Disclaimer : These are purely my thoughts about the equity market and do not take this for investment advice.

In the Macro sense , the difference between bond yields between the US and India have historically gone down . Now this means that the pace of growth of a country like India has remained stable while that of a developed nation i.e the leader of nations USA has become volatile. Now does this mean going ahead we will see the same trend ? History has shown that a country which is the superpower of previous times eventually becomes less powerful. One of the indicators to it are decreasing bond yield difference between it and developing nations.

With reference to the Indian scenario, the world is a smaller place because of globalization that took place in the last century and the countries are interwoven with each other. Growth becoming slower in a country which is not yours, will have an effect on the growth of your country. Hence this does affect factors like Oil Prices, Demand, Commodity prices which will in turn affect the raw material prices of various goods, increase debt in the overall country and thus leading to lower growth. Hence we cannot infer that a slowdown somewhere else will not affect us. Now this will affect the returns of your funds in the short to medium term.

When it comes to bottom up picking i.e picking individual stocks, i’d say even though valuations are slightly high. There are companies which are brilliantly run. I’m constantly amazed at the ways some promoters allocate cashflows to be at the forefront in their industries and investing in such companies are a sure shot way to get reach, keeping in mind that investing is a full time job and being aware of how businesses work just decreases your risk over time.

Hence even though the markets look slightly riskier , but the opportunities do remain, although fewer.

It is often easier to follow the crowd as we don’t need to take time off and think for ourselves. Even in terms of internalizing your life’s purpose , crowd mentality saves us most of the times. There is no denying that we also fall victims to a bad crowd mentality since most of us fall into the trap of wanting to be a part of the environment.

Enough said in terms of philosophy, when it comes to the field of savings, investments and spending there is a tendency to follow the crowd here as well. When we see the environment of consumerism in our western counterparts, the people in these countries are influenced by the thought of upgrading your life by buying a product. Data suggests that culture is a strong force that shapes a consumer’s buying habits.

Asian countries like India and China have predominantly higher savings compared to the western nations. Here culture pays an important role as financial nuances like credit, emi, mortgages penetrated the society at a slower pace. An Indian Father will emphasize saving over spending and also show a way to invest those savings. That’s because in his youth in order to buy a bike he had to save up for it.

These cultural preferences are changing in recent times , products like emis, personal loans are available easily. An individual can buy an Iphone today even if it costs 8 months his salary. It remains to be seen what ideas about financial savings and investing he will pass on to his next generation. This will have an impact on the overall debt in the macro scenario as well. Maybe in the next few decades the consumer’s debt will be many times that of government debt. Now that would be a bad situation to be in, because the government cannot tend such a situation as it has its own debt to take care off.

Attaining a balance between the culture of savings and consumerism is what the world should aim for going ahead.

The most common trait of wealthy people I have come across who are cash rich, has been primarily to save more than they spend.

Now, we have to realize that whatever time we spend on work that transforms to how much we earn i.e time = money. Our lifespan when put under a microscope goes something like this. 0-22 year, we gain knowledge, 22-30 years we survive i.e whatever we earn goes towards our needs, 30 – 60 is actually when we are able to save some money towards our long term financial goals, 60-80 we spend the money that we have accumulated.

The difference being wealthy and not being wealthy is what you do in those 30 years of your working lifespan, now to dissect it even further. 1/3rd of our lives is spend sleeping. So technically we do have only 20 years of working lifespan, to create wealth, also to make a difference.

I think financial clarity helps in building life clarity over time and should be considered very early in your life.

The relationship between money and us starts at an early age when we notice our parents exchanging rupees to buy stuff which we need or like. We learn the value of money when we buy our first chocolate with the money from our piggy bank. These experiences teach us and mold us in the way we handle money.

Our parents, in our early lives become our authorities on how to save up for that Game-boy we needed, or the clothes we need to be in trend. This relationship between us and money grows more complicated over a period of time. The collection of our working life is either a comfortable retirement or a struggle to make ends meet.

Setting Financial Goals

When we associate money goals to a life event, the process of planning for it becomes easier. Setting short-term, midterm, and long-term financial goals is an important step toward becoming financially secure. If you don’t plan for a life goal then you are likely to spend more than you should. And then come up short for most of your bills in the future, you start compromising on things like basic insurance which leaves you more vulnerable than you already are.

Establish a budget

Make your present clearer, basically means spend some time on seeing where your money is flowing. “You might be shocked at how much money is slipping through the cracks each month”. With the tools and accountability our phone gives us on where we spend, you might discover that ordering seamlessly every work-from-home day is costing you on an average around 10000 a month. You might learn your spending another 2000-3000 per weekend on date night meals or on a socializing weekend.

When you see how you are spending your money you’re guided by that information and this makes informed decisions on where you want your money to be going.

Planning investments

Define goals into short, medium and long term, match natural life stages of youth, middle age and post-retirement.

There’s never an early or late time to start investing. Of course playing catch if you have not started early this will mean making few lifestyle changes based on your budgeting, major benefits accrue when you start investing early.

Debt management takes priority because it makes no sense earning 11-12 % on your investments if your debt is at 9-10% as inflation will make your money negate the benefits. Bear markets and bull markets are inevitable in your investment journey. Don’t invest just because you haven’t got a chance to be part of a bull market instead save up some money which is less volatile and invest when the markets are depressed and an opportunity presents itself. In our lifetimes we might have comparatively fewer opportunities while investing in equities the important trait to learn is perseverance, patience and seizing the right opportunity.

Conclusion

Starting early and figuring out your investment goals earlier helps reduce unpreparedness later in life. Even if you don’t make perfect linear progress towards achieving your goals it’s important to be consistent. Review your financial portfolio annually to make up for changes in financial goals. This continued pursuit towards achieving financial discipline will make you more aware of daily finances and make it easier to achieve your financial goals.

While investing the key parameters to watch for are returns and goal associated with the investment.

Equity does give better returns over the long term compared to other asset classes.

While investing we need to look at the treaties of tax done between countries which will help in avoiding taxation errors in the future.

We don’t want the IRS to call us saying that you have been avoiding taxes and you need to pay penalties for it. This also doesn’t bode well with the internal rules in the company you work for as well.

1.Direct Equity Investing

An investor can directly invest in stocks by opening a PIS account (Portfolio Investment Scheme) commonly called as a PIS account. This account has to be linked to your demat account. Investing in stocks directly needs a lot of time as you will have to be constantly looking for opportunities and studying about companies which is fruitful but not at the cost of the full time job you’re in.

Returns are higher over the long term but it will have periods of volatility, Risk is higher over the short term and this isn’t a good option if you’re looking to park money for short term.

Taxation is based on the report that is generated by your stock broker.

I would recommend Zerodha’s platform if investing through this route as the seamless experience will make it easier for investing in direct stocks.

2.Mutual Funds

Some Mutual funds in India do offer investments with them. Taking care of the taxation part in the USA is primary before venturing into them. The mutual funds here obtain a declaration stating that they will comply with IRS in case there is an under reporting of gains made and taxes not paid there. Although India has signed a double tax avoidance treaty with the USA. It is still not very clear whether you need to pay taxes on the gains in the USA as well. Few leading mutual fund houses avoid taking investments for US and Canada based investors as it’s still a grey area.

Mutual funds can be a better to way to passively take part in India’s equity growth and an equity mutual fund will give better returns compared to other asset classes.

Fixing goals while making an investment plan plays an important role.

3.Real Estate

Real estate does play a role in diversifying your investments. “Diversification is the holy grail of investing”. While it sounds attractive owning a physical asset there are certain drawbacks with investing in real estate. Some of them involve large ticket size, meagre returns when you compare against equity as an asset class, higher taxation and transaction costs, finding the right opportunity as it is not as transparent as other asset classes, low liquidity.

It should be a part of the overall portfolio for diversification but not a large part.

4.FDs

Having an FD through your NRE account will also serve a tool for returns on your overall portfolio and also be a way to diversify your investment. The safety grade being high and volatility being low to the asset class makes it an attractive form of return as the interest rates also tend to be higher.

Happy Investing…