I was just going through this headline in economictimes website "Stocks fall on US, China economic news" and I was wondering what is really happening in the world economy?

We see China posting slow growth (taunted to be the driver of world economy) USA still crawls, UK's debt mounting all the time and whatever our politicians say India is no better. Because I myself and my friends experience the difference of the present time and time we are flooded with offers in 2007. I can tell you one of my friend who has an experience of 5 years and working as a relationship manager is finding it very hard to even schedule a prospective interview for himself. And the hikes that are announced by most of the companies are only in paper's or in peanuts.

On the basis of current situation I'm actually wondering about two things about India.

1. The stock market keeps on rising - This increase is may be due to the fact that FII's are pouring in money. But china being a FII's darling has seen their stock market value coming down. But that does not seems to be the case with India. Is Indian stock market rising just because of FII's or Indian public is investing in stocks? Or Is India really immune?

2. Real Estate - I have heard and seen in most of Tamil Nadu that land prices have stagnated or have come down in a very few areas, but in most of the cities and towns the sellers are quoting those absurd prices with no takers, but still the sellers or hanging on to the price. Where it is all going to end? Will RE as whole (flats, land) survive this period or the imminent depression predicted by economists like Paul Krugman will sweep the world and India.

I would like to know your thoughts on it. I know there are people in this forum who say the RE is going to rise all the time and there people who say the RE will go down in short term. Let's see what we can get out of this thread?
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  • Originally Posted by sridharchennai
    Hi Sri,

    I was also a guy who was too much into data when completed my MBA. The first url is the reactions of economists from banks. You see in these times after 2008 I think their respective organizations have asked all these economists to always say "All izzz well" to the public and create the feel good factor.

    Personally I have stopped believing all these economists who predict booommm and the world bank reports. Most of them are short sighted and try only to create the feel good factor.

    Thanks,
    Sridhar



    I fully agree with you regarding economic predictions and analysts are a whole....

    But ask anyone in living in chennai if they are spending less for the same goods/services they used to last year...it would be a big no.

    So its common sense not rocket science - petrol costs more by 2rs/l, tor dal has risen by 50% in last few years,
    milk costs more by 2rs than a year ago- bus ticket prices have raised in the last year.

    and someone says we are seeing deflation ....more than any thing its totally insensitive to the struggling people

    http://www.outlookindia.com/article.aspx?266106
    CommentQuote
  • Originally Posted by sridharchennai
    Yes, the 6th pay commission has indirectly increased the wage inflation but, how long the private companies keep increasing the salaries in this volatile market? If that happens India for sure will lose it's wage advantage to other asian countries. When the salaries are not going to keep increasing near term, how will the RE prices alone can increase?


    Increasing wage (cost) due to Inflation does not mean loss of wage advantage If your currency value goes down.

    That is what happens in a high inflationary environment.

    Say Indian wage cost grows up by 20% - a fall in INR value by 15%
    The gross rise is 5%.
    let us say average annal inflation in developed nation is 4%, then the real wage rise is in India is than only 1%.

    For an overseas investors point of view it is a 1% rise not 20% therefore the wage advantage is till maintained.

    This is what always happens in India and it will continue.

    Coming to the next point : Timing the market.

    Timing the market is not possible and attempting that will always result in pain.

    My personal opinion:

    I dont expect or wish the market to shoot over the moon or crash.

    I am long term investor who does not try to time the market ( as I believe the market is above all of us and the unpredictability is the core of its characteristic).

    only people who want to cash there investment in short term need to worry about volatilities. If you don't want to/ need to sell in 2-3 years why worry where the market will be in 2 years.


    That doesn't mean you blindly overpay for some crap apartment in an area where there is chronic over supply with unaffordable loan - No substitute for due diligence and prudence.

    I am more interested in the fundamentals of the asset and location.

    I look for supply and demand,location and potential of the asset.

    I believe in India as a strong RE investment destination.

    I believe India's population (working age) will grow - they will be employed locally or overseas , there is so much under development india so there is plenty of room for growth and development.

    I believe Inflation coupled with real growth, supply constraints would ensure RE investors are on the right side of the economic divide on the long run (haves and the have-nots).
    CommentQuote
  • Hi,

    It is true the prices of RE in southern districts of TN and Kovai region appreciated faster than Chennai in the last 3 years. This is due to the un-affordable prices in Chennai and the people who earn from Chennai are started investing in other part of TN.

    The "Property Plus" papers still bring the Advt of the projects started 2 years ago.

    Few example are 1) DLF 2) Hirco, 3) Hallmark, 4) Unihomes, 5) Excello, 6) Metrozone (cost is very cheap :) etc., etc.

    The "New York Times" last week's post says the guys who had borrowed $ 1 million (Rs 4.5 Crores) could not repay the loan and just leaving their homes. :( And this may happen in India also for high borrowed asset.

    -----------------------


    The Chennai real estate prices were on Top price in the year 2007 August. After the US bubble and Lehman collapse the RE prices went down. Corrected to 30 %. So from the year August 2007 to May 2009 the prices of the Chennai suburbs were not increased. From the middle of 2009 and 2010 have seen some raise in RE price but not the peak of 2007 rates. This year also will not see any much raise in land price. So the interest loss for 3 years for the people who bought at the high price of July-Aug 2007. They have to wait for another bull run to exit/Sell their lands at higher price than the 2007 price.

    I feel the second tier cities (like Kovai, Madurai, Nellai, Tiruchy and Salem) will do better in Real Estate than Chennai. The Chennai suburb RE price was increasing because of IT industries. As of now all the IT majors are having enough lands in the suburbs, so they don't buy any more. Pune and Bangalore were the two cities developed quickly due to IT in the year 1995 to 2005. After 2000 the cost of living in these cities were high and the IT companies started looking at Chennai. Chennai started growing from year 2000.

    I think now it is the time for Tier II cities of Tamil Nadu will do better than any other State in India for IT and other sectors.
    CommentQuote
  • Originally Posted by Srinidhi
    Thank You Economist for your comments .

    This is my stand :

    I am going to forget chennai and other metros for some time especially 50L+ properties .I don't think these 50L+ properties will get double in 5 or even in 10 years , since income - EMI ratio doesn't match .Builders are playing tricks to keep the prices of these kind of properties since their profit is very huge on this segment.It is going to get a very big hit in short to medium term , it may take even some years based on how G20 is reacting for this GFC .I am an NRI and I am looking for some decent plot / house which I need only when I return to India , Basically I am from southern part ,even In my home town RE went up multiple times , but still in the range of affordable level to the people who lives there , our home town is mainly driven by govt employees / local people who spend less and save more .You can still buy plot for 1 or 3 lakhs per ground in outer areas (inside the town they are quoting 20L - 30l per ground which doesn't make sense to me).Now a days any one can afford 1-3 laks rupess which I feel is the great investment(since we don't have any other better option) for this time and give good return during these inflationary times as Economist said because we have enough space for appreciation .And also we don't need to go for loan for these kind of amounts.I have already invested a lot in my home town during 2000- 2006 and the prices went up multiple times , even if it doesn't make sense , I personally happy about that .I am still waiting with some good amount of cash to buy 50L+ property in chennai which is only for living purpose which I am personally feel is going to take a big hit , because no one can justify this price level , it is really un affordable to any one , tell me who can buy a plot / house for 60 - 75 lakhs with cash / loan during this GFC (may be businessmen,doctors and politician and whoelse?) ,
    I am planning to wait with Cash as wiseman said for atleast next two years , if nothing got changed , I will go and buy my home town 1-3 lakhs properties (may be for 4-5 lakhs after 2 years) and get into the RE bus .I am pretty sure RE won't go anywhere atleast for next 2 years .
    Please feel free to correct me If I am missing anything .


    Hi,

    It is true the prices of RE in southern districts of TN and Kovai region appreciated faster than Chennai in the last 3 years. This is due to the un-affordable prices in Chennai and the people who earn from Chennai are started investing in other part of TN.

    And I am sure other parts of TN will grow faster than Chennai if the following are met.

    1. Chennai to Kanyakumari - Rail Double track.

    2. More number of Kendriya Vidyalaya schools. (Central govt is planning for it)

    3. Good medical facility (at-least in the district head-quarters). Central govt is trying for a short term Medical courses.

    4. Water and drainage facility.

    Actually all the parts of TN are well connected by Roads.

    And the fact is If there is a chance (due to good economy) for Chennai to grow then definitely there will be a chance for other part of TN to grow as well.
    CommentQuote
  • Stocks slump as consumer confidence plunges and Citi, Bank of America report lower revenues - Wall Street

    On Friday July 16, 2010.

    NEW YORK (AP) — Stocks slumped Friday after earnings reports from two big banks disappointed investors and a survey showed that consumers are becoming more pessimistic.


    The Dow Jones industrial average fell more than 190 points, and other major market indexes were also down more than 1 percent. Interest rates fell in the Treasury market as investors once again sought out the safety of government securities.


    The market fell at the opening after Citigroup Inc. and Bank of America Corp. released earnings. The two banks, like JPMorgan Chase & Co. a day earlier, reported higher earnings as losses from failed loans fell. But they are also seeing lower trading revenues because of the stock market’s plunge this spring.


    Stocks fell further after a twice-monthly survey from the University of Michigan and Reuters found that consumers’ gloom is increasing. An index of consumer sentiment compiled from the survey fell to 66.5 in early July from 76. That was a bigger drop than expected.


    “It’s mostly about the poor consumer confidence numbers,” said Anthony Conroy, managing director and head trader for BNY ConvergEx Group. “The possibility of a double dip also starts to come to mind” for investors, he said, referring to a phrase that describes the economy falling back into recession.


    Typically low summer volume Friday intensified the market’s losses, he said.
    “We’re going to see more volatility, days when there are 2 percent swings,” Conroy said. “The economy is OK. But the one concerning part of it is jobs — that’s the reason why you have poor consumer confidence.”


    Citigroup’s shares were off nearly 4 percent while Bank of America was off more than 8 percent. General Electric Co. fell 3.7 percent despite delivering stronger earnings and a healthy outlook before the market opened.


    Stocks had struggled to a mixed finish Thursday after being down for much of the day on disappointing regional manufacturing reports for the Northeast. Much of the deficit was erased late in the day as news began to circulate that man Sachs Group Inc. had settled civil fraud charges with the government over its dealings with subprime mortgage securities.
    However, while investors were relieved that man was putting the case behind it, they were again confronted Friday by larger ongoing worries: the economy and the future of the banking industry now that Congress has approved the banking industry overhaul bill.


    In midday trading, the Dow Jones industrial average was down 194.21, or 1.9 percent, at 10,165.33. The Standard & Poor’s 500 index fell 22.84, or 2.1 percent, to 1,073.64. The Nasdaq composite index fell 48.40, or 2.2 percent, to 2,200.68


    About fie stocks fell for every one that rose on the New York Stock Exchange, where volume came to 620 million shares.


    Bond prices rose in what’s known as a flight to safety. That sent their yields lower. The yield on the benchmark 10-year Treasury note, which helps set interest rates on mortgages and other kinds of loans, fell to 2.93 percent from 3.00 percent late Thursday.


    The formal announcement of man’s $550 million settlement came after the stock market closed on Thursday. man was the only major financial company to show a gain Friday. It was up $3.75, or 2.6 percent, at $148.97.


    Bank of America’s stock fell $1.26, or 8.2 percent, to $14.13. Citigroup was off 16 cents, or 3.9 percent, at $4. Both companies beat analysts’ expectations. However, the drop in their revenue as a result of the stock market’s slide had investors worried about how banks would make money in the future under new government regulations.
    Google Inc. fell $26.02, or 5.3 percent, to $468 after its earnings fell short of analysts’ expectations.


    GE lost 56 cents or 3.7 percent to $14.69.


    The Dow ended a seven-day winning streak on Thursday. The Dow was down as much as 126 points early in the day, but closed down just 7 as word spread about the man Sachs settlement.


    A government report on consumer prices for June was mainly in line with analysts’ expectations. The Consumer Price Index dipped 0.1 percent last month, largely due to lower energy bills.
    CommentQuote
  • Don't be too quick on your trigger finger!

    Originally Posted by sri_idea
    Wiseman has posted a few jokes before but this one tops it all.

    Deflation !! ...does he not read the papers or watch the news ?

    In India people are taking to the streets on the oil price rice, food price rise...the PM has made a statement conceding that the prices will rise for a while
    In the UK the VAT rise coming up beginning of next year will push the inflation up from its present 3.5% (which, based on historical data is already high) ...

    Interest rates are set to increase n most countries.

    I agree with the general uncertainty in the market...but however eloquently someone say 'deflation' can't buy it...



    Sri and Sridhar,

    Krugman is a Keynesian and an inflationist. Only very recently he went deflationist (that too as a threat to the Obama to spend more).

    Secondly, Sri, looking out of your Window at the pouring rain might make you believe that India's rainfall is in excess this year. But, unfortunately for you, India is a bit bigger and its real rainfall is 14% deficit.

    Sri. India's GDP is around 2.5% of Global GDP. Focusing on India's inflation (and that too mainly Food Inflation, fuel inflation is a temporary aberation based on pricing coming closer to reality), i.e, price inflation in parts of 2.5% of world GDP and then extrapolating it to say that the world is threatened by inflation makes you the joker (I only use the word you used against me). Thats like saying the tail is wagging the dog.

    Go back and read the world of economic news a little more carefully. The remaining 95%+ of this world is in a deflationary spiral!!! Repeat. Money is being destroyed faster than its being created (even with all this stimulus) - and thats the true definition of deflation!!! When this stimulus ends, money will be destroyed at an even faster rate. And so will be the fate of asset prices and value all over the world. They too will decline hugely. And that is called deflation!!!

    When the world is trying to get rid of excess debt, it must destroy money net-net. This is deflation.

    Once there is substantial destruction of the value of money like the Dollar losing 60% of its value), there should be some kind of hyper-inflation. But that is NOT inflation the way you understand it.

    We will see a reasonable-to-long period of deflation, after which we may see a short period of hyperinflation and drastic revaluation of currencies.

    And you guys are saying fundamentally the same thing I am.

    When RE prices are going nowhere and stagnating, it is deflationary with respect to time value of money. And that seems to be the general opinion in this thread.

    So, Sri, get the fundas straight before calling others jokers on the basis of unsound fundas!!!

    cheers
    CommentQuote
  • wiseman

    i never claimed i knew my fundas and world economics. - u were the one who claims it ..I just claim i have some common sense

    great rainfall logic- but what is really happening is when its pouring outside ....and a great expert comes in with a beautiful explanation about how the worlds weather pattern is going to stop the rains tomorrow and will not see any rain for 3 years

    - call me a joker or anything u want ....dosent bother me ...its an anonymous forum afterall
    CommentQuote
  • Originally Posted by sridharchennai
    Hi abk,

    When a person is excess of cash then no price is too costly for him. As you said home is not always about investment but, when mistimed it can eat all your life of savings. That is where I'm concerned about.

    Well, the market has not definitely crashed but, even the bus has not yet started moving. It's still there stagnated.

    I have my flat in perungudi and I can tell you the prices are down from 2008 peak. I don't buy your argument of price rise based on my experience

    Thanks,
    Sridhar


    Check out other areas in chennai like kilpauk,adyar,velachery,adambakkam,chromepet,east tambaram,virugambakkam,valsarvakkam,porur etc.
    when comparing rates check for projects in the main areas not peripheral locations.
    OMR is fraught with oversupply and basically it is a newly developed location wherein the majority of the buyers are from the IT sector and salaried.
    The ground rates in the above mentioned areas have appreciated by 10-20% in the past year which are above the rates in 2008.

    this is not my argument this is info.
    CommentQuote
  • Originally Posted by wiseman


    When the world is trying to get rid of excess debt, it must destroy money net-net. This is deflation.

    Once there is substantial destruction of the value of money like the Dollar losing 60% of its value), there should be some kind of hyper-inflation. But that is NOT inflation the way you understand it.

    We will see a reasonable-to-long period of deflation, after which we may see a short period of hyperinflation and drastic revaluation of currencies.

    And you guys are saying fundamentally the same thing I am.

    When RE prices are going nowhere and stagnating, it is deflationary with respect to time value of money. And that seems to be the general opinion in this thread.



    cheers


    Dear wiseman,

    Can you please guide us on how to manage cash better during these times?

    Though my liquid/debt investments have been giving better returns than I would have got in any other assets, I have some very basic concerns during this period of uncertainity.Looks many here share the same concern too.

    Let me try and explain.Deflation I feel doesnt always result in price coming down and better affordabality.Especially when it also results in shortage in supply/volume.It could result in people who have more wealth and money fight with each other for the limited resources pushing the price even higher.

    In India, Business dont generally cater to the masses - i.e. low profit mass volume but its increasingly becoming high profit low volume.The corporates are not obliged to provide value for money and concentrate only where they can profit more.It has become only the responsibility of the government to announce freebies, provide subsidy, take care of have-nots.It works for the government/political parties as such announcement are populist and they also recieve kick-backs from corporates.

    Ths issue now is, whether to choose the devil or the deep blue sea.I choose to believe the government as they are the known devil and think, thanks to their policy and past history we will become increasingly poor and keep expecting them to provide for us and we inturn vote for them.

    Unless rupee appreciates considerably or governments policy shifts towards domestic production/consumption, I feel with global deflationary effect destroying value of money, It will not only ensure pressure on jobs and salary but also deprive the middle class from what they are able to afford currently.I am not talking about borrowed money, but what we can buy now using cash from hard-earned savings.

    I have started to believe and prepare myself to face stagflation for India.I feel it is more or less the same preparing for deflation now and hyperinflation later, only difference I now carry my umbrella in case my house leaks eroding value of my cash and threaten to drench me and flood my livelihood.

    Request you to kindly put things in perspective for me and advise.Thanks very much in advance.
    CommentQuote
  • Originally Posted by nabishek
    Dear nabhishek,

    Can you please guide us on how to manage cash better during these times?

    Though my liquid/debt investments have been giving better returns than I would have got in any other assets, I have started to believe and prepare myself to face stagflation for India.I feel it is more or less the same preparing for deflation now and hyperinflation later, only difference I now carry my umbrella in case my house leaks eroding value of my cash and threaten to drench me and flood my livelihood.

    Request you to kindly put things in perspective for me and advise.Thanks very much in advance.


    can you tell us how? liquid funds?
    CommentQuote
  • Originally Posted by yeskrish
    can you tell us how? liquid funds?



    No, Not liquid funds.

    For my cash savings, I have chosen long-term fixed schemes with moderate returns, periodic cash outflow and less exit load.Cash that cannot be invested in such schemes, goes into purchase of Bullion.

    I believe money gets multiplied only when it keeps rotating.My strategy is to keep rotating the money from periodic returns of debt instruments into better equity-linked schemes to get more compounded returns meanwhile ensuring capital guarantee of my principal in long term.

    There are so many good schemes that give better returns than Bank FD.Such as from Post office, Co-operative banks and societies, Bond issues/NCD.Most of them are close-ended so you have to constantly look out to know when they are announced.

    Instead of Fixed deposits, you can select fixed maturity plans MF where you can choose growth or dividend(tax free) option and also if invested more than a year avail indexation benefit to adjust for inflation and save tax.

    Also, check the following scheme.Capital is guaranteed by the government.

    http://www.indiapost.gov.in/Netscape/6yearsMIS.html

    One can open a joint account and invest 9 lakhs and get a monthly income of Rs 6000/-. Invest it back as SIP in a good ETF or mutual/index fund that provides more returns.

    You can also choose to do the same on the amount you tend to pay every month for EMI from salary through SIP.It would give better returns than trying to leverage on appreciation of mortgage.

    I hope to hear better strategies and advise from experienced members.Thanks in advance.
    CommentQuote
  • I do not call people names ...

    Originally Posted by sri_idea
    wiseman

    i never claimed i knew my fundas and world economics. - u were the one who claims it ..I just claim i have some common sense

    great rainfall logic- but what is really happening is when its pouring outside ....and a great expert comes in with a beautiful explanation about how the worlds weather pattern is going to stop the rains tomorrow and will not see any rain for 3 years

    - call me a joker or anything u want ....dosent bother me ...its an anonymous forum afterall



    Sri,

    As I mentioned in the post, my calling you joker was only in response to your calling me joker. Find any post of mine that calls someone names without provocation and I will change my title to foolman. :)

    I don't call people names without provocation and even then only use the same words.

    But a lot of people get panicky about what I say and react badly. No need. Under any circumstance, if one maintains their equilibrium and seeks proper advice and follows a systematic approach, most issues become non-issues.

    cheers
    CommentQuote
  • Very important question ...

    Originally Posted by nabishek
    Dear wiseman,

    Can you please guide us on how to manage cash better during these times?

    Though my liquid/debt investments have been giving better returns than I would have got in any other assets, I have some very basic concerns during this period of uncertainity.Looks many here share the same concern too.

    Let me try and explain.Deflation I feel doesnt always result in price coming down and better affordabality.Especially when it also results in shortage in supply/volume.It could result in people who have more wealth and money fight with each other for the limited resources pushing the price even higher.

    In India, Business dont generally cater to the masses - i.e. low profit mass volume but its increasingly becoming high profit low volume.The corporates are not obliged to provide value for money and concentrate only where they can profit more.It has become only the responsibility of the government to announce freebies, provide subsidy, take care of have-nots.It works for the government/political parties as such announcement are populist and they also recieve kick-backs from corporates.

    Ths issue now is, whether to choose the devil or the deep blue sea.I choose to believe the government as they are the known devil and think, thanks to their policy and past history we will become increasingly poor and keep expecting them to provide for us and we inturn vote for them.

    Unless rupee appreciates considerably or governments policy shifts towards domestic production/consumption, I feel with global deflationary effect destroying value of money, It will not only ensure pressure on jobs and salary but also deprive the middle class from what they are able to afford currently.I am not talking about borrowed money, but what we can buy now using cash from hard-earned savings.

    I have started to believe and prepare myself to face stagflation for India.I feel it is more or less the same preparing for deflation now and hyperinflation later, only difference I now carry my umbrella in case my house leaks eroding value of my cash and threaten to drench me and flood my livelihood.

    Request you to kindly put things in perspective for me and advise.Thanks very much in advance.



    Hi Abishek,

    I am prone to believing that progressively the world is getting from bad to worse in the economic sense. Please note that I said "world" and not "India". But what affects the world will also affect us since we are getting increasingly coupled into the world economy.

    The core belief is that we will see a global depression of zero or low growth overall and negative GDP growth in many parts of the world for a few years from today. There will also be a massive destruction of "credit" which happens to actually be "debt" and is the root cause of the whole mess.

    A recent statistical study shows that the worst case scenario will see around half the world's economies go into Sovereign Default (where the Govt itself defaults on repaying debt) and a ultimate loss estimated between $10 - 15 Trillion. But this is the worst case and maybe we will see something far less.

    The takeaway is this. The World will not end! Thats a relief!:D

    But how you handle your job (income), your spending and your investment as well as the debt you take on can make a HUGE difference to your financials for decades to come.

    This is how I'm approaching the next few years..

    - Reduce all debts to ZERO! I started this in 2006 and went Zero in 2008.

    - Do not leverage to buy any asset since most favored assets (land, stocks) will see significant declines in value (obviously this will be only for short periods of time in India, but in the US they could take several years to come back to where they were in 2007 or for that matter even today. Buy only for cash

    - Reduce discretionary spending (postpone buying those fancy cars, high cost stereos, etc unless you are spending cash and that too after putting aside at least 1 years living expenses for emergency. This will be the toughest thing to do for our youngsters who started their careers running revolving credit on their cards by middle of the month

    - Do not go into long-term debt. 1 year debt instruments (FDs, etc) are probably optimal as Interest rates will be very dynamic

    - Put at least 15-20% of your longterm assets into investment (even at today's price). Foreign Coins (Krugerand, Sovereigns, etc are best). Also buy some silver

    - When markets crash, load up on high dividend yielding stocks with good performance. In the last crash, one could easily pick up good companies with 8% - 12% dividend yield, which is phenmenal as a starting position. Remember that, today, these dividends are tax-free in your hands (which will change with the new tax code) and over the next 5-5 years these dividends will grow to give you a yield of 15% - 25% on your original investment.

    Thats about it. On my part, I also put around 2-3% of my portfolio into highly leveraged speculation in Options which could yield (if you are lucky) returns in the 100s of percent. But this is not an easily available option (pun intended :)) and I would not ask anyone to get into F&O as it is a most dangerous field.

    Any other ideas rom others will be welcome as I can add to my tools for financial growth!

    And most importantly, answering your question on stagflation. As money supply crashes (deflationary), credit will become very scarce and very costly (I believe it would easily surpass 90s interest rates of 15%-20% and we will see 20%+ interest rates). Couple this with even stagnating prices of assets along with stagnating incomes as salaries remain flat and real purchasing power of rupee declining and you are heading for some very hard times if you take on debt, especially very large debt (loans) in relation to your income and savings (assets). Remember that, until you pay off your last EMI the house belongs to the bank and in a stagnating price environment and low liquidity, distress sales will see you losing even your down payment if you are forced to sell within the first 5 years as interest takes up most of your EMIs.

    Also relating to investing large parts of our savings in fixed income securities is (in my opinion) a losing proposition when you are simultaneously hit with dropping PP of Rupee, rising interest rates and a lagging return on investment on these securities (the interest you receive is always lower than the interest you pay on debt, that why I call it lagging). If you take a more dynamic interest in the stock market and look for crashing markets to throw up high dividend yields and get into sound stocks purely for dividend with price appreciation as an extra bonus, you will get returns north of 20% and even as high as 50% per annum in a flat market going nowhere. You might want to experiment with this as it has served me very well over the last 25 years!

    But I suppose you know that already Abishek! :)

    cheers
    CommentQuote
  • Thanks for sharing yours.

    I also have invested in POMIS and PPF. But only a portion of my wealth. < 10%. rest i have invested in equity MF 30%; debt MF 30%; liquid MF+BankFD 30%.

    I hope that with this styrategy atleast i can conserve wealth net of inflation, though i would much rather prefer wealth to grow!
    with food inflation at 15%; education inflation at > 15%; Healthcare inflation at > 15%; all form of investments in india are useless.

    i have a vague feeling that once this phase of india's growth tapers say in 5 years time, inflation in india will settle down to 2nd world levels. at say 3-5%.


    Originally Posted by nabishek
    No, Not liquid funds.

    For my cash savings, I have chosen long-term fixed schemes with moderate returns, periodic cash outflow and less exit load.Cash that cannot be invested in such schemes, goes into purchase of Bullion.

    I believe money gets multiplied only when it keeps rotating.My strategy is to keep rotating the money from periodic returns of debt instruments into better equity-linked schemes to get more compounded returns meanwhile ensuring capital guarantee of my principal in long term.

    There are so many good schemes that give better returns than Bank FD.Such as from Post office, Co-operative banks and societies, Bond issues/NCD.Most of them are close-ended so you have to constantly look out to know when they are announced.

    Instead of Fixed deposits, you can select fixed maturity plans MF where you can choose growth or dividend(tax free) option and also if invested more than a year avail indexation benefit to adjust for inflation and save tax.

    Also, check the following scheme.Capital is guaranteed by the government.

    http://www.indiapost.gov.in/Netscape/6yearsMIS.html

    One can open a joint account and invest 9 lakhs and get a monthly income of Rs 6000/-. Invest it back as SIP in a good ETF or mutual/index fund that provides more returns.

    You can also choose to do the same on the amount you tend to pay every month for EMI from salary through SIP.It would give better returns than trying to leverage on appreciation of mortgage.

    I hope to hear better strategies and advise from experienced members.Thanks in advance.
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  • Originally Posted by yeskrish
    Thanks for sharing yours.

    I also have invested in POMIS and PPF. But only a portion of my wealth. < 10%. rest i have invested in equity MF 30%; debt MF 30%; liquid MF+BankFD 30%.

    I hope that with this styrategy atleast i can conserve wealth net of inflation, though i would much rather prefer wealth to grow!
    with food inflation at 15%; education inflation at > 15%; Healthcare inflation at > 15%; all form of investments in india are useless.

    i have a vague feeling that once this phase of india's growth tapers say in 5 years time, inflation in india will settle down to 2nd world levels. at say 3-5%.


    I share the same view.I hope the smoke clears soon on when exactly the stimulus will be exited and interest rate hiked substantially to control inflation.

    Supply side constraints should be dealt by punishing hoarders, Streamlining the supply chain by clearing road-blocks and introducing regulators.

    Somewhere deep down I also feel, all the above will remain wishful thinking.The government may just anounce another stimulus when growth is slow pushing inflation even higher.

    Have to see how they are planning to use the money from 3G auction and other disinvestments.
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