Time your equity investment

 

Suparna Pathak:

Namoshkaar. Welcome to Mon Money presented by Content Crankers. This discussion is about the intricacies of Savings, so subscribe and keep learning about the various facets of savings. I am Suparna Pathak, with me is Investment Advisor Saibal Biswas. Before taking our questions to him, let us take a quick look at our opening screen.

Saibal, we had promised our viewers that we will discuss about the stock market. Many people say many things about the stock markets. But the point that keeps recurring is that the more time one remains invested in the stock market, the more the return. The age of the investor is also relevant in the context. If you could tell us something about this.

Saibal Biswas: 

As an investment advisor we hold the view that the faster one enters the market, the lower becomes the risk. There is always risk in the share market, but if one remains invested in the market for a sufficiently long period of time then the risk is reduced. When one enters the share market at a young age, then the person gets a long time to remain in the market. Let us take an example – suppose one wants to buy a car worth Rs 20 lakhs after a period of seven years. This means that an investment of about Rs 12000 monthly in some Systematic Investment Plan of some Equity Fund will ensure such a sum. If I do the same thing after two years, the SIP requirement will become Rs 25,000 per month. This means that by missing out two years I have to invest so much more to access the same amount. It is clear that the younger we start; the bigger will be the corpus that we will be able to create with a lesser amount of money.  Secondly, when we are young, we end up spending much more – we all have pent-up demands that we want to address, and there are other enticements also with so much being on offer on the net …. But if I approach my investment plan from a different angle, that is, if I invest first and then spend, then you will see that my spending habit will also fall in line…

Suparna Pathak: if you explain this a little more clearly…

Saibal Biswas: When we get our salaries, what we first do is spend, and then, from what is left, we think of saving. What I am saying, is to think the opposite. First, you invest according to your goal, then spend. This will help reign in the spending apart from controlling the youthful urges to splurge. 

Suparna Pathak: What you are trying to say is that one should change the priority of spending with the money in one’s hands… what we normally do is spend and after meeting all the monthly expenses, whatever is left, view it as savings. You are saying, “No”, one has to first define the expenses, and while doing so, separate the savings, and what will be left will define the expenses. Right?

 Saibal Biswas: exactly.

Suparna Pathak: My next question is what is the role of age in the context of rise and fall in the market?

Saibal Biswas: One is, at a young age, one’s ability to take risks is much higher. At a young age, one has the strength of conviction that one can overcome the market swings. Second, what we have not discussed yet, is compounding. The most potent tool to beat inflation is compounding. As we have discussed in the past, the return in the equity market is higher, as is the risk, and volatility, which leads to the doubling of monies in the long term…

Suparna Pathak: this is becoming too complex … you are saying that as the market is volatile, if one invests when the market falls, one loses …

Saibal Biswas: till one actually sells out, one does not lose. It is an opportunity, if I buy more after one's investment and a subsequent fall, I can actually average down.

Suparna Pathak: that means, if one can stay invested for a long period, one can take the ups and the downs of the market in stride. Normally people say that the Indian markets have a 5-year cycle. Now suppose one remains invested for twenty years. And suppose both the up and the down cycles remain for five years. Then, if I hold on for twenty years, what is my benefit?

Saibal Biswas: The benefit is simple. If I buy a share or into a Mutual Fund when the market is going down, then when it goes up, then in a relatively short period of time, my money can be doubled. Now for the compounding – 2 becomes 4, four becomes 8, 8 becomes 16 – imagine how this can grow like an atom bomb, if one is able to give it sufficient time. Suppose somebody starts investing at 50 or at 40. Then by the time the 4 becomes 8 or the 8 becomes 16, the time runs out. But for someone who starts young, the time available may be 30 years – just imagine the number of times the money can be rolled and to what value it can be taken to.

Suparna Pathak: Another thing that we heard is that the share index which was at a certain level twenty years back, would be at a much higher level twenty years hence. This means that the growth in the index will also be reflected if one remains invested for a longer period. This means that like going uphill, taking the ups and the down into consideration, the incline is upwards…

Saibal Biswas: It is like the maths problems involving the monkey going up a greased pole… it goes up and down, but ultimately reaches the top. The same is true for investments in the stock market…

Suparna Pathak: I see you have done some calculations …. If you quickly explain this, please…

Saibal Biswas: This is about the example that I was giving. If one has a time period of seven years to buy a car. If one invests Rs 15000 every month then one’s total investment is Rs 12 lakhs. This will allow one to buy the desired car worth Rs 20 lakhs after 7 years. But if one starts after 2 years, then one will have only 5 years, which will call for a monthly investment of Rs 25,000. For going back two years one has to invest Rs 3 lakhs more to reach the same target.  

Suparna Pathak: Consider this: If you start early, then. In the end, your gains will be much more. To sum up, the market is characterised by ups and downs, you have to be patient to enjoy the power of compounding. I mean, the fruits of patience are always bigger.

Let us stop here. In the coming episodes, we will cover the other areas of savings and investments. Stay with us. Subscribe and Like.

Saibal Biswas: Don’t forget to share. Awaiting your questions. Thank You.

 

Takeaway

To reap gains invest in shares from early in life

Calculate your requirements: first set aside for investment, then with the leftover, meet you expenses.

 

Searching for the Serendip

 

I am still looking for clues about the proverbial lost camel. 

King Giaffer’s sons were clever. The three princes of the Serendipo were taught well. Their teacher was great. He managed to imbibe in them the power of logic and its application. Incidentally, this Serendipo is said to be the Serendip for us that gave birth to ‘serendipity’.

The story, in case you don’t know it, runs like this. King Giaffer had three sons. He wanted them to grow as able heirs to the throne of Serendipo. Their master on completion of their education returned them to the palace reporting that the princes were ready to take over their royal duties. But the king needed to test his sons’ ability to rule with sagacity. At that point, a merchant came into the royal court to complain that his camel was lost, probably stolen. The three princes were tasked with finding the camel even without being told anything about the camel.

So, the three Royal Princes set out on their task to first find the clues. I leave the details about how they found the clues to the camel’s look and other details for identifying it for you to find by reading the story. 

When the princes approached the merchant with the details, the merchant thought they were the ones who had stolen the camel, for how else would they know so much about his lost camel? The story ends with someone finding the camel in the desert and bringing it to the King and King rewarding the princes for their sagacity and cleverness.

Alas! For me the life that I had aspired for remains even now like the camel. Lacking the sagacity of the princes of the Serendipo, I am still searching for the clues that would lead me to the life that could douse the craving for that life in me. But the Serendip or the Serendipo continues to elude me.

I sometimes feel that I was not meant to be. Whatever that has happened to me, in a good way that is, came in accidentally. That was the serendipity for me. But for the rest that actually was meant to be.

Take for example the issue of achievement. All my contemporaries and classmates are achievers and resting on their laurels. And me? Well! Still learning tricks to stay in business called earning and surviving.

So, I thought he could be my master when he told me I was still in my prime and I need to learn the tricks of creating content in a modern way. But he left that to my sagacity to define ‘modern’!

Trust me since then I have been running from pillar to post to learn about what modern was. The ultimate was the guy who nursed whisky at my expense telling me to leverage my experience! So, I blended the two received pearls of wisdom and thought digital would be the way.  Isn’t it modern? I learnt video editing, and creating a domain for my blogs (yes, that’s where, if you are reading it, I have posted it.) and now I am told I need to create a sub-domain. I don’t know how. So I have to learn it.

But the best came from the wisest. He told me to learn from my failures. From relationship to profession, I have been a serial failure. So, my bag of wisdom is full by that count. Yet, I still remain in search of the master who taught those three princes so that I would at least know about the shape of the craved life and the way the princes predicted the camel’s look!

(Please feel free to leave your comments in the comment box so that we can stay connected)

(DALL-E created the pix for me)

Bond buying: What to look for

Suparna Pathak: Namoshkar. Welcome to Mon Money produced by Content Crakners. I am Suparna Pathak, and with me is Saibal Biswas, an Investment Consultant, who is well-known to many of you. In this episode, we will be discussing savings and investments. Before that, a quick look at our starting screen.Saibal, in the last episode we mentioned that the cost of debt papers goes up when the interest rates fall and vice versa. If you could please elaborate on this as people have many questions about this?  

Saibal Biswas: let me explain this with an example. Suppose a government debt paper costs Rs 100 with a coupon rate of 7 per cent. In the meantime, suppose the interest rate falls. This means that new debt papers will carry a coupon rate of 6 per cent (say). This will lead to a situation where the 7 per cent bond will attract a premium, as no one else in the market will be able to offer 7 per cent bonds. When interest rates go up in the reverse scenario, what is the effect on debt papers? Suppose I have the same 7 per cent debt paper, while in the market such papers are sold at 8 per cent, then my debt paper will be sold at a discount. It is clear from the example that when interest rates go up, debt papers become discounted, that is, their prices go down. Similarly, if interest rates go down, debt papers become more expensive. Whatever the coupon rates, the price depends on the rise or fall of interest rates. 

Suparna Pathak: Let me get this clear. Suppose I buy a bond, I can think of them as fixed deposits, at seven per cent. Now if I do not sell it, what happens to the relation between coupon rate and interest rate?  

Saibal Biswas: if I do not sell and hold on to it till maturity, then I will get seven per cent only. But if we want to evaluate, that is arrive at the “mark to market”, that is to find out what should be the value of the debt paper according to the market, then all these factors of discount and premiums will come into play. But if I hold it till maturity like a fixed deposit, then I will only get the coupon.  

Suparna Pathak: Let me try and understand it in layman’s terms. Suppose I buy a debt paper at Rs 100 which carries a 7 per cent interest. That is the coupon is 7 per cent, which means if I do not sell it, I will continue to get 7 per cent. Now the interest rate becomes 6 per cent in the market. Now suppose someone approaches me to buy the bond. Now if he buys the bond at Rs 100 from me, he will be entitled to an interest that is above the market rate. Now the logic is, as the market entitles you to 6 per cent and as you will be getting seven per cent if you buy from me, you will also have to shell out more. That is why, if the interest goes down, the price of bonds goes up. The opposite also holds true. 

Saibal Biswas: Exactly

Suparna Pathak: How should one look at the prevailing cost of interest for buying bonds? Suppose I want to choose between equity and bonds. Suppose the return on equities is 6.5 per cent and the rate of interest in bonds is 6 per cent and someone advises me to invest in bonds. Why would they give such advice? 

 

Saibal Biswas: Look there are two things here. Bond is like a fixed deposit. Its asset class is also different. Its risk profile too is completely different from equity. Equity investments carry much higher risks, while a bond, acting like a fixed deposit also carries a much lower amount of risk.

Where do we buy our bonds from? From the Government of India, State Governments – Corporates also float bonds but they are relatively riskier though their risk profile is unlike that of equity.

Suparna Pathak: “Their risk profile is unlike that of equity”, please explain.

Saibal Biswas: The stock market's volatility is much more pronounced with steep ups and downs. Now in a bond with a coupon rate of 7 per cent, if you hold on to the end, you will get seven per cent for sure. So, you can rest assured about the return. Equity cannot give you such a surety about the return, though, in the long term, it tends to be more.

So, when you are buying bonds, you are buying them because of the asset class in which bonds are in your portfolio, you will buy them if there is a need for such an investment in such a class. So, it is not correct to say that you are buying bonds against that of investing in equity – you are buying bonds because of their value proposition because it is needed in your portfolio. 

Suparna Pathak: What you are saying, and we have talked about this in the past, is that the risk must be spread out in the portfolio. High risk for high gains, medium risk for medium gains. Low risk for relatively low gains. I have to fit my bond investments in this scheme of things – keeping in mind that as the risk in terms of bonds is low, the return is also comparatively steady. Is this what you are saying?

Saibal Biswas: Exactly, exactly.

Suparna Pathak: Today we have seen why the bond prices go up and down with the movement of interest rates. We have also seen how we can fit in bonds to address our individual risk profiles. That is, what will be the position of bonds in terms of risks within the portfolio?

We will discuss the importance of one’s age in stock market investing.

Please keep watching, please subscribe, and like. In our description box, you will find our web URL. Please visit to find the gist of this discussion should you want to refer or otherwise feel the need.

 

Saibal Biswas: I think the next episode will be an important one as young people always want to know things like what is the right age to enter the stock market, where and when to invest, and such things – watch the next episode, for the answers. 

Suparna Pathak: namoshkar.

Takeaway

Invest in bonds to balance the risk of your portfolio.

Cooking fish with milk: A Quixotic revolt that could have been my nemesis!

 

There was nothing spectacular that happened on 13th May 2022. Hardik Patel rebelled against Congress high command, while the Congress brass went into a huddle. The spectacle is known as Chintan Shibir. This, I am told, is a periodic attempt to create a road map for the future by the grand old party of India. Then there were a few incidents. Accidents that were allegedly the fault of the administration, someone killed somebody else for reasons best known to them, and so on and so forth. And of course, the usual tears shed over rising prices of fuel and essentials. Everything that happened was expected to happen and nobody’s morning tea got spoilt bar a small incident. I decided to try my hand at cooking!

 

I am still baffled by the way the wire entirely ignored this epochal event but then that is a matter of speculation that I refuse to dwell on. It’s not as if I am entirely starved of work. No. In fact, some might even call me a busy man. And the detractors, I am told, call me a busy man without business. This also I refuse to dwell on. But as of now what I am sure of is me being someone who is clueless about his existence. The last sentence, if read by my clients, might jeopardise my living as my bread depends entirely on my being quite sure of my existence. If I am not, how dare I advise others on how to define and communicate someone else’s existence. But then how long can you hide the truth?

 

So, here was this listless soul made even more listless by the despicable edibles being served on the table in the name of lunch and dinner. With due apologies to my dear wife who is so modest about her culinary abilities that she wouldn’t even flaunt them regularly so as to hide her skill from public scrutiny, I must confess that my tastebuds get titillated just by thinking about the food cooked by my mother and grandmother.

 

And, dear readers, I couldn’t take it anymore. The humiliation of being berated by friends who cook and flaunt their skills by inviting me over was getting on my nerves, to put it mildly. So on that fateful day, I lit the gas oven. I had seen maa cook this and still remember the taste. A summer dish that cannot go wrong. Hoping that you might like it, I am sharing this experience.

 

By the way, the kitchen by the standard of lower-middle-class families is big. Yet it was crowded with gawking ladies totally sure that the man of the house would ruin the perfect pieces of katla peti and the milk. But that day armed with my memory and the complete trust in taste buds I was the Don Quixote in the kitchen to out-chef the best chefs in the world.

 

But they wouldn’t allow me the full independence that I deserved. They quietly put haldi and salt on the fish as I was busy at the grinder mixing six almonds with a dash of milk. Readers, if you are new to the kitchen take it from me. Don’t allow the womenfolk of the household to watch you cook. They would ruin what is fated to be ruined anyway. Do not allow them the credit for ruining it. The haldi might interfere with the colour of the final output which is expected to be milk-white though a tad greyish. A tad, not more than that. Why? Read on and don’t be impatient.

 

I put mustard oil in the pan and lightly fried the fish. The inside of the fish should be cooked so that it remains soft yet the typical fishy smell is eradicated. I am not used to the expert’s words to describe it. While reading just remember that this is a disgruntled unwilling cook!

 

Then in a separate pan, I put some white oil and put two dried red chillies, one bay leaf and put two green cardamoms and broke one small cinnamon stick into the oil. Once the flavour filled the room, I put a little bit of oil and then put ginger paste, coriander powder, cumin powder and mixed them well.

 

And then put the almond and milk mix into the pan and bought it to a boil. It was the time to put chili powder, salt and ground black pepper to taste.

 

Don’t ask me the proportion. I didn’t measure. I trusted my taste bud.

 

It was time to put the fish in. And then let it boil on medium flame a bit just to allow the fish and the curry to get used to the marriage. And, yes, I had covered the pan to ward off prying eyes intruding into the process of this holy consummation.

 

And then I put a dash of ghee, chini (sugar) and garam masala (Bengali) powder and let it simmer a bit more.

 

Wait. All adventures of Don Quixote had disasters. And I was no exception. As I was cooking there were mechanics in the kitchen trying to bring our 16-year-old micro back to life, there were service people working on AC and then the driver from the garage to take our car for repairing the AC!

 

So I made a big mistake. Just before putting in the ghee, I had to put kalonji pasted in the grinder with a dash of milk. The paste shouldn’t have so much of the black spice as to turn the curry greyish on the dark side. But I had put two and a half spoon full of kalonji when a little over one spoon would have done the trick.

 

But you know what! For a first attempt, it wasn’t bad. I have my wife’s word for it. And yes, nobody clicked the final output!

A capital called education: Senior citizens can make society more productive

He doesn’t have a pension. But what he has is education. A professor of a globally acclaimed academic institute in India, he used to despair about his future after his retirement. He worried about treatment costs, meeting monthly medicine bills and all that after retirement. Then covid happened. Both he and his wife had a nasty attack and almost died. And that changed him in a way that should be seen as, for want of a better word, revolutionary. 

Not that the essence has changed. What has changed is his life thought. He still thinks that pension is important. After all, it’s a guaranteed income. Thinking otherwise wouldn’t have been rational. But not having one may not be the end of the world once you hang up the boots worn during your salaried days. 

Having lived a large part of your life under the shelter of guaranteed income this uncertainty indeed is a challenge, even scary. But education is a leverageable capital whatever age bracket you belong to. It might sound trite. But knowledge and realisation are two different things. What happened in this case is a hard pointer. 

The professor has been a successful academic and a teacher. He couldn’t have been what he was had he not been competitive and fought his way up through a tough competitive process. The PhD from a top global university in the USA couldn’t have happened had he not been capably competitive. 

Why is it that we always measure success by a metric called money? And judge old age as liability?

Somehow we have steadfastly refused to find enterprise in being academically successful. Yet, we define enterprise by that grit that makes you win challenges! The feeling is so deeply entrenched in the environment that even a person who has the distinction of fighting through his academic career to come up trumps takes a life-threatening affliction to realize that end of a career could also bring an opportunity to create another irrespective of what others might think. 

This is not to say that society would look down upon it. No. But it would definitely be condescending about the effort. Or, might even say, “Look at him. The poor man.” Or, “Look at his greed!” But no one would cry, “Bravo!” 

Therein probably lies the rub. We are so used to staying gainfully employed that we don’t think of it as an enterprise. Or, a learning experience! The risk averseness flows from here. There is no harm in favouring a pensionable job or aspiring for one. But what if it doesn’t make its way towards you? Or, even if it does, why should we call it a day? 

I keep wondering about it. Now that I am past sixty, retired in the conventional sense of the term, why is it that the environment asks me to relax. That I don’t have a pension has no bearing on this. Why is it wrong to dream of success even when you are past sixty? Or, for that matter, to dream even of doing stuff that defies dotage as defined in the conventional sense? In the sense of doing something new equally challenging as the one that you left? 

I dream of success as intensely as I used to in my twenties. Probably I do so more intensely and more consciously. The issue that keeps cropping up here is how I look at success versus how my success is measured by the society. Or, how my efforts would be measured by me and by the rest. Why is it that we always measure success by a metric called money? And judge old age as liability? It’s time to challenge it. And only we can do it and reshape the world-view about us. Shall we?

A Rummy Dream

 

Much as I would have liked to pose as an exception, my much too known past defiantly stands in the way of even soliloquizing, “I didn’t live a clichéd life.” But, you know, even in some ordinary run of the mill lifestyles there could be sparks of extraordinariness. And in my case, it happened on the first day of my earning life. 

 Trust me, I never wanted to be a journalist! I wasn’t remotely interested in anything to do with writing. But like millions of youngsters brought up those days with a heavy dose of a “secured life should be your life goal, and a first-class is a must” life mission, my sleeps were dogged by nightmares of failing in exams and the waking hours by being a disappointment in academics. 

 All parents dream of children achieving success. My parents couldn’t have been an exception. But they never told me what it was. Yet when I would write an essay without a mistake with a few nice lines thrown in, I couldn’t but notice that glint in my father’s eyes. Or, coming back home with less than ‘worthy’ grades and the consequent thrashing from my mom would tell me that she also had aspirations. 

 But you know, my parents were indeed different. They would seek happiness in my writing that nice sentence, reading that difficult book and holding forth on it as if it were written by me and working out that Euclidean geometry problem that even my seniors would struggle with. And if I could do all that I would naturally win grades worthy of a middle-class Bengali son. 

Yes, I could do all that but not consistently. Some days I would write a few good lines and on some others, I would be an Einstein. But I could never be an Einstein and a Tagore on the same day!  Unlike many other, my parents were strangely also happy with their ‘not so Einstein, not so Tagore’ son. But to be honest, they never tired of talking about achievers in the family. And believe me, they all were, bar me! And my grades also kept swinging from Einstein to Tagore, without adding up to that hallowed status of a scholar. 

 I was growing up. By the time I entered college, I became an intellectual – not by virtue of my scholastic prowess but by the grace of spirit. I cleared university in good time and was in the labour market as an aspirant. My family wanted me to follow my uncles and become a teacher. 

As for me, I didn’t really have a clear goal. But yes. Teaching was an option because of the holidays and the possibility of enough time to spend with the spirit. But that spirit had a different idea. 

 So I got a job in a newspaper where you could drink during the night shift! And the blighter of a Monk decided my fate. So here I am -- a scribe with a clichéd life and without a pension. Sadly, you can’t do that anymore. Life has indeed changed. So has the cliché about a scribe’s life. And I have yet to collect my degree certificate!

But his father was no AB!

 

When Usha knocked on the door and told me about the call from Calcutta, I walked into their flat like a zombie. Someone from the other end said something. I mumbled a response and cradled the receiver. Usha said, “Congratulations.” Even then it didn’t register: For I was sozzled. 

I had every right to be. My stint at the IIM, Ahmedabad, was coming to an end. My paper won the registration the day before. Padmakumar, now the HR Director at one of the multinationals in India, had this bright idea to celebrate the occasion. (If you are wondering as to how in a state under prohibition I could get drunk, I will say only this – it was never an issue.) Not that we needed one. But Padmakumar was a clever one about excuses.

To run a long story short, my wife was in Calcutta expecting our first child who was supposed to be born sometime in December but merrily dealt a surprise by deciding on 25th November to be his birthday. Those days you had to book a call and wait for the connection to materialize. Lightning calls charged a bomb and urgent calls had no urgency to connect though they also cost a packet. So the day he was born, my parents and hers were busy with the grandkid. Sometime along the way they remembered my existence and the call materialised the next day in the morning. 

One good thing about inebriation is that you are not fuzzy all the time. There are moments of lucidity as well. As I entered our apartment that moment of lucidity hit me. Usha, the daughter of our neighbour Prof Jain and my wife’s close confidante, congratulated me on my becoming a father! And the lady talking to me was no other than my proud mother-in-law! Broke the news amongst my friends littered across the floor,  and again it called for celebration and so on and so forth. That’s how I landed in Calcutta to the realisation that I was a dad! 

But no sooner had I landed than my father handed a diary to me saying, “Go through it and take a call. You need to get his birth certificate fast. Time is running out.” There we were with a diary full of hundreds of possible names to choose from. His nickname though was fixed. He was his grandparents’ Tartar. I am Suparna, she is Shubha so what about Shinjan! And it went on and on. Cousins chipped in. Uncles had their own views, aunts would, of course, have a different opinion. In short, there was no agreement. My logic was simple. Pathak is given. Both my wife and I have had the bitterest of experience of always being last in the queue because of our names. We wouldn’t like our son to suffer the same way. 

Thus determined I walked into the Corporation office, filled in the form and named him Abhishek. The clerk took a glance at the form, looked at me and smiled. I wondered why and it took my father to clear the reason. Amitabh Bachchan’s son was also called Abhishek!

With hundreds of Abhishek around and with Pathak as his surname, he still comes almost last in the queue!