal opinion of the author)







Demonetisation and You !!

Writing about the hottest topic could be a difficult job. Many things are already being “analysed” and discussed all around.

Since this space is among the favourite platform of its readers for Personal Finance, I will try and keep away from talking about the politicisation of this move. As usual, we will stick to the WIIFM (Whats in it For Me ?) principle.

We have just picked up some asset classes and we will see how do they get impacted in the short term and in the long term due to Demonetisation.

  1. Debt

Short Term: In the Short term, cash liquidity has dried up from the market, whereas banks seem to be flooded with Cash (mostly old currency). This currency can (hopefully) be used by banks as CRR when they give it to RBI.

This will bring down the immediate liquidity requirement of the banks which will push them to reduce interest rates on FDs.

Loan becoming cheaper in the short term could be difficult as they ideally need to use the new currency for disbursement to people waiting to withdraw.

Long Term: In the Long term, when most of the cash holdings (I am sure most of us would agree that all cash still wont come in banking system) are in banking system, we could see loans becoming cheaper.

Strategy : This could mean lower interest rates will be offered across various fixed income instruments like FD, PPF, G Sec, Post Office etc. A fall in interest rates could very well benefit investments in Debt Funds. Thus, whoever is willing to invest from a 1-3 years time frame, can start looking at Debt funds.

  1. Forex / USD

Short Term: Some big cash hoarders (whether black or white) are also trying to convert their old currency into USD or other Foreign currencies. This has pushed up demand for dollar and thus we are seeing the dollar appreciating. Among other factors, an anticipation of hike in Fed rates is also putting pressure on FIIs to sell which is again pushing up demand for dollar. Thus, we could see dollar continuing to appreciate in short term.

Long Term: Assuming that a substantial chunk of cash (in Indian Rupee) will be destroyed as we see lot of incidences of people burning old currency etc, we can again see a bounce bank in rupee to some extent. Fundamentally, as long as there is a difference in inflation rates of India and US, the rupee will continue to depreciate by 4-5% p.a. so as to keep our exports competitive. But the additional fall which we see in the short term, might get reversed to some extent in the medium to long term.

Strategy: Those planning to “invest” in dollars need to be cautious or be happy with a 4% p.a. kind of returns.

  1. Gold:

Short Term: Similar to dollars, some cash hoarders queued up to buy gold and the prices started rocketing. However, there have been fear propagated (both genuine and fake) that Gold also might get traced and could be a cause for trouble for those holding Gold in unreasonable quantities.

Long Term: There seem no other fundamental reasons for Gold to rally at an unreasonable rate. In fact, those who are buying Gold at 40-50% premium could be stuck with it as the spike might subside in the medium to long term.

Strategy: Gold can continue to be a 10% part in your portfolio. Also, from a long term perspective, you should be regularly investing in Gold irrespective of the price levels. Timing the Gold prices can go both in favour or against you. Better to be a regular investor with a long term view.

  1. Real Estate:

Short Term: Real Estate is usually believed to be the favourite “parking space” of black money hoarders. There are possibilities that Real Estate sales start happening in this period (till 30th December) wherein hoarders of black money hastily buy properties, thinking that this will help them to get rid of the black money held in old currency. This could cost them a premium as the sellers also know their weakness.

Long Term: With lot of money coming into the system and black money reducing to a great extent, the artificial demand of Real Estate will dry up. The natural demand will prevail which may not yield ultra-high returns (as seen few years back). In fact, those buying real estate in haste in the short term, will be stuck with it for quite some time. They can just psychologically console themselves that they saved some tax and penalty.

Strategy: Don’t buy useless properties to dump black money. Few years later, you will realise that to save 40-50% tax, you bought a property at an unreasonable price, and you might take years to get rid of it. Instead, paying tax could turn out to be a better option. For future, you can start investing in instruments which give you good returns and still don’t increase your tax liability.

Those with genuine white money, can wait for some time as we could see a 30-40% drop in property prices.

  1. Equity:

Short Term: In Short term, there could be confusion and panic which could mean negative returns / flat returns in equities. Also, due to dynamic changes happening, any news can see overreaction by the markets. Even fundamentally, consumer spending can be lower due to lower availability of cash. This could impact the quarterly results of the companies in short term.

Long Term: In Long term, we can expect more rationalisation of taxes which could increase corporate profitability. Also, the additional taxes mopped up due to demonetisation could either be used for higher infrastructure spending or to lower the taxes (hopefully). This would mean more post-tax money with the people resulting more money being invested in equities.

Strategy: Equities anyways shouldn’t be used for short term investments. Those with long term time horizon, can start investing in equities. If one doesn’t have an expertise for equities, seeking professional help would be helpful.

  1. Cash (in Indian New Currency):

Short Term: There could be a natural question that why shouldn’t I hold a lot of cash (in new currency) rather than investing it here and there. In the short term, you may not have this option very easily as it will take some time for the new currency to circulate in abundance.

Long Term: This Demonetisation could be a wake up call for those who are traditionally habituated to hoard lot of cash. We never know if after 3-4 years, the new note of Rs. 2,000 might also be declared invalid (I don’t have any authorised news about this. Its just my own hunch looking at the paper quality of the new note, that it is not made to last too long). In that case, your entire exercise could be prove futile.

Strategy: Cash anyways keep losing its value due to inflation. We need to just keep a bare minimum cash needed for our household expenses (plus a little amount for emergencies). But just piling up cash is going to be a big pain as we move towards a more transparent and cashless economy.

Overall, Demonetisation could be big game changer for the Indian Economy. Whether the game changes for our good or bad, depends on how wisely we take our investment decisions.

We look forward to your valuable comments and feedback.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. He may be contacted on CEO@nidhiinvestments.com if you have any questions.

Disclaimer: The above points and suggestions are personal opinion of the author. They may differ in application from person to person. Please consult your financial advisor before making any investment decisions.