The original SUV

Isn’t it a miracle that in spite of all the technological advances, what we really want is the original old version that we actually started with

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Handling Parents

A visit to Landmark, Infiniti Mall, Mumbai made me realize that there are a few dozen books on parenting, handling a girl/boy child, how to handle rude kids, teenage, etc. etc.
Basically for parents facing having kids/grandkids of almost all ages and facing variety of issues.
However I could not find a single book on handling pushy parents. Parents who push their own agenda too hard that they rob the kid of the freedom. How to bond with parents who spend so much time on the job that they completely ignore you?

I guess there is a big market to be tapped.

Crusader for Dalits: Mayawati

Mayawati in almost all her speeches highlights the fact that Congress party failed to uplift many wretched dalits while ruling UP and India for over three decades. However it makes me wonder that already in 2007 this dalit leader was voted to power for the fourth time. So how much more time will it take before her actions will start showing results?

BSP is probably the only party which has grown to a national party from a regional party. Yet the party is little more than a vehicle to serve the wishes of her Leader Mayawati. In spite of all the tall claims. In this year general elections the 17 Dalit leaders that BSP has fielded belong only to the reserved seats (where she could not field any other candidate. I could not locate the party manifesto. However I won’t be surprised if like Mulayam Singh’s Samajwadi Party, all the manifesto says is removing computers and bring India back to the Dark ages.

As of now, there is no evidence that Dalits in UP are doing better than in any other part of the country. At the moment the only results that I am seeing are the grand birthday and the public display of millions of dollars worth of public wealth amassed by her party leaders.

Personal Financial Planning

A friend asked me yesterday how one should plan his/her finances. At what stage in life where should the money go and how best to plan my taxes.

After spending a couple of hours listening to his idea, this is what we came up with:
1. Don’t confuse investments with tax planning. First decide in which financial instrument you want to park your money. This is because whether you want insurance, property, FD/bonds or mutual funds, there is always some tax saving instrument to help you.

2. At any given point of time have liquid assets to cover for 6 months of expenses. This could be parked in savings bank, or FDs or other financial instruments that can be prematurely encashed instantly without attracting much penalty. This cash often comes handy when you are between jobs, during emergencies esp. medical and when family/friends need you. I strongly advise that an individual should not dip into it and also refrain from any long term investments until this reserve has been created.

3. Work towards reducing your loans. If you have a education loan which costs you more than the Bank Fixed deposit (even after accounting for the tax break it provides) then it is advisable to retire it before doing any financial planning.

4. I would recommend you to keep your personal finances separate from that of the parents. However, what good of is all the money if it is not there for those who need it, when they need it. If your parents/family needs money or has taken a high cost debt, work towards retiring that.

5. After taking care of all these, I would recommend you to read this amazing book “Rich Dad, Poor Dad”. This simple book gives a remarkably different insight about how one should classify various assets and investment options.

Now some serious stuff……. 🙂
6. FDs are a good place to park the money. You can be sure that your money is safe and will be there when you need it. However the returns this generates is hardly sufficient and inflation eats into it. Hence One should invest in the Stock Market linked instruments (Shares, Mutual Funds, ULIPs etc.) Early on when your savings are small and risk appetite sufficient, then one should park upto 50% of the money these instruments.
However it is also advisable to reduce it as you age. The best way I found is to put an artificial cap of 3 years of Salary on your Market portfolio. 3 years of salary is large enough that it will be a substantial part of your investment. Yet at 15% p.a. expected returns, it won’t be able to generate half of what you earn from 8-10 hours of labor. Hence the market performance will not be a major distraction from work.

7. Now comes property/home: Some people who want to take less risk want to buy a property immediately after graduating. However I would recommend you to push off this decision by a couple of years. The reason for this is that even if land prices don’t fall, it often involves taking a EMI on floating rate. With EMI payments exceeding 50% of the salary, the financial flexibility one has to cope up with unexpected events is severely limited. Once you have sufficient savings and/or a working spouse, then investing in property is advised.

8. Insurance: It is one of the most mis-sold financial instrument. An insurance is neither an investment avenue, nor a tax saving instrument. It is taken to enable a person to take care of the unexpected. The best times in life to buy a life insurance are:
a. When you take a long term loan (for property/education etc.)
b. Marriage (esp. to a non working home-maker)
c. Planning for Kids
Also whenever possible, please buy Term Insurance (huge insurance cover for a small premium) and medical insurance.

So to summarize we have covered liquid assets, market linked portfolio, property and insurance. Last is tax.

9. Most tax savings happen under 80c. If you buy an insurance, its contributes under this segment.
If you plan to go for bonds: then NSC, Infrastructure bonds, PPF are few of the avenues
If you want to invest in market then ELSS (Equity Linked Savings Scheme)
If you want to invest in property then Home Loans give you tax shields.
Hence you should first look into what lock in period you are looking for and what risk/return profile you fall into and then select the tax saving instrument accordingly.

I hope this really long and boring post helps. How different is your investment philosophy?

Money Laundering and Insurance selling

These agents are paid a commission of about 25% of the premium collected (plus a 40% bonus if the targets are met) Although the practice is illegal, but most agents offer a 10% of the policy premium back to the customer as a kickback. Now this kickback is a big source of money laundering.

If an agent sells all the policies in his name, then after paying the tax and kickbacks, hardly any commission would be left for him to earn his bread. Hence instead of selling the policy in his name, he would sell a part of the policy in a businessman’s name. The businessman would hence use the channel to legalize his black money, the agent is able to reduce his tax burden and the black money gets dissipated to the policy holders who receive kickbacks. A very simple arrangement.

As per LIC website, it has over 10,02,109 agents all across the nation. So its not as small as an operation that it sounds like. If you are still skeptical, ask your broker how come there are so many high profile agents from leading business families and he will spill the beans.

Industrial Area: Poor Infrastructure

It does not take long for someone traveling on road from Lucknow to Kanpur to realize when Lucknow ends and when Kanpur starts. I asked my taxi driver, why Kanpur roads are so bad, ill maintained, dirty and congested. His curt reply was, because Kanpur is an industrial town.
In almost all states of India, one of the poorest infrastructure is found in the industrial belt. Esp in the region where small/medium scale industries are setup (SME). World over Industry enjoys the best infrastructure. They get good roads/highways so that the logistic bottlenecks are taken care of, uninterrupted power and water so that production does not stop etc. Probably this is the reason why India is so behind in Industrial development. In the month of Feb, once again the industrial production shrank.

I wonder how long will it take for the people to realize that small and medium scale industries form the backbone of the economy.

Who do I vote for?

All the political parties are mediocre. Who do i vote for?

Like Ram Jethmalani said (0:52 to 1: 20), probably I should vote for the party that I least disagree with.

I am really scared of what the Indian Politics is becoming.

– Cross posted from Sri’s Views