Ten honest questions to ask yourself before you are investing in any financial product.... especially in this bull market...
1. Am I buying this product because everyone else is buying it? Fundamentally, remember, you don't create alpha by buying what everyone else is buying at a price similar or higher than them.
2. Am I buying a debt product that will give me significantly higher returns than the risk free rate? With consistency or guarantees? Immediate red flag. Free lunches don't exist in finance. Returns greater than the risk free rate, don't come risk free.
3. Do I know in what circumstances this product will make money, and why it will do so? Has that happened in the past? I can't emphasize enough the importance of looking at rolling returns carefully to have realistic return expectations.
4. Do I know in what circumstances this product will lose money, and why it will do so? When has it lost money in the past, especially extreme money? Do these times mirror times like this?
5. What is this product adding to my portfolio that isn't already there? Am I adding a 3rd tech fund to my portfolio and tripling down on tech exposure? Or I am buying something that is genuinely going to add something new? Don't load up funds like clothes in a closet!
6. What am I paying for this? Do I know all the fees? Is this product too expensive, and if so is it worth it? Is this product too cheap, and if so, what am I missing?
7. Am I locking in my money? How I can exit if something goes wrong? If I am locking in money, what I am getting in return for doing so? Remember, if you are giving up on liquidity you should get significant incremental return for doing so.
8. Can I get the same kind of returns-risk-exposure in a simpler / cheaper / more liquid product? Simplicity is always at a premium.
9. Do I trust the person/firm I am handing over money to, to do this particular job well? Have they done it well in the past? Have I done reference checks? Why do I trust them? What is my regulatory recourse if things go wrong? Never buy unregulated products.
10. What kind of disclosures and information do I need to monitor on this product, after investing? Will I get this information? Decide before investing, what are the metrics you will monitor after investing.
P.S It is important for buyers to beware, when investing hard earned money. When markets are at all time highs, do not let your caution hit an all time low. Invest sensibly, safely, and wisely. And remember, no opportunity is running away!
5 pieces of money advice I would give my 22 year old self (who just started earning)…
1. Start early but not just because of compounding. When you start your career you are often so neck deep into work and proving yourself that hard earned money can just sit in a bank account despite being a finance professional. I waited for 2 years of working to start.
It was bad idea. The wait then claws at you and when you start you make rushed decisions because you feel you missed out (I did). Starting early helps you ease into the process, test the waters and make mistakes on small capital.
Some takeaways from rebalancing my own mutual fund portfolio…
Preface: I do a once in 5 year major relook at the funds and asset allocation in my portfolio. This is the time when I make big structural changes. Why 5 years? Goals, circumstances, needs change over this period. It also gives me enough time to fairly evaluate managers.
In the interim, I am largely buy and hold. I add to the same asset allocation and funds broadly, unless there is a real pull factor - markets or personal or fund news - that calls for a change. Also my portfolio is of course heavily Edel, but I do have other AMCs.
Five thoughts about money, that I want my child to learn first.
1. Money does have a real purpose. It enables you to fulfil your dreams, it makes the little and big things in life easier. It adds comfort, it enables moments of joy, for you and people who care for you. So earning money and saving money is important.
2. But money cannot define you. Never let it affect your sense of self worth or your confidence, because it has the power to do that. Never let it affect how you are and behave with others either, because people are more than their bank balance.
Firstly, @KirtanShahCFP does a fabulous job explaining fixed income in a simple way including highlighting different risks clearly. He is also one of the few who while having a view - in this case preferring active - lays out facts in a very unbiased way for both sides.
This kind of nuanced and balanced debate is rare on social media and total credit to him!
I still disagree :).
While TMFs are limited or fixed in terms of the returns they provide over the holding period, at least they do a good job of providing that predictable return.
The curious case of short term funds and why we need a simple place to park our money…
Everyone needs a place to park “short term money”. Not liquid fund money that you need in a few days or weeks, but that pool of 1-3 year money that you may or may not need. The time horizon is ambitious which is why target maturity funds are not the best fit.
Because this is short term, many customers don’t want the constant rollovers of TMF, a fact @passivefool educated me on. You need to be able to perpetually park money with the option of holding it for 1y, 2y, 3y or even more.
A thread about the *continued* pain of a homebuyer and some questions about what resort we have under RERA.
My issues with my first home purchase with Kalpatru Avana (under construction) are not new. This despite being in a so called luxury project with one of the so called better builders in the business. They were covered here also.
At the time of this article in March 2021, we were promised a March 2022 possession. This clearly lapsed. With no communication from the builder. Our agreement has a RERA date of June 2022. This will lapse. What protection does a home buyer then have?