There is No Fate But What We Make

Does this explain Aegon Religare's profits?

2010-01-25T03:35:00.001-08:00

A copy of my email sent to Aegon Religare
Hello xxxx,

hope you are doing well. i was looking at the IRDA's annual statement recently.
It seems there were 7 claims in the whole year and 5 of them rejected/repudiated.
I have attached a screenshot of the relevant page from IRDA's report.
You can get the whole report from here:
http://www.irdaindia.org/annualreport09/annual_rep_eng_09.pdf
The relevant report is page #151.
Aegon Religare's Claims repudiation ratio is above 70% !!!
This is rather extreme. No other insurance company has it so high.
LIC's figure is 1.33%
No other private players' number is so high.
How would you explain this?

I hope this is not what explains the profit numbers of Aegon Religare.
As a person who has bought life coverage from Aegon Religare, i am very nervous about this.

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

From: XXXX Chowdhury
Sent: Fri, January 8, 2010 1:19:11 PM
Subject: Press Coverage- Aegon Religare posts profit

Dear all,

Attached are the scans of the coverage we’ve received:

Yesterday:
In the Financial Express under the headline ‘Life Insurer’s losses soar 43% in FY09’.

Today:
Ø In The Hindu Business Line under the headline ‘Life Insurers’ losses mount 43% in FY09’.
Ø In The Economic Times under the headline ‘Insurance aggregators leave you spoilt for choice’.
Ø Indian Express on web, under the headline ‘Insurance firms widen Net, tap online market’
http://www.indianexpress.com/news/insurance-firms-widen-net-tap-online-market/560856/

Regards,
xxxx
AEGON Religare Life Insurance Co Ltd
Please visit us at www.aegonreligare.com

LIC promises 35% returns! No one can beat that!

2010-01-16T04:57:00.000-08:00

Just see this letter from LIC chief manager pitching an LIC policy. And they say there's no mis-selling!

"Jeevan Saathi Plus of LIC was launched on 29/06/2009. The units became NAV based (initial NAV of Rs 10)
on 29/06/2009. Current NAV of Growth fund as on 13-Jan-2010. is Rs. 11.5500 Average annual growth is :
24.96%

If we hypothetically assume similar performance of LIC in managing the fund of Market Plus-I, then the
benefits can be projected as under....."

I am stunned at this. IRDA has clearly instructed Insurance companies to project returns based on 10% and 6% nominal returns.

Complaint sent to IRDA on Jan 14, 2010

2010-01-14T03:39:00.000-08:00

misleading advertisement by LIC employees

Hello Sir,

i am a policyholder of LIC. Please see the advertisement LIC has sent me. It claims to provide 30% returns.
This is not an advertisement from an unscrupulous agent. But seems from the LIC branch directly.
I called the cell number provided and the person (Mrs. Jayasree Krishnan) claimed to be a
Chief Manager of LIC's N.R.Square branch. She claimed that 10 lakh invested in this policy
would become 1 crore in 10 years. This is an IRR of around 30%.
I feel that this kind of advertising is misleading and customers are being cheated.

According to IRDA guidelines the project returns should be based on a nominal returns of 10%
and 6%. In light of this, this advertisement is a violation of IRDA guidelines.
I hope you take action against such practices so that customers are not cheated.

Please find a copy of the advertisement attached.

regards,
Sumant

Access Your CIBIL Credit Report

2009-10-12T20:52:00.000-07:00

There you go! Finally, individuals can access their credit report in India. Here's the website that has the instructions:
http://www.cibil.com/accesscredit.htm
I am sending a request today. Will post the experience.

Update:
I received the report within the time period CIBIL said. All looks good except that a home loan I have is classified as "Business Loan Priority" for some reason. I have given a letter to the bank I took the loan from asking them to fix this.

This is how the mutual fund industry works

2009-08-22T01:50:00.001-07:00

Courtesy: http://dilbert.com/strips/comic/2009-08-22/

No kidding. This is the reality.

Mutual Funds continue to disappoint me

2009-06-27T09:02:00.000-07:00

When I invest in a mutual fund, I am basically saying that I would rather have an expert manage my funds and for that service, I will pay a percentage of my money. In this relationship, the investor is the employer and the customer. The expert (fund manager) is the employee and the service provider. But how many of us hold the expert accountable for underperformance? Do the fund manager consider it a job they are accountable for?

I invested in a bond fund (Birla Sun Life Income Plus) late last year. This is part of my emergency fund (rest of the emergency fund is in a Liquid fnd).

The YTD returns of this fund is -3.27%.

First, I asked the agent about this. No response. Of course, I didn't expect any. Agents generally consider their job to end once the NFO form and the cheque has been submitted and the commission has been obtained. Till the next NFO comes, the customer is off the mind.

So I asked the AMC why the returns are negative even though interest rates have gone down. (when interest rates go down, bond fund NAV goes up). I didn't get a satisfactory answer. I got a standard patronizing response. ("Bond fund returns depend on many factors. Be rest assured that our fund manager strive to maximize the returns by investing in to securities as per scheme objective"). The correspondence so far has been given below. I will update it as it progresses.

Anyone has any clue why bond fund returns have been negative off late? As a category, the YTD return has been negative.

Correspondence with Birla Sun Life

-----Original Message-----
From: S.Sarkar
Date: Friday, June 26, 2009 08:21 AM
To: birla mf (connect@birlasunlife.com)
Subject: Question on a fund I have invested in

Sir,

can you tell me why the NAV of 'Birla Sun Life Income Plus - Growth' is going down? The interest rate has been moving downwards. Still the NAV is going down.

regards,
Sumant

From: A_Connect
To: S.Sarkar
Sent: Sunday, June 28, 2009 2:03:56 AM
Subject: RE:'BSLFS=008-181-302' Question on a fund I have invested in

Dear Sumant,

We thank you for writing in to Birla Sun Life Mutual Fund.

With respect to your query, we would like to inform you that bond yield in the debt market decreases with the decrease in the interest rate in the market, which results in the decrease in the valuation of investment. (Comment from Sumant - fair enough. Bond interest may go down. But that no way explains why NAV would go down!)

However, the scheme NAV also depends on the various factors.

Further, please be rest assured that our fund manager strive to maximize the returns by investing in to securities as per scheme objective.

For any further information or assistance, please feel free to contact us between 9 a.m. & 9 p.m. from Monday to Saturday on our toll-free number 1-800-270-7000, or, on 022-6691 7777 (non toll-free). You may also visit our web-site www.birlasunlife.com

To avail of the bouquet of value added services we offer/ to request for an Account Statement/ to sign up for SMS/ Email alerts, please click on the links mentioned below:

Online Access registration || Statement on demand || Sign up for Services( SMS / Email alerts)|| To post your feedback || Branch list ||
We assure you best of our services and look forward to your continued patronage
Regards,
Mohd Shabbir Khan
Client Relations
Birla Sun Life AMC Ltd

----- Forwarded Message ----
From: S.Sarkar
To: A_Connect
Sent: Saturday, June 27, 2009 9:08:24 PM
Subject: Re: 'BSLFS=008-181-302' Question on a fund I have invested in

Thanks for replying.
First of all, whenever interest rates go down, the bond prices go up.
NAV should go up and not down.
The interest income may come down, but the returns should not become negative.
So I still don't know why the NAV has gone down.
As an investor, I have a right to ask the fund manager why returns are negative.

Moreover, if you see the YTD returns, Birla Sun Life Income Plus has returned -3.27%
But the category average is -0.83%.
Why has Birla Sun Life Income Plus lagged the category by such a huge margin?

regards,
Sumant

ActiveStatement - Nice online service from CAMS

2009-06-22T04:00:00.000-07:00

This is a really good service from CAMS (Computer Age Management Services). If you have invested in mutual funds and provided an email address in the fund application, you can enter the email address here at the CAMS site. It will fetch ALL your fund portfolios and send you an encrypted & password protected statement covering all the funds. There's more.

Once you have received and opened the statement, it comes "alive". You can interact with it like it's an application. Provide inputs, make corrections, view information on your holdings.

It even let's you do transactions (I haven't tried it yet). It's rare when the Indian financial services industry comes up with an innovative product that is useful for investors. So this definitely is a welcome change. This product is so good that if I were a regular mutual fund investor, I would pay to have access to it. It's possible that the product may become a paid product in the future. Or regulations may severely curtail its usefulness. So enjoy it for free till then. After that you can take a call if you would find it useful enough to pay for it.

Sometimes even prominent magazines get it wrong

2009-06-21T22:13:00.001-07:00

Money Today magazine's current issue provides a list of mutual funds and their past performances. Here's a snapshot of a page:

In the column for price, the fund NAV is listed. What is the price of a fund ? Is it the NAV ? Most investors fail to grasp the meaning of a fund NAV. The absolute value of the NAV is of no consequence. It's just a notional figure. It certainly does not represent the cost of a fund. The cost of a fund is the annual expense ratio and the entry/exit loads. That is what should have been provided here. Sometimes I feel there's a conspiracy to keep the expense ratio under wraps. In the fund documents, it's buried deep somewhere and is hard to fund. Magazines don't talk about it as much as they should. Considering that such magazines are dependent on advertisement revenues from financial companies, it's not hard to see why.

The focus needs to be on the expense ratio

2009-06-21T22:06:00.000-07:00

It's heartening to see the attempts to reduce the entry load for mutual funds. However, the thing that is more insidious is the annual expense ratio. Let's consider that 1 Lakh rupees is invested for my retirement which is 25 years away. Let's say I save the entry load by going direct. Consider a fund that makes 10% CAGR and has a 2% expense ratio. The investment grows to Rs. 6,53,840/-. Now assume I pay 2.25% entry load but the expense ratio is 1.5%. In this case the investment grows to Rs. 7,25,843/-. This is more than 11% higher than the earlier case. So it's clear that common investors are better served if the focus is on reducing the expense ratio. Compared to the western countries, Indian funds charge 2% or more in terms of expense ratio. Even index funds which don't have to hire a fund manager charge more than 1%. Retail investors should make a concerted effort to reduce the annual expense ratio charged by the mutual funds.

Life Lessons I wish I had earlier

2009-05-08T06:10:00.000-07:00

1. Opportunities arrive from unexpected sources at unexpected times. So do threats.
2. Take care of health. Health is indeed wealth. Keep your weight low. Take care of the teeth and knees. They can cause immense pain later. Don’t develop tartar and cavities in the teeth.
3. In an organizational context, when in doubt on whether to reveal or not, reveal. Reiterate message/risks.
4. Dramatize. Don't be plain and boring.
5. Consult. Even if it is only to use people as a sounding board.
6. Genuinely value loyalty and reward it. But can't live off yesterday's achievements.
7. Take time outs to recharge batteries.
8. Balance experience and naivety.
9. Give second chances to people.
10. Don't compromise on integrity. Hard to live with yourself if you are not.
11. Flight and inaction can sometimes be the best response. Live to fight another day.
12. Be proactive. It saves a lot of time and resources and exploit opportunities.
13. Foresee and tackle problems early.
14. Be honest, forthright and upfront.
15. Life is not fair. Get over it. The world owes you nothing. You are not the centre of the universe.
16. Things change with time. You cannot predict the changes. Leap of faith is required in joint efforts (such as marriages, companies)
17. You can control or predict very little. Be flexible and prepared for opportunities and threats.
18. Have some good friends.
19. Praise people behind their back.
20. Do good to people whenever you can, without expecting or asking for payoffs (at least not immediate payoffs).
21. Anyone does anything because he has an incentive. Incentives are extremely powerful. Align them to achieve goals - individual goals and team goals. Eliminate conflict of interest.
22. Be slow to judge negatively.
23. Schedule some quiet time for yourself. Think. It's not easy. But take a step back and think - SWOT or whatever else.
24. Lower your and your community's carbon footprint. Reuse/Reduce/Recycle. Don't hoard. Rent rather than buy (unless it's a long term asset, in which case other factors apply).
25. All progress happens through advancements in sciences. Keep abreast of progress.
26. Don't fret boredom. All achievements are partly due to talent and partly due to persistence.
27. Learn new things/ideas/skills. Build new relationships. Keep existing relations warm.
28. People are important. Teams are important. Teamwork is important.
29. Never miss an opportunity to shut up. Self incriminating stuff are said when we try to fill the silences. Use silence as an effective negotiating tool.
30. Prioritize and work on the important things. Balance urgent with important.
31. Money is like air. We can't live without it. But we don't live for air, do we? Appeal to self-actualization to motivate others (after the basic needs have been met).
32. You cannot count on anyone but yourself.
33. Appreciate generously.
34. Don't walk into a room talking. You never know who is inside.
35. You don't gain respect by cracking racist/misogynist/sardarji jokes. Even if people laugh at it, they secretly look down upon you if you crack such jokes.
36. Never say anything behind a person what you won't say in front of him.
37. Don't spill secrets. Don't encourage others to. One who spills to you isn't your friend either.
38. Good old fashioned politeness never hurts. It's ok to open and hold doors for women.
39. Acquire offbeat skills. Exotic dance, a new language, whatever. It makes a huge difference in people's perception.
40. Mocking someone is a waste of breath.
41. Think many times before firing someone from a job.
42. If you feel hurt, express it.
43. When you are wronged by someone, don't bottle the anger. Don't get hysterical but express your anger and disappointment clearly. Don't tolerate anyone taking advantage of you.
44. The world tramples the weak and worships the strong.
45. People project themselves on to others. Don't ascribe motives to others based on your own nature.
46. It always seems to you that people are in control. Most of the time they are not.
47. Don't attribute to ill-will what can be attributed to incompetence.
48. We are selfish and self-obsessed. Accept it, embrace it. All human progress is motivated by so called vices such selfishness, laziness. Nothing wrong with that.
49. It may seem to you that everyone is watching you. The reality is people are bothered about themselves. They are concerned about how they look and not how you look.
50. Back yourself. Don't undersell. Your success and achievement are limited by not your wealth, caste, looks, skills, but your self-belief. You achieve what you think you will achieve. So think bigger.
51. Data driven decisions can only go so far. Don't get ensconced into complacency just because the decision is data driven. Black swan events are always a possibility.
52. Life is too short to be petty.
53. Mountaineers don't carry bricks in the backpack.
54. People tend to believe what is convenient to them. Examples of such beliefs are:
a. When a person makes a profit in the share market the gain is attributed to skill. A loss is attributed to bad luck, bad timing, evil corporates, evil big bulls, Harshad Mehta etc.
b. When a person doesn't get a job it is attributed to bad luck/ bad interviewer/whatever. But if he does get it, it is due to his ability/skills/experience/potential.
c. all terrorist incidents are sponsored by country x
55. Don't fall for "Everyone is doing it, it can't be wrong" trap blindly.
56. Don't wait for a 100% consensus.
57. People crave for leadership. They'll follow you if you make them believe you can provide leadership.
58. You always have to answer "What's in it for me?" before people do what you ask or follow your leadership.
59. Formal education isn't all that it is cracked up to be. Plenty of people have achieved success without it.
60. This too will pass. Nothing lasts forever.
61. Be conscious of "self talk". Your destiny is made by what you say to yourself in your head. Losers brood. Winners think and mind-talk themselves into success.
62. People rarely change views when someone tries to make them change views. People rarely believe they have erred in any way. Even Al Capone never thought he had committed a crime (though he had just shot a police officer dead who merely asked him for a driving license).
63. People regret much more about things they didn't do rather than what they did do.
64. No point being shy. People are self-absorbed anyway. They won't watch you.
65. If you exude self-confidence, people will take that at the face value and believe in your abilities.
66. People follow a simple heuristic - "looks good = is good". Taller and more beautiful earn more for the same job. You can't fight it. No one said life is fair. If you are aesthetically challenged, work around using skills and self-confidence. If you are gifted, milk it.
67. Some people are smart and will notice any attempt to hoodwink. Maintain integrity.
68. You cannot know in advance which initiatives will bear fruits. Work on many. If you keep doing the right things, something will click and bring results.
69. Avoid fraternization at work. Avoid cliques. Separate personal and work life.
70. Pick friends carefully. You are defined by the company you keep. Your outlook in life is also determined by the same.
71. Pick your enemies carefully. You mark the person as an equal when you pick an adversary. Learn to let go sometimes. Not every battle needs to be won. Not every argument needs to be won.
72. Listen. You learn more by listening than by talking.
73. Wealth creation can be done by (a) knowing your financial goals, risk capacity and risk apetitte (b) asset allocation (c) giving it time. Ignore noise created by TV channels, newspapers, magazines, tips from friends and brokers. Focus on asset allocation and passive Index based products. The odds of you or that star fund manager beating the market over a long period of time is extremely small.
74. Serious wealth needs exploiting a good leverage. Working as an employee or a professional means you leverage your time and skills. Being an entrepreneur means you leverage an idea/product/patent/others time and skills. The 2nd lever is a better one and scales more. Hence more wealth is created this way. The risk of failure from a lever is commensurate to its payoff.
75. It's easier to seek forgiveness than permission.
76. When you take a decision, be prepared to accept and live with all the consequences. You cannot cherry pick only the good results.
77. Your parents are probably the only ones who are truly happy at your success.
78. Most things in life are mixed bags – they have both pros and cons. You always have to weigh in both pros and cons and decide. A clear black or white case is rare.
79. When someone asks for your opinion or feedback, don't give it right away. You may feel flattered and blurt out immediately. Hold your tongue. A lot of times, when someone asks you for an opinion, he doesn't really want your opinion. He just wants someone to agree with his opinion. So ask some follow up and probing questions to ascertain the true intention.
80. You will never have enough time.
81. Plan but don’t take too long planning.

Equity Mutual Funds vs. Index based ETF

2009-02-08T02:40:00.000-08:00

Ask my grandpa. He thinks of FDs and traditional Insurance policies as the only investment instruments. Looking at the historic data, equity is our best chance of earning inflation beating returns. We can create a better asset allocation plan by having a part of our assets in equity. Exactly what % of their assets should be in equity depends on the risk profile and the time horizon. We will be better off considering equity in addition to the existing FDs and insurance policies.

On the other extreme, many of us invest in individual stocks, either from the open market or through IPOs. Implicit in this kind of investing is our belief that the portfolio we create in this manner will do better than the general market. Otherwise, why will we take the pain & risks of individual stocks (the fact that we don't consciously think of this is a sign that we are being irrational).

Do we ask the question - what are the odds that I would beat the general market in a sustained manner ? How many of us work the numbers and evaluate the performance? After adjusting for taxes, brokerage and other expenses, did we beat the general market ? Most of us would be clueless on how to do this ? The right way to do this is to calculate the portfolio IRR over the extended period. In contrast, the most we do is to cherry pick specific stocks and time periods in an anecdotal manner. Useless bits such as "I bought this stock at X and sold at Y" get bandied about. What is required is the portfolio IRR over the complete time period, adjusted for expenses, taxes and risks.

Like the Greeks of the classical times, I know I don’t know anything! I have no qualms accepting that the odds are stacked against me and it's very unlikely that I will be the one whose portfolio will beat the general market.

I turned to equity mutual funds. After investing in them for nearly a decade, I stopped. No, I didn't stop investing in equity. Nor have I started picking individual stocks. I don't read "research" reports from brokerage firms. I don't watch CNBC and such TV channels. Nor do I lend ear to stock tips, internet message boards, newspaper/magazine recommendations and hearsays. The odds of anyone (including the financial "experts") beating the general market over a long period is low. Some fund manager may beat the market. But how do we know in advance who that will be?

To remove the risks of lagging the market risks - the most sensible thing to do is to invest in the Index. No stock picking, no churning, and no fund manager. There are a couple of ways we can invest in an Index. Mutual funds and ETFs. I prefer the latter option due to lower recurring costs.

After investing in equity mutual funds over a decade, I have come to the conclusion that it is good for those who would otherwise shun equity, or who would burn money in individual stocks following "tips". For people in these categories, even a low cost ULIP is a better option.But for others like me, Index based ETFs are a much superior option.

These are my gripes against the Mutual fund industry in India:

1. Systemic risk - the chances of a particular fund beating general market over a long time period is low. I don't like the risk of getting stuck with a laggard. (whenever I have mentioned this to my acquaintances, I usually get a response in the lines of "but fund XYZ has given a return better than the general market over 5/10 years!" To this my response is - sure, it has. First of all, how many have done so among all the funds out there? Don't forget to count all the funds which were killed off midway or merged into other funds. Take "survivorship bias" into account. Secondly, how can we know in advance which fund will beat the market over the next 10 years?)

2. Blatant portfolio churning. Mistaking activity for progress is a common human pitfall. We just don't like inactivity. So you see funds with 100% or more portfolio turnover in India. Most of us don't bother to look into this at all. It adds to the risks and costs. We think of such funds as "dynamic".

3. Fund manager turnover. Unlike the US, the "star fund manager" phenomenon isn't big in India. At least so far. But, for what they are worth, there needs to be stability in fund manager just so there's an accountability. If fund managers move from one AMC to another, they have no incentive to generate good returns. Their efforts are geared to increase the AUM (asset under management) so they can get a better remuneration. This is a complete conflict of interest.

4. The blatant quest for AUM is true for AMCs too. New Fund after new Fund is launched with the sole goal of increasing the AUM. There's hardly any real difference among them. It's so predictable. Whatever has taken investors fancy will be the theme of the new funds. And they come in droves. If infrastructure is the "hot" theme, you will see one AMC after another coming up with Infrastructure funds.

5. Distributors - The devils you can't do without. It's a fact that in India investments (as well as Insurance) are sold and not bought. There is a complete lack of education on personal finance aspects among Indians (can't blame us - thanks to half a century of socialism, most of us are new to the concept of personal finance - so far we did whatever option government gave us - it didn't need any education). So we need the distributors. I don't mind paying an entry load to distributors. But the trailing fee is not logical. If I invest now for 10 years (equity investments should have that or longer time frame), I'll pay a trailing commission even after 10 years to someone for a one time service. I don't mind paying an entry load to distributors if they provide me a real service. If all they do is peddle the latest NFO, ULIP, or whatever gives them the most commission, there's a clear conflict of interest. I am willing to pay a commission to someone who is qualified and takes the effort to study my financial situation, my goals and then recommends an investments. All we have now is a bunch of people certified by AMFI (a certification which has been totally gamed by distribution companies). I am NOT willing to pay any commission to such people. Thankfully, we now have the option of buying funds directly from the AMC. We save on the entry load as there is no commission to pay to any distributors. However, the trailing commissions, incentives, foreign holidays for distributors continue to come from the common fund pool. Over a long period of time, these recurring expenses are much more damaging to the fund's return than the initial one time entry load.
Distributors are essential to increase AUM. Fund companies know this and wield to the power of distributors. They pander to them. All innovation in the fund industry in India happens for the distributors' benefit. Most of the times, at the cost of retail investors.

6. Scheming by AMCs. Whenever SEBI comes up with a new rule that will help investors, the AMCs come up with a way to circumvent it. This is a worldwide phenomenon. The regulatory bodies such as SEBI do not pay very high salaries to employees, but AMCs do. So AMCs attract very bright MBAs. So it is quite expected that the AMCs will be one step ahead of the regulators. When SEBI barred charging initial expenses to the fund for open ended funds, each and every AMC came up with close ended funds. The average Indian investor doesn't understand the implication of open ended vs. close ended, he gets fooled easily.

7. Corporate money is pooled with retail money. Due to hunt for AUM, fund companies do not shy away from giving discount on NAVs or other incentives to corporate investors. Alas, this is at the cost of retail investors.

8. High annual expense ratio - It's appalling to see funds with 2+ % annual expense ratios. What justifies this ? In the west, active funds charge around 1%. With a handicap of 2+ % annual expense, the odds of it beating the market are even lower. Even Index mutual funds have 1% expense ratio. What for ?

So far I am happy with Index based ETFs. They have no fund manager risks and much lower annual expense ratio (0.5% or so). I invest in Benchmark's Nifty Bees. There are some other options too. The expense ratio can go lower. Vanguard ETFs in the US have an expense ratio of 0.1%. So we have some way to go, but it's not as horrendous as 2+ % by mutual funds. We cannot eliminate all the risks (what if Benchmark's Nifty Bees does a Satyam on us!). But looking at all the pros and cons, Index based ETFs are the right option for me and not equity mutual funds.

Importance of Asset allocation

2009-01-03T02:43:00.000-08:00

Investing according to an Asset allocation plan and sticking to your plan is so hard when you are bombarded by noise from newspapers, loud TV channels, tips and "research" articles from brokerage houses, tips from friends and colleagues and of course, blogs such as this. So I thought I'll share some my asset allocation information.

This is at the beginning of 2008.

This is at the beginning of 2009.

The changes were mainly due to the 50% downward market movement. Also, it was a conscious decision to increase the commodity part to 4%. The real estate part increased not due to an appreciation of market value but due to outstanding principal going down as I paid off EMIs. I created a 4.5 Lakh emergency fund and that contributed to an increase of debt percentage. A good chunk of incremental investment goes into debt, whether I like or not (PF, Employee Superannuation, LIC policies).

The general market is down more than 50% and yet my networth has held almost steady. This cannot be explained by the incremental investment in the year 2008 as it represents only 10% of networth. It can be explained by simple principles of asset allocation and diversification.

Based on my risk profile and financial goals, I had decided to have 45-25-25-5 split among equity, debt, real estate, commodity. I would like a higher equity % and a lower real estate %. However, I have to take into consideration the large ticket sizes of real estate investments (in the absence of real estate mutual funds for retail investors in India) and the compulsory debt investments such as PF and Superannuation.

As my current asset allocation is far from my target, this is what I will working at. Increase the equity portion and decrease the debt portion. I won't be able to control the real estate part so much due to the large ticket size. So the future incremental investments will be skewed towards equity. Not that I haven't done so in 2008. But due the need of building an emergency fund and market conditions, the equity % went down.

The point is - we tend to take more logical decisions when they are based on our personal financial profile & asset allocation rather than the noise around us.

Insurance cover for Terrorism

2009-01-01T06:38:00.000-08:00

Terrorism cover of 5 Lakhs cover for 99/- a year
http://click2insure.in/NewFightTerrorism.aspx

It's a group insurance policy from Oriental Insurance co. of India.
Do check the exclusions and the terms and conditions.

Purchase is online and you can generate and print the policy contract note.

This cover is no way a substitute for life insurance. A term life insurance of adequate cover should be taken. A term life insurance covers death by any reason, including terrorist incidents (well, it does exclude suicide in the first year).

Benchark ETF S&P CNX 500 Fund product

2009-01-01T06:37:00.001-08:00

It's unlikely your financial adviser talked to you about the Benchark S&P CNX 500 Fund product. It has been launched recently.
Here's more on this:
http://www.benchmarkfunds.com/static/staticinfo.cgi?filename=spdownloads.htm
http://moneytoday.digitaltoday.in/index.php?option=com_content&task=view&issueid=683&id=4697&Itemid=1&sectionid=106
http://www.outlookmoney.com/olmnew/article.aspx?sid=2&cid=22&articleid=7114
http://www.valueresearchonline.com/story/h2_storyView.asp?str=12251

It's a complete market Index product, ideal for the equity part of your asset allocation. As it is an Open fund, it will be available for buying and selling just like any other fund. Watch for expense ratio and tracking error. Both should be extremely low (upto 0.5% can be tolerated)

Update on Jan 20th, 2008 - Thanks Sandeep for that.

Investing in Gold asset class

2009-01-01T05:36:00.000-08:00

A portfolio should consist of diversified and uncorrelated assets. To that end, investing in gold (and commodities in general) should be part of portfolios of 10 years or longer duration. 5% of networth can be kept in this. (Of course a portfolio depends on many factors but here we are talking about the median portfolio).

How do we invest in gold ?
Indians have a voracious appetite for gold. In fact, Indians are probably THE largest consumer of gold. So it's odd to suggest to Indians to invest in gold.

The issue is Indians buy ornamental jewelery and there's a huge cost of acquisition/ownership with ornamental jewelery -
1. Making charges
2. Wastage
3. Taxes
4. Locker charge
This is akin to entry loads and expense ratios for mutual funds. I analyzed jewelery purchase from a leading place in Bangalore and the "entry load" is nearly 40%! This pales the entry loads of even many ULIPs! There's also a risk of theft, loss and impurity with jewelery purchases.

A much better option is to invest in Gold ETFs. An AMC pools in money from retail investors and keeps gold of certified purity. The entry load is just the brokerage (typically 0.25% to 0.75%). The annual expense ratio is about 1% and it certifies purity and insulates against theft and such losses.

Someone asked me about DSP BR World Gold Fund.
DSP BR World Gold Fund is a mutual fund that invests a part of its corpus in shares of companies involved in gold business such as mining.

The returns from this and Gold ETF are correlated but not exactly the same.

If the goal is to hedge portfolio risks by keeping a part of your assets in gold, Gold ETF is what you should invest in. It tracks gold prices better and has lower expense ratio. It also avoids company specific risks. I cannot think of a single reason for opting for DSP BR World Gold Fund
over Gold ETF.

There are two Gold ETFs available in India:
Benchmark Gold ETF
UTI Gold ETF

To choose between the two, consider the following:
1. Pedigree of the AMC
2. Expense ratio (lower, the better)
3. Asset size (larger, the better as it distributes the fixed costs over a bigger pool)

How the Kashmir crisis began

2007-10-29T06:06:00.000-07:00

BBC has a nice article on this. Reproducing this here in case they archive it off...

http://news.bbc.co.uk/2/hi/south_asia/7057694.stm

-----------------------------------------------------------------------------
How the Kashmir crisis began

It's 60 years exactly since one of the world's most enduring
conflict zones, the Kashmir valley, first erupted in violence.

The BBC's former Delhi correspondent, Andrew Whitehead,
looks back on how the Kashmir crisis started.

Before dawn on Monday, 27 October 1947, soldiers from the Indian army's Sikh Regiment gathered at short notice at Palam airport outside Delhi.

Their mission - to spearhead an urgent military airlift intendedto secure the Kashmir valley for India.

"I arrived at Palam airport at 0300, an hour before the Sikhs were expected," Staff Officer SK Sinha recorded many years later. "The aerodrome was floodlit to facilitate loading and we had tea ready for the troops...

Pashtun tribesmen on their way to fight in Kashmir (Photo: Frank Leeson)

"We were racing against time but fortunately things somehow worked all right." The Dakota planes could take at most 17 soldiers along with personal bedrolls and ammunition. The airfield at the capital, Srinagar was basic - no fuelling or servicing facilities, no tarmac landing strip, no lighting for night-time flights.

Unresolved conflict

The first Indian troops reached there about 9 am on that morning. By the end of the day, 28 military flights had been completed and 300 Indian servicemen had landed.

They were the first ever Indian troops in Kashmir, and the following morning - as they sought to check the advance of invading Pakistani tribesmen - Indian soldiers fired their first shots in a conflict which still remains unresolved.

When India and Pakistan gained independence from Britain inmid-August 1947, the status of Kashmir remained uncertain.

Its autocratic princely ruler, Maharaja Hari Singh, was a Hindu; three-quarters of his subjects were Muslims. He didn't know which way to turn, and he personally favoured the unrealistic option of independence.

A pamphlet for a women's militia formed to fight the tribesmen

To force the issue, sections in Pakistan's army and political leadership encouraged an invasion of the Kashmir valley by thousands of Pathan tribesmen.

They crossed the border in the early hours of 22nd October and - aided by desertions from the maharaja's army - quickly took control of the town of Muzaffarabad.

Khan Shah Afridi, a veteran of the invading force, said he was instructed to go to Kashmir by a Muslim holy man.

"The pir told us we will fight and we should not be afraid. It's a war between Muslims and infidels, and we will get Kashmir freed."

Many Kashmiri Muslims initially viewed the tribesmen as liberators, but the raiders' appetite for loot cost them much local support.

As the tribal army advanced towards Srinagar, the maharaja and his entourage fled by road, south to the city of Jammu.

"Everybody was furious," recalls Leela Pasricha, then in Srinagar; people said the maharaja was "running away, that he was abandoning everybody, that he was a coward. Saving his own skin, that's what we all thought."

Quest for booty

To save his capital city, the maharaja signed the document which made his princely state legally part of India.

The conflict has left some 40,000 dead

At next-to-no notice, the Indian armed forces began the airlift of troops to Kashmir. It was the first big military test of independent India. By then the invading tribesmen, accompanied by a handful of Pakistani army officers, had captured Baramullah, the second city of the Kashmir valley.

"Dirty, blood-stained, ill-kempt with ragged beards and hair; some carrying a blanket, most completely unequipped," wrote Father George Shanks, a missionary priest in Baramullah, describing the ill-disciplined tribal army as it entered the town.

They were armed "with rifles of Frontier make, double-barrelled shotguns, revolvers, daggers, swords, axes and her and there a Sten gun. Jostling one another, shouting, cursing and brawling, they came on in a never-ending stream".

The tribesmen ransacked the mission, looted Muslim homes and businesses, and abducted Sikh girls and women.

The quest for booty delayed their advance towards the Kashmiri capital. The Indian airlift, and strafing and bombing by India's air force, started to tip the military balance against the invaders.

But the tribesmen were effective fighters, and they reached the outskirts of Srinagar.

In the capital, the Kashmiri nationalist leader Sheikh Abdullah -an opponent of both the maharaja and of the tribal army - stepped into the power vacuum. He organised a militia of his supporters, men and women, to help keep the tribesmen at bay.

Within two weeks of the start of the invasion, the tribal fighters were in disarray. Almost overnight, they turned tail and headed out of the Kashmir valley, with Indian troops in pursuit.

But while the Indian army won control of the valley, some other areas which had been ruled by the maharaja remained with pro-Pakistan forces.

Kashmir has, in effect, been partitioned ever since. By the spring of 1948, Pakistani troops were openly deployed in Kashmir, and the two countries were at war.

Kashmiri Muslims, many of whom initially acquiesced in Indian rule, have in recent years been more hostile.

The past 18 years of separatist insurgency has seen huge loss of life - about 40,000 people killed by the most conservative of estimates.

The rise of Islamic radicalism and the nuclear arsenals of the two claimants of the Kashmir valley, India and Pakistan, have compounded the conflict.

In recent months, there has been more talking and less killing. But 60 years on, there's still no sign of a lasting solution to Kashmir's suffering.

----

Dateline

KASHMIR 1947
14/15 August: India and Pakistan gain independence - Kashmir's status
remains unresolved

21/22 October: Pakistani tribesmen invade Kashmir at night - by dawn
they have overrun Muzaffarabad (now the capital of Pakistan Kashmir)

24 October: Tribal army captures Kashmir's main power station at
Mahura, plunging much of the valley into darkness

25 October: Kashmir's maharaja and his entourage flees Srinagar late at
night by road for Jammu

26 October: Thousands of armed tribesmen enter Baramullah, the second
town of the Kashmir

27 October: In response to the maharaja's plea for help, the Indian
army begins a huge air lift - the first troops land at Srinagar about 9
am. The Indian government accepts the maharaja's formal request for
Kashmir to become part of India. Tribal fighters ransack and desecrate
a convent and mission hospital in Baramullah, in the most notorious
episode of the invasion

31 October: The Kashmiri nationalist Sheikh Abdullah sworn in as head
of a new administration - his National Conference militia prepares to
defend Srinagar from the advancing tribesmen

7 November: Indian troops rout tribal fighters at Shalateng outside
Srinagar - the invaders retreat hastily

8 November: Indian soldiers take control of Baramullah

11/12 November: Nehru, India's Prime Minister, visits the Kashmir
valley, almost all now under Indian army control

Portfolio Update in Money Today magazine

2007-10-28T08:53:00.000-07:00

The latest issue of Money Today (page 32) magazine has taken a second look at
some of the Portfolios they have reviewed over the last one year.
The section is here.
Here's a portfolio that was originally reviewed in March '07 issue.
The article is cross-posted here:

-----------------------------------------------------------------
http://moneytoday.digitaltoday.in/good-getting-better-3.html

Good getting better
October 24, 2007

Sumant Sarkar is reaping rewards of a good diversification strategy

BEFORE THE CHECK-UP
* Investments spread across all asset classes
* Aggressive equity player investing in both mutual funds and direct equity
* Ample insurance cover through term and endowment policies

WHAT WE SAID
* Tweak investments in funds for better diversification
* Convert endowment policies into term plans, take family health cover
* Increase investment in pension plans to build retirement corpus
* Take a loan for investing in real estate

ACTION TAKEN AFTER OUR PRESCRIPTION
* Changed mutual fund portfolio according to advice
* Bought a family floater health insurance
* Taken a loan for second real estate investment. Paid higher down payment than originally planned.
* Investing in equity-diversified funds rather than pension plans for building retirement corpus.

FINANCIAL HEALTH NOW
Financial planning couldn’t get a better brand ambassador. The rewards are for all to
see (and envy) in Sumant Sarkar’s portfolio. Invested across all asset classes,
he’s making his money work terribly hard. But it is the investment blend that is amazing.

For most investors, one property purchase gobbles away 60-70%
of total assets. Here’s Sarkar, owner of a Rs 32-lakh apartment
with real estate constituting just 27% of his portfolio. Even equity
investments stand a notch higher. It was a near-perfect
investment strategy and we presented it likewise — a model portfolio.

But some nip and tucks would make a better fit. Like reducing
concentration in Franklin India Prima fund and investing in
mid-caps (already in his kitty) for better diversification.
Spreading investments within an asset class is important
to reduce risk. Especially in the unpredictable markets where
a consistent performer can take a sudden downturn.

Letter to Editor, Outlook Money sent on Oct 28, 2007

2007-10-28T04:27:00.000-07:00

I really appreciate SEBI's move to bring no-load mutual funds. I do not
think the distributors deserve a 2.25% cut specially all they seem to do
is peddle NFOs. Every time I have to meet distributors to renew my
SIPs, they try to influence me to invest in NFOs in large amounts.
They blatantly misguide about the "benefits of low NAV". I have to
request them not to give me any investment advice and just do the
transactions. I feel very bad about shelling out commissions to such
distributors. I will be very happy to invest directly with funds,
bypassing the middlemen.

Secondly, I wonder why the expense ratios are so high in India.
The expense ratios of a typical equity fund is double that of such
funds in developed countries. When we claim to have efficient
stock exchanges with the lowest transaction costs, why are the
expense ratios so high ?

I think the role of middlemen can be reduced in Insurance area
as well. Let the person who is purchasing insurance do his/her
own paper work, medical tests etc. That can reduce the premium.

on ETFs

2007-09-29T08:38:00.000-07:00

This was published in Money Today magazine.

----------------------------------------------------------
How to invest in an exchange traded fund?
August 8, 2007

Question :

I don’t like the high entry loads and expense ratios of equity funds. How can I invest in exchange traded funds (ETFs)? What is the load structure and expense ratio of an ETF? Which ETF tracks Nifty 50? How can I invest in it?

— Sumant Sarkar, Bangalore

Answer :

How to Buy: As their name suggests, ETFs are traded on stock exchanges just like any listed share. You can buy an ETF if you have a trading account with a stock broker. You also need to have a demat account.

Load Structure: ETFs have lower entry load than equity mutual funds. The brokerage payable is around 0.5% (including commission, service tax and securities transaction tax). Equity mutual funds charge 2-2.5% entry load. But there is no exit load in open-ended mutual funds. In case of ETFs, you also have to pay brokerage when you sell the units, so the total load adds up to 1%.

Index Tracking and Pricing: ETFs track a stock index and invest in shares of that index in the same proportion. They are priced at a specified fraction of that index. For instance, the Banking BeES ETF is priced at 10% of the Bank Nifty level while the Nifty Benchmark ETS is priced at 10% of the S&P CNX Nifty. If the Bank Nifty is at 6838 level, the Banking BeES will be trading around Rs 683.80 per unit. Similarly, when the Nifty is at 4,200, units of the Nifty BeES will be traduing around Rs 420 each.

Recurring Expenses: Since they invest in a fixed basket of shares and do not require active management, ETFs have a lower expense ratio—the recurring annual charge for managing the fund—of about 0.3-1%. In comparison, actively managed equity funds have expense ratios of up to 2.5%.

Index Funds: A fund type that resembles ETFs is index funds. Like ETFs, index funds have low expense ratios. These funds track stock indices and invest in the same basket of shares. The entry load is about 2.5% and the expense ratio is about 1%. But index funds do not match benchmark returns so closely as do ETFs. In fact, they often underperform the benchmark.

Equity Funds: Of course, there is always the option of investing in equity funds. Well managed equity funds usually outperform the benchmark, thus justifying their high expense ratio. But they are more volatile than ETFs and index funds. If you are willing to take a little risk for higher potential returns, diversified equity funds are a better option.

Real Time Trading: ETFs can be traded at any time during trading hours. Equity fund and index fund transactions are recorded at the end of the day.

Financial Questions I received from a friend

2007-09-25T10:58:00.000-07:00

Publishing here if it helps other readers
=============================

Question:

Needed a quick advice.

Ever since my EMI days, I have been slowly out of the market.

And now, I am so totally out of the market.

I just wanted to keep some money aside, and was wondering which was a better option.

Now that banks are giving a 9.5% interest rate, should I make an FD? Or should I invest in MF?

Even at 16K index, if you suggest an MF, then could you please suggest me funds and give me a breakup for investing 1L

I trust your market knowledge the best, and also got no time for any research, and hence would like to follow your advice.

Would really appreciate your time in suggesting.

Response:

this is so heartening to see young people investing for future.

The choice of investment instrument depends on your goals, risk tolerance

and risk capacity.

I read this in your email : "I just wanted to keep some money aside".

This begs the question - what for ?

I mean, what is the goal for this money ? Sounds like you would like to keep

some money as an emergency fund, which can be used in case you need money

urgently for some reason. This is a very good idea and experts say you should keep

about 6 months expenses (plus EMIs) as "emergency fund".

In case of a job loss or health problems (god forbid), this will help you.

So if that's what you have in mind, this fund should be kept in an instrument

where the risk of principal loss is minimum.

FD would be a good idea but for high tax brackets, the post-tax return sucks !

This doesn't even beat inflation. So 9.5% rate actually is not that attractive because

after tax, it is more like 6.5%.

I would consider Liquid mutual funds or variable interest rate debt funds.

They are tax efficient. The post-tax returns are better than FDs.

If you can block the fund for some period (a year or more), you can look at

FMPs. But then blocking funds earmarked for emergency doesn't make sense.

I would strongly suggest Liquid mutual funds. Opt for dividend reinvestment option.

But don't keep too much money in this emergency fund. Six months expenses plus EMIs.

Any more, and you are missing out on higher returns of other financial instruments.

Look up this site for more info on these funds.

Hope this helps.

"Even at 16K index, if you suggest an MF"

Choice of financial instruments has nothing to do with index levels.

It depends on your goals and your risk profile. I invest in equity MF every month for

my long term goals, irrespective of where index is.

Question:

Thank you for such a detailed mail.

My purpose was actually an emergency fund, which you figured so well.

Thank you for explaining how much an emergency fund should contain.

I really wasn't so sure.

I shall go over all the options that you have mentioned and then write back, for suggestions/clarifications.

"If you can block the fund for some period (a year or more), you can look at FMPs. But then blocking funds earmarked for emergency doesn't make sense."

What are FMPs?

Also If I want to start to invest monthly in MF, do you have any MF recommendations?

Response:

you are welcome !

FMPs are a special kind of bond funds.

Bond funds (also called "debt funds") are mutual funds that take money from investors like us

and lend to companies and government. Usually they don't lend directly. But they buy bond papers.

Usually debts are long term things - may be decades. To provide liquidity (so that investors can get

out if they wish to), debts are secuterized and sold in small pieces (called bond papers).

So these bonds are sold and bought in the market just like shares.

Bond funds trade in such papers and the value of these papers determines the NAV.

How FMPs are different is that they buy and hold papers for a Fixed Maturity Plan.

So they are not so volatile and the NAV doesn't swing when interest rates change.

So FMPs are safe investments in terms of volatility. They give around the same return as FDs do.

But they are much more tax efficient (for those in high tax brackets).

These should help you:

http://www.dnaindia.com/report.asp?NewsID=1001843

http://inhome.rediff.com/money/2006/dec/27spec.htm

http://www.themoneytimes.com/articles/20060715/fixed_maturity_plans_the_best_bet-id-10815.html

http://www.rediff.com/money/2006/jul/10perfin.htm

http://in.rediff.com/getahead/2005/may/16fund.htm

"Also If I want to start to invest monthly in MF, do you have any MF recommendations"

I would love to, but I have no data on your goals and risk profile to base my recommendations on.

Feel free to call me and discuss.

SeventyMM Video rental service review

2007-06-24T08:36:00.000-07:00

1. Largest collection in English, Hindi and 12 regional languages
2. Browse and select movies online
3. Get movies delivered and picked up for FREE
4. No late fee - keep movies as long as you like

That Simple ! This is the value proposition of SeventyMM, India's equivalent of NetFlix.

The first online video rental store - they claim to be the only one in India, and they have a large
collection - over 15,000 titles. You can join as a member, and select movies, and they are delivered
to your home. Clearly, this is based on the extremely popular Netflix service in USA, which is rapidly
spreading to many cities, and will overtake Blockbuster soon in terms of revenues.

Everything online
You can sign up, select and browse videos, ask for pickup and delivery, all online. The Search feature
can search by title, actor, director. You can't do this at your video store.

The collection to choose from
They keep adding more titles to their list all the time, they already have a decent collection of 15,000+
videos in many Indian languages and English. You may find movies you normally don't see in your local video
store. How it works - you browse their collection, and make a list of movies to watch. Each time,
they deliver the top two movies on your list. You can keep adding to the list.

Pickup and delivery
You never have to step out of the house, they deliver the videos, they pick up the videos.
Within 1 day of your request.

Good prints
Frequently your video store carries pirated prints. Camera in theater prints are especially horrible.
Here they carry only legal DVDs/VCDs, so the prints will be good. No more disappointments due to
unwatchable prints.

No late fees !!
You can keep them as long as you want. Your local video store guy charges by the day, doesn't he ?
That’s not very convenient if you couldnt watch the video for some reason, and need more time,
or want to watch again with a friend.

Fixed prices
The Basic monthly membership is 199/-, for which you can see 4 videos a month. That works out to 50 Rs per DVD,
which is the same as your local video, minus your petrol charges for driving up to the store.
The Unlimited plan is 549/- a month, for which you get as many videos as you want. 549 Rs works out to
about 11 videos per month in your local video, at Rs 50 per video. So consider which suits your viewing
habits better. You can only get 2 videos at a time. You can return them as late or early as you want,
and get two more. The Basic plan seems to be for people who watch very infrequently, and Unlimited for
those who watch a lot of movies. You can of course also keep your local video membership, if it is cheaper,
and use the SeventyMM's Basic service to get those harder-to-find movies.

Other costs
They also have a deposit of 999/-, which is refundable if you cancel your membership. That seems a little high,
but as they are carrying legal (non-pirated DVDs), then the cost of two DVDs is about a 1000 rupees, so that
makes sense. There is a registration fee of 499, which is not returnable. This is probably to keep out the
people who wanna join for short term only. However, from time to time, they have offers to reduce this
registration fee to 199/- or remove it altogether.
Update: Actual experience of people about getting back the security deposit back is not all that good.
It can take around 1 month.

Trial membership
There is none generally. But from time to time, they have offers to give 1st month off so you can try
their service.

Free membership if you bring friends
If you bring six friends to join up, your membership becomes free forever!!. For every friend you bring,
one-sixth of your membership fee is reduced.

Availability
Currently available only in Bangalore, Delhi, Bombay, Chandigarh, Chennai

Advice
Please make sure you browse their database of movie titles (that is open for non-members also) to make sure you like
their collection, before joining.
This is a new service, so there will be some glitches. For eg, when a new Bollywood movie comes to video, everyone
will want to watch it immediately. But depending on how many copies of the movie they have, you may not get it
immediately. You also get the movies in the order of your list, so there you dont have a choice, I think, if you
suddenly change your mind. Delivery and pickup times may also vary, and someone will have to be home to deal with
the deliveryman. If you are a working-couple, this may be a bit of a problem. I hope they are flexible and can
deliver at your convenience, in such a case.

You can share the videos, since Seventymm.com allows you to keep them as long as you want.

I think this is a very good service as such, and I hope Seventymm is here to stay and get better
I have used Netflix in the US, and initially I had some doubts, but this online format with door-delivery works really
well there. There I get the videos in the mail. In India, by mail is not really a good option, so it will be
personal delivery.

My first attempt at Ambigrams

2006-07-09T03:29:00.000-07:00

Beautiful song

2006-05-29T09:04:00.000-07:00

Ye Tera Ghar Ye Mera Ghar, Kisi Ko Dekhna Ho Gar
To Pehle Aake Maang Le Meri Nazar Teri Nazar
Ye Tera Ghar Ye Mera Ghar, Ye Ghar Bahut Haseen Hai
Ye Ghar Bahut Haseen Hai, Ye Ghar Bahut Haseen Hai

Na Baadlon Ke Chhaon Mein, Na Chandni Ke Gaaon Mein
Na Phool Jaise Raaste Bane Hain Iske Vaaste
Magar Ye Ghar Ajeeb Hai, Zameen Ke Kareeb Hai
Ye Eent-Pattharon Ka Ghar, Hamaari Hasraton Ka Ghar
Ye Tera Ghar...

Jo Chaandni Nahin To Kya, Ye Roshni Hai Pyaar Ki
Dilon Ke Phool Khil Gaye To Fikr Kya Bahaar Ki
Hamaare Ghar Na Aayegi Kabhi Khushi Udhaar Ki
Hamaari Raahaton Ka Ghar Hamaari Chaahaton Ka Ghar
Ye Tera Ghar...

Yahan Mahak Wafaaon Ki, Mohabbaton Ka Rang Hai
Ye Ghar Tumhara Khwaab Hai Ye Ghar Meri Umang Hai
Na Aarzoo Pe Qaid Hai, Na Hausle Pe Jung Hai
Hamaare Hauslon Ka Ghar Hamaari Himmaton Ka Ghar
Ye Tera Ghar...

Film: Saath Saath
Singers: Jagjit/Chitra Singh

So right that it is wrong ?

2006-05-20T06:04:00.000-07:00

Just about everyone says that when it comes to financial planning, our most important friends are:
(i) Diversification
(ii) RCA (Rupee Cost Averaging)
(iii) AAP (Asset Allocation Planning)
(iv) Saving on investment expenses & taxes

In this blog, I have recommended these myself. But sometimes, something can be so right that it is wrong!

Let me explain:
Going for higher education and acquiring skills are the right things to do. Most of us, who do it, make a reasonably good life. They give us the tools to make a good living. However, a Bill Gates or a Steve Jobs comes and makes billions with no college education...
And I think that this is fair - risks and rewards should be proportional.... We manage/minimize financial risks by doing RCA/AAP etc and we create so so wealth... someone else takes higher risk by going after a new idea and makes a lot more wealth.... this is how things should be.....
For most people, "so so wealth" is a pretty good thing and hence DCA/AAP etc are still valuable... but if everyone did these, humanity may miss out on some innovations. Humanity needs mavericks who will give higher education a miss… or who will refuse to diversify financial assets and put all eggs in a single basket (as Bill Gates did on Microsoft).

Makes me wonder… right and wrong can be so relative to the person!

Higher education success in India

2006-05-15T07:26:00.000-07:00

Today i read some moronic comments about how IITs are better than top US schools because the acceptance rate at IIT is way lower than the top US schools.. and that Narayan Murthy's son treated Stanford/Cornell as safety schools... blah.. blah.. blah..

The best rebuttal of this is in Atanu Dey's blog... It is a Herculean task to get into a Mumbai local during commute hours, compared to that, using the Paris Metro is a piece of cake. Does that make the Mumbai local better than the Paris Metro ?

Congestion is not an indicator of quality.

The higher education in India will continue to suck and will lack innovation until:
1. Government gets out of it and allows free market forces to play. No subsidies, no control, no policy mandated affirmative action in higher educational institute.
2. Indians dump the culture of respecting teachers and respecting books. As long as the basic premise of our educational system is "teachers know it all" and "books are always right", there can be no innovation/creativity. Innovation needs an attitude of challenge/disrepect/disdain towards existing beliefs/order. Too much respect for teachers and books gets in the way of that.

How I miss good lyrics in bollywood songs!

2006-02-26T07:52:00.000-08:00

I wonder why we stopped producing good lyrics in film songs now…. heard the song “Fazaa Bhi Hain Jawaan” on radio the other day … and my heart skipped a beat... the haunting, nasal and very melodious voice of Salma Agha is just awesome… not to mention that the film Nikaah is a very good film making a case for women’s liberation. For some reason, many films with strong women’s role and promoting women empowerment tend to have great songs (example: Umraao Jaan, Damini).

Anyway, enjoy the lyrics:

fazaa bhee hain jawaan, jawaan,
hawaa bhee hain rawaan, rawaan
sunaa rahaa hain ye samaa,
sunee sunee see daasataan

pukaarate hain door se,
wo kafile bahaar ke
bikhar gaye hain rang se,
kisee ke intazaar ke
lahar lahar ke honthhapar,
wafaa kee hain kahaniyaan

bujhee magar bujhee nahee,
na jaane kaisee pyaas hai
karaar dil se aaj bhee,
naa door hain naa paas hai
ye khel dhoonp chhaanw kaa,
ye kurbate, ye duriyaan

har yek pal ko dhoondhataa,
har yek pal chalaa gayaa
har yek pal firaak kaa,
har yek pal wisaal kaa
har yek pal guzar gayaa,
banaa ke dil pe yek nishaan

sunaa rahaa hain ye samaa,
sunee sunee see daasataan

Travesty of History

2006-02-26T07:12:00.000-08:00

It's amazing how India and Pakistan are mirror image of each other in terms of falsifying history to suit the powers-that-be. I have hinted earlier in my blog how the historic accounts we read in books are misinterpretations at best, and fabrications and lies at worst. It was disappointing to read even Narayan Murthy uttering the clichéd lines of glorious first millennium in India while considering the second millennium as the dark age of "islamic invasions". The reality is anything but this black or white. However, the topic of history falsifications is a complex one and needs a book rather than a blogpost to elucidate. What prompted me to write this, is this news item.

"Kabul objects to Pakistani missile names
KABUL, Feb 22, 2006: Afghanistan formally complained to Pakistan for naming its ballistic missiles and other weapons after historic Afghan heroes, a minister said here on Wednesday. Afghan Information Minister Makhdom Raheen said that Kabul had recently sent a letter through its foreign ministry to Pakistan over the use of names of Afghan nation’s heroes, including Mohammed Ghauri, a 12th-century conqueror who ruled what is now Afghanistan and invaded areas in what is now India and Pakistan several times. A series of Pakistan’s ballistic missiles is named after Ghauri, including a 1,500-kilometre-range nuclear-capable weapon. “We asked them (Pakistan) not to use the names of great elders of Afghanistan on weapons of mass destruction or other war equipment,” Mr Raheen said. “These great elders played a major part in building national solidarity and in transferring science and knowledge from the homeland across southwest Asia.” Pakistan’s Foreign Ministry spokeswoman Tasnim Aslam refused to comment or say whether it had received such a letter. Afghanistan is also complaining about Pakistan’s use of the name of Ahmad Shah Abdali, an 18th century king who founded the powerful Durrani dynasty, on a weapon that Raheen did not identify. Abdali laid the foundations for the Pashtun tribal rule in Afghanistan. Mr Raheen said Pakistan was welcome to use the names but only for peaceful things like memorials, monuments, conference rooms and historical places. — AP"

The reason the generals in Pakistan chose these names? Of course, to intimidate the Indians and psychologically browbeat them! Indians of course have their own twisted version of history that conveniently forgets to mention that Ghazni fought other Turkic and Uzbek powers much more than he did Indians. He fought and killed Turks, Persians, Uzbeks (all muslims) much more than he did Indians. These accounts also avoid any mention of the hindu rajput kingdoms of what is Afghanistan today. It was this kingdom (Anandapal, Jayapal etc) that Ghazni fought in his later career, as he usurped them and established his empire there. The complex maze of rajput alliances and counter alliances made Ghazni friend of some and foe of others. Anyone wonders why he only attacked a few rajput kingdoms again and again but never molested others like the chandela kingdom? The chandela kings made the Khajuraho temples which were never touched by Ghazni. Why Somenath again and again when there were many rich temples to loot Kabul eastwords. Indian history is also silent about the rajput/hindu generals and soldiers that fought on the side of Ghazni. It’s sad to see the travesty of history in Indian historic accounts, which see this complex series of events as a one-dimensional “hindu vs. muslim” colour. A mistake whose repercussions we see all the time in the bitter fruit of communal riots in south asia.

Now, back to the news item on dawn. Sure enough, there was an innocuous little response from a Karachi resident.

"Afghan demand
THE Afghan government’s demand (Dawn, Feb 23) that Pakistan should stop naming its nuclear-capable missiles after their heroes should be taken seriously by the government.
After all, Mahmud Ghaznavi, who had invaded our soil in the 11th century, Mohammad Ghauri, who had established Afghan rule in northern India in the 12th century, and 18th-century Pakhtun king Ahmad Shah Abdali, who led several incursions into India, were Afghan citizens. They had earned a lot of glory for their country by conquering our territories. But more than that we must correct our history in which these invaders are seen as heroes and defenders of the faith. Pakistan’s nuclear hero Dr Qadeer Khan had spent millions of rupees (enough to construct several dozen schools) on repairing of Mohammed Ghauri’s grave in Pakistan. The Afghan government never thanked us for that act. The Afghan demand is enough to underscore our ruling elite’s predilection for Central Asian and Middle Eastern history and distaste of their own past. Their distaste for this soil’s past and thinking of decorating invaders is evident. It was this policy under which the rulers disassociated themselves from the rich past of the country which inherited the Indus Valley civilization. They started tracing their roots to the Middle East and Central Asia. It is time to re-write history and see what is the best in our own soil and people.

MANZOOR CHANDIO
Karachi"

Indeed, reading the history as presented to Pakistanis makes me sit up in horror. Not just because of the blatant and unfair anti-india and anti-hindu overtones. But because here’s a sad case of people celebrating rapine of their own land and people. Mohammad-Bin-Qasim, Ghazni, Ghori and above all, Ahmad Shah Abdali attacked, looted, committed Qatl-e-Aams in Sind/Hind, as they did elsewhere, but the brunt of these attacks were borne by the very areas that constitute today’s Pakistan. Pakistani cities like Lahore, Peshawar, Multan took beatings all the time from central asian and Afghan invasions. Given that the overwhelming majority of Pakistanis are NOT progeny of Arabs/Persians/Turks, and are of south asian stock, Pakistani history reading is basically celebrating the rapine of their own ancestors. I don’t know of such a case anywhere else in the world.

Reading letters such as the one above from Manzoor, leaven my hopes of eventual rapprochement between the two south asian nations.

Google says, "So long Dalai Lama, Hello China !"

2006-02-18T09:39:00.000-08:00

Spot the difference ? Image Seach results for "tiananmen" in Google.cn
and regular Google.

How's the "don't be evil" thing working out Mr. Page ?

Converting black money to white

2006-02-15T09:09:00.000-08:00

Like every body else, I have relatives who are agents of LIC. You know the kinds who call you up and peddle high-premium insurance policies. I met one such relative during a cousin's marriage. He claimed he could give me any policy without any medical checkup. Not to mention the usual 50-50 split of commission. The commission splitting is very common. I was more intrigued about the "no medical test" part. So I asked how it was possible to do that when LIC clearly needs medical documents for underwriting purpose. He explained to me that he can get medical documents arranged with no difficulties. I was like, "hmmmmm...". What came next was a shocker. He explained to me that most of his clients were businessmen who bought single premium policies - where the one time premium is in lakhs. Mostly as an investment - not for insurance. I advocate term policies to most people. So I was interested to know why many businessmen would buy single premium almost pure investment type policies. My relative explained to me the whole process of how many businessmen convert black money to white. Let's say they have a black money of 1 lakh. They purchase a policy of 1 lakh single premium. Now LIC doesn't care or check about the source of the income. So they issue the policy bond. Now the person can sleep at ease because if Income Tax officials do a raid, they won't find the money. However, there is the problem of the policy bond. That can be found by the IT officials. Solution is simple and ingenious. The businessman would take a loan of a small amount (say, a hundred rupees) from LIC. Now, LIC would take the policy bond as a collateral. So in effect, LIC takes care of the safe-keeping of the policy document. The tenure of the loan will usually match the tenure of the LIC policy. So at the end of term (say, 5 years), the businessman gets back the bond which he then uses to liquidate the original investment. Now this money is white as it is the maturity proceeds of an insurance policy. Since IT officials can only dig through three years of paper, they cannot question on the source of funds of the insurance premium. Neat, isn't it ?
Here I am - suggesting simple things like term insurance and mutual funds. So naive !!!

P.S - This is not an advice or suggestion for an illegal transaction. I pay my taxes and do not endorse anything illegal. Loss of sleep and risks are not an adequate compensation for the gain by tax evasion. Just don't do it.

P.S 2 - The story could be apocryphal. Even if it is true, I am sure the IT department is smart enough to have caught up by now.

Somebody explain Bush's strategy to me

2006-02-12T04:34:00.000-08:00

As Bush is going after Iran now, I can't help but wonder what a strange approach his has been. Before the advent of his "War on Terror", Iran was surrounded by enemies on both sides. The fanatic sunni Taliban hated the Iranian shia regime. Saddam Hussein's government fought Iran for eight years. If the war on terror helped any country become more powerful, it is Iran. As the US army destroyed both Taliban and Saddam's Bath regime, Iran not only got rid of its arch enemies, but also moved in to flex its muscle in Iraq and Afghanistan. As host to million plus refugees from Afghanistan, Iran had a legitimate say in what happens in post-Taliban Afghanistan. The Herat region is awash with Iranian agents singing to its master's tune. Historically, Herat has always been under Iran's part or at least in its sphere of influence. Now that influence is very strong and is something US will find hard to shake off. Recent elections in Iraq brought decided Iran sympathesizers to the forefront. Never has been Iranian control so strong over Iraq. This has been a gift from US to Iran. Now if US goes after Iran, there will be repurcussions in Iraq too - which will surely get destabilised by Iran sympathizers.

US resources are stretched to the breaking point already. The last thing it can afford is to make its enemy more powerful before an attack. Having committed the mistake, US would be better off discussing a negotiated solution to the current Iran issue. However, I doubt US would like to leave Iran alone now. Having understood the extent of Iranian influence, US can hardly leave the region as an open playfield for Iran.

Crusades 2.0 ?

2006-02-12T00:49:00.000-08:00

"Deus lo volt!" (God Wills It!). Said, Pope Urban II about a thousand years ago. This speech, delivered in central Gaul (modern France), started a series of attacks by Christian Europe on Middle East. The soldiers were mostly french but the armies included soldiers from almost all of european christiandom. The purported purpose of these attacks on middle east was to make the christian pilgrimages to the holy land safer. But soon it transformed into a general attack on Arabs and Jews in the area. These attacks, now called the "crusades" collectively, succeeded in planting a small christian kingom in the heart of the middle east. It took more than 100 years and the bravery of Saladin for the Arabs (+Turks+Kurds) to finally shake off this kingdom from their midst. But this series of wars permanently scarred the relations between the middle east and western europe. The mistrust and hatred, though may be under the surface now, has persisted to the modern era. During the height of western colonial era in 1920, as the french soldiers marched through the tomb of Saladin in Damascus, the words of the French General Gouraud were, "Saladin, we are back !"

So what's the relevance of the crusades now ? It feels that the world is hurtling towards another round of crusades now. Consider the events of recent history:
1. Western colonism over arab countries
This includes not only the middle east, but north africa too. Other regions that have arab influence and suffered from western hegemony, include Iran, central asian countries, south eastern asian countries. The colonial era was replete with economic exploitation and mass murders (eg: Algeria). The mass murders may be over now that colonialism is over. But western companies still dominate key industries (Oil, of course) and sustain tin-pot dictators and "kings". The western hypocrisy is so obvious when it talks about democracy and liberty when convenient and then hobnobs with regressive governments and gives strength and legitimacy to these. I dare say that without western props, many countries like Saudi Arabia, Pakistan may be having democracy now.
2. Breakup of Ottoman Empire
After the industrial revolution in europe, Ottoman empire started losing its power and started shrinking - first from europe, then in middle east itself. The WW-I was the final straw for the Ottoman empire. The loss of Khalifa was something many grudged back then (and started a "Khilafat movement" in India too).
3. Creation and western sustenance of Israel after WW-II
I always wonder if it is a coincidence that the map of Israel is almost identical to the crusader kingdom established a thousand years ago. No need to discuss what the creation of this country (and its later land acquisition in 1967) did to relations between the arabs and the west. We can read about the affects of this in the newspaper everyday.
4. East Timor independence
The world meditated independence of east Timor was seen by many in islamic nations as an interference and similar reciprocal interference is not there in cases like palestine, kashmir, chechnia etc. (These are not my opinions - but this is how many in islamic nations see it)
5. 9/11 and War on Terror
The hundreds of thousands of civilians that have died in Iraq and Afghanistan since the so called War on Terror started, pale the 9/11 casualties (with all due to respect to those who died in 9/11 - they certainly didn't deserve to). The US may find the war justified but the other side almost uniformly sees it as an unjust war doing more damage than good.
6. Cartoon controversy
Again, it is being seen as a general western attack on muslim sensibilities. While I am all for freedom of press, it is hypocritical to jail someone for an anti-semitic remark while allowing gross insult to Prophet Mohammad (PBUH). Keep a single set of rules for everyone on all issues. I am not condoning the violence conducted by protesters in Syria but western countries are not blameless.

My fear is that Bush administration and such other brainless western regimes will take the world towards another series of wars akin to the original crusades.

From India's point of view, she should hedge her bets. Like China is doing. Don't take any sides. Take advantage of this situation and start making deals with nations involved.

Don't give in, without a fight !!!

2006-01-26T00:00:00.000-08:00

This post is not about the famous Pink Floyd song. But it is what I want to say to the Indian administration today. I am not the patriotic type (saying this on Jan 26th !), but I am amazed at the foolish manner India is wasting away the golden opportunity she has.

So, US Ambassador David Mulford says the nuclear deal is off, unless India votes in its favour, against Iran. And India is meekly towing the line. Hang on ! haven't we forgotten what Chanakya wrote in his book, a book that we keep touting to the world. "Keep your cards close to the chest" – Which part of this is the administration not understanding ?
US administration's bullying tactics are in line with its self interest and the hawkish right-wing government it has. But why doesn't India realize that it is US that needs the nuclear deal with India more than she does ? India is US's only chance of having a real ally in this part of Asia - standing as she does among decided US haters. India can get access to alternate sources of energy even if she can't get nuclear fuel from NSG. To hell with NSG. There's plenty of natural gas left in Asia/Russia. Combine this with non-conventional energy resources, India can last till fusion is ready to deliver energy (at that time, nuclear fuels like uranium/thorium will no longer be required, obviating the need for NSG's approval). In this scenario, for multiple reasons, US needs India much more that India needs US. Just what stops India to come to agreement with Iran/Pakistan for the gas pipeline ? US approval ? Even if India has to agree with US on Iran, it should do so in its own terms. If she must sell her soul, at least extract a hefty price. There's no point in going into whether the actions against Iran are fair or not. Who cares if Iran is really going for nuclear weapons or not ? Diplomacy has nothing to do with fairness. If India has to take a stand, she should do so based on her interests – not those of US, not those of Israel. The best strategy for India is to maintain the ambiguity about which side it is on. Don't throw the lot either way. Chanakya would smile from heavens if India did that. Because it will lead to US and Iran bargaining for support and trying to outbid each other in terms of the reward India will receive for support. Ambiguity should be India's mantra. Sometimes this surprises me. Why do countries like Pakistan and India sell themselves so cheap ? Pakistan volte-face on Taliban and keeping mum on civilian deaths in its country by US airstrikes, were bought by US at a very cheap price. US got a very good deal. But India is not asking for ANY quid-pro-quo. Pakistan was at least promised 4 billion USD and (no longer cutting-edge) F-16s. What is India getting ? Indian government seems to be more spineless than Pakistan's Musharraf regime.

Anyone wants to sing with me ?
We don't need no nuclear deal, we don't need no bullying !

Why does the wind blow?

2005-12-20T22:52:00.000-08:00

"You are going to be parents," said the doctor to the blushing couple.

Both Indra and Indrani were ecstatic. The royal couple of heaven had been hoping to have an heir for the kingdom. As the news spread all over heaven, all gods embraced each other in jubiliation. They distributed sweets to each other. The first couple of heaven had never been so happy.

But as weeks passed by, Indrani realized that while she has to suffer from the disfigurement of her body, mood swings and the desire to eat gluttonously, Indra gets to share none of this. "Why is to so unfair?" Angry with Brahma for creating such an unfair world, she decided to perform hard penance to persuade Brahma to change the rules.

"Ah women! This must be one of those mood swings. It too will pass," Narad assured Brahma.
But Indrani, who had a bit of a feminist streak in her, was determined. "I am fighting for all the women of all the worlds," declared Indrani.

The gods of heaven waited with baited breath for the outcome of this duel. Will Indrani give up this penance for the sake of general welfare? Or will Brahma give in?

Weeks passed. Indrani wouldn’t eat anything. "This puts the unborn child at risk", petitioned the gods to Brahma, "please go and talk to her." After a lot of deliberation, Brahma gave in.

"I am pleased with your devotion," Brahma appeared and said to Indrani, "what is it that you seek? I shall grant your wish."
Indrani opened her eyes and asked, "why have you made this world so unfair? Why is that we women have to undergo all the pain ? Can’t men share some part of it?"
"What do you have in mind, my child?" asked Brahma.
"The women carry the child for nine months. Go through all the disfigurement, pain and the mood swings," said Indrani. "But let the father go through the labour pain".
Alarmed at the preposterous idea Brahma tried to persuade Indrani for a different wish. But Indrani insisted. Having already granted a wish, he couldn’t go back on his words. All he could say is "granted!"

Indra was scared at the prospect of being the first man to undergo labour pain. But he loved Indrani so much that he accepted the challenge. "Women have gone through this for millennia. Why can’t men, for a change?" he confided to his council.

Months went by. The D-day arrived. The best doctors and medical attendants of heaven came to handle the event. Indra lied on a large bed expecting labour pain to start any moment. The royal obstetrician advised him about the breathing techniques.
All the other gods and goddesses gathered in a neighbouring hall to participate in this momentous event.

The expected time came and Indrani delivered a healthy baby. She was anxious to find out how Indra handled the pain. She got up and went to Indra’s bed, only to find him still perfectly all right. There was no sign of pain! They looked at each other surprised. As they came out to greet other gods outside, they saw that all the gods were standing around someone making a circle. Curious to find out who he was, they walked towards the centre and found Pawan writhing in pain!

As the realization dawned on Indra, he picked up his weapon and ran towards Pawan. Indrani immediately ran to Brahma get the new scheme of labour pain reversed! Pawan somehow managed to get up and run for his life.

Since then Pawan has been running and running around all the three worlds with Indra chasing him.

That my friends, is the reason why wind blows….

Ode to the one who fell aside

2005-12-16T06:43:00.000-08:00

"mera naam chin chin choo…"

While this song is well recognized, the singer isn’t that well known today. In her heyday, Geeta Dutt (nee, Geeta Roy) was a member of the most exalted group of female singers that Indian cinema has produced. This star-studded group enthralled a generation of music lovers, covering a span, starting from the pre-partition days to the 70s. Included in this group are stalwarts like Shamshad Begum, Noor-Jahan, Arti Mukhopadhyay, Runa Laila, Geeta Dutt and Lata Mangeshkar. Geeta’s relationship with Lata was controversial. More on that, later.

Geeta was born in 1930 in Faridpur district in what was then East Bengal. She moved to Bombay as a pre-teen girl and lived with her parents in a modest flat. Once she was noticed by a director, there was no looking back for her. She went from strength to strength producing one hit after another. Take a look at some of her famous numbers:
Tadbeer se Bigdi hui Taqdeer - Baazi (1951)
Aa Jaan-e-wafaa - Anarkali (1953)
Babuji Dheere Chalna - Aar Paar (1954)
Yeh Lo Main Haari Piya - Aar Paar (1954)
Thandi Hawa Kaali Ghata - Mr. and Mrs. 55 (1955)
Jaane Kya Tune Kahi - Pyaasa (1957)
Waqt ne Kiya Kya Haseen Situm - Kaagaz ke Phool (1959)
Na Jao Saiyaan - Sahib Bibi aur Ghulam (1962)

She had a style which some say originated in her earlier practice of Bengali kirtan. S D Burman effectively used her kirtan style in film songs and produced some really memorable songs.

What strikes me the most about her is that she doesn’t "perform" so much. Her voice is so smooth that she seems to sing effortlessly. "mera naam chin chin choo… wah waah" ! Doesn’t her voice seem to just glide through? Compared to that, I find Lata’s voice, though extremely melodious, quite studied and exerted. Comparison and competition with Lata was inevitable since at Geeta’s peak, Lata was still not the unchallengeable queen of melody that she became later. Though eventually relegated to the second spot, Geeta managed to hold her own against Lata for more than a decade and she and Lata were the premier two female playback singers of the 1950s. Many people have accused Lata of manipulating directors into giving her plum songs and mechanizing the eventual destruction of Geeta’s career. Such accusations gained strength since these were corroborated by similar accusations from Runa Laila, Arti etc. It’s difficult to confirm the veracity of these accusations. May be Lata would have triumphed either way. However, if I have to pick one over another, I would pick Geeta.

Geeta’s tragic personal life took toll on not only her career but on her life too. After a brief romance with Guru Dutt, who was then an upcoming director, she got married to him in 1953. Geeta sang some of her best songs in Guru Dutt’s films.

By 1957, her marriage was in trouble, largely due to Guru Dutt’s philandering ways. He had got involved with Waheeda Rahman. The marital breakdown affected her career. Guru Dutt’s restrictions on Geeta prevented her from utilizing the opportunities that came up in S D Burman and O P Nayaar films. Though both of them wanted Geeta to sing in their films but gave up on her and started nurturing Asha Bhosle. Asha eventually took her place and went past her. By then, Geeta had taken to alcohol. Then in 1964, Guru Dutt passed away. Like typical Indian women, her attachment was still so strong that she suffered a nervous breakdown. On top of this, she found herself in a financial mess. Her feeble attempts of a comeback went largely unrewarded and she continued her drinking ways. Finally, her body gave away and she died of liver damage in 1972.

I wonder what more classics we would have been blessed with, if only she had not died at 42. The world missed out on more from a genius.

Ringa Ringa......

2005-12-14T06:38:00.000-08:00

Ringa Ringa Roses
Pocket full of Poses
Husha Busha!
We all fall down!

As a parent, I get the immense pleasure of watching my child play with the other children of my apartment complex. I particularly like the "Ringa Ringa" games children play - where they go round and round singing this poem and at the end they all, sort of, fall down on the ground together. Having grown up in mofussil towns, I had never done this as a child. So, it was fascinating when I watched this for the first time. Turns out that this simple poem has a poignant history.

This rhyme has its origins in the time of the great plague attack in Europe in the 17th century. Symptoms of this plague included a ring shaped rosy red rash ("Ringa Ringa Roses"). Sweet smelling poises (placebos, really) were put in pockets ("Pocket full of Poses") to prevent the spread of the disease, since it was believed that the disease was spread through bad smell. The other symptom was constant sneezing ("Husha Busha!"). Since medicines weren't effective against the plague, almost no one survived this disease ("We all fall down!").
Made me sad! Could never enjoy this game after that.

But it's very interesting to read about the origins of nursery rhymes. The "Yankee Doodle went to town" rhyme is very interesting too. It goes like this...

Yankee Doodle went to town
Riding on a pony
He stuck a feather in his hat
And called it macaroni.

Yankee Doodle keep it up
Yankee Doodle dandy
Mind the music and the step
And with the girls be handy.

Father and I went down to camp
Along with Captain Gooding
And there we saw the men and boys
As thick as hasty pudding.

Yankee Doodle keep it up
Yankee Doodle dandy
Mind the music and the step
And with the girls be handy

There was Captain Washington
Upon a slapping stallion
Giving orders to his men
I guess there was a million.

Yankee Doodle, keep it up
Yankee Doodle dandy
Mind the music and the step
And with the girls be handy.

Usually, children learn to sing the first two stanzas only. I could never have guessed that this poem has such an interesting story behind it. It deals with the American war of independence from Britain. The rich and the powerful English were mostly settled around the New England area. They looked down upon the country folks. "Yankee" itself was a derogatory term, which evolved from the Dutch version of "John", implying a simpleton. This wasn't the America of today. The class hierarchy was fierce those days.
The cultured, rich and powerful English aristocracy slapped “Yankee doodle” appellation on the country folks. During the independence war, the Americans turned this insult on its head by making it their war song - something they sang to cheer themselves. By using the British coined term ("Yankee Doodle"), to refer to themselves, the Americans were signaling that they no longer were affected by such insults. In fact, Americans completely mocked the aristocrats for their snootiness by making fun of their high airs. "went to town" indicates becoming urbane. However, Americans didn't care about the snobbishness of Horse carts. They went to town "riding on a pony". "Macaroni" was a headgear worn by the aristocrats. This hat which had lots of bird feathers on it, originated in Italy and was lapped up by all rich Europeans. In this song the Americans mock them by saying the simpleton just "stuck a feather in his hat and called it macaroni". In other words, Americans are saying that they are breaking all rules of what's considered acceptable by the English.

Singing this, and other such songs, American troops stormed city after city and forced the mother nation to grant freedom to America!

I wonder if today's world is creating songs that will be sung by children centuries later.

On spies

2005-12-03T00:58:00.000-08:00

"My name is Bond, James Bond !"
Lines immortalized by the Hollywood Icon. Yet, the reality is that a spy as flamboyant as Bond will not survive in real life. Real life spies are the exact opposite of what Bond is in the movies.
My father worked as a "spy" during the early 70s in East Pakistan (what became Bangladesh after the 1971 war). The word "spy" conjures up an image of a dashing guy who is brave, intelligent, takes extreme risks and gets very valuable information for his side. All of this is false. Exactly the opposite is true.
Real life spies are trained to lie low, not to attract any attention by doing anything spectacular and not show any heroics. They gather very routine and mundane information.
Military works with the assumption that any spy caught will spill the beans. Movies and novels create an image of heroes who will endure any amount of torture and pain but not reveal the secrets, but in real life, people are human beings and beyond a point, all human endurance breaches. That's why the spy system works under the maxim "Don't get caught". Any capture of spies is taken as equivalent to compromise of secrets. The whole system is geared around two guidelines:
(a) Don't let spies get caught
(b) Don't let spies know more than they need to know

James Bond would fail the test on both these counts.

Here's how real life spy system works. Send people who can easily blend in. People who show no tendency to be flamboyant. People who can lie low. These traits are determined by psychological profiling. Probably my father's most suitable trait was that he could speak Bengali with the eastern accent (since our ancestors were migrants from East Bengal). To be able to speak with the local accent, the style of smoking the bidi, the style of sitting on a cot and, of course, eating habits, it is based on such mundane matters that a spy is selected.

Contrary to popular misconception, the job of a typical spy is not to get war plans or military intelligence. These are way too well guarded. It is likely that the enemy side will leak out things to create confusion. And it is possible that the spy himself may be compromised and may be sending deliberately misleading information. No country takes a bet on these. The job of a typical spy is to send very routine information, like
- what's the morale of local population
- how many soldiers are patrolling
- what's the frequency
- what vehicle is used for patrolling
- ethnicity of the soldiers
None of this information is ultra secret. Any civilian who is present in the towns and villages can gather this information. No heroics required. It is in the military headquarters of the army who sends the spies, that real intelligence resides. All the information sent by field spies are collated and studied together. Patterns are established. Data Mining may be a recent computer technology. But military intelligence personnel were aware of techniques to extract valuable information from a mass of mundane information. Just to give an example, based on the number of soldiers sent for patrolling, you could infer whether the garrison is a brigade or a division. An attack on a brigade is a different ball game as compared to taking on a whole division. The fact that the exclusively Punjabi soldiers were being sent for patrolling, Indian army could infer that the Bengali soldiers of the Pakistani army were no longer trusted. This would make it easier to march in to those areas where Bengali troops were deployed. Areas inundated with water were also easier targets as the local Mukti Bahini boys would find much easier to navigate through the water logged fields as compared to much bigger built Punjabi soldiers of the Pakistani army. This tactical information that Punjabi soldiers were rendered immobile in waterlogged areas was also a result of mundane spying that studied the rate of movement of soldiers - something that could be inferred from a series of simple data points being sent from a large number of spies.

The intelligence derived from the exoteric facts sent by the large number of spies distributed over all the areas of East Pakistan, was a crucial determinant of the final outcome of the war. But individually, the spies achieved little and did nothing spectacular. Not the kind of stuff that would make a movie, anyway.

I am starting to see a pattern here - mainstream media highlights what is actually unimportant and is silent on what is really effective - perhaps because they don't sell as much. But this would be grossly unfair to those who actually bring in the results. Consider these:
1) There is so much hype around MBAs. Specially, those who get dollar salaries abroad. But the reality is that bigger impact is made by "regular" MBAs and those who don't even have an MBA! (Bill Gates, Walmart, Ambani etc)
2) There is so much hype around each gyrations of the SENSEX. But real wealth is made by owning the right assets in the right proportion over the long term.
3) There is hype around sophisticated Weaponry. The reality is that the most lives in a war are lost due to not keeping the head down!
4) There is so much hype about sophisticated medicines and gene research. Most number of people can avoid diseases and death by the simple of act of washing hands before eating and boiling water before drinking. Water borne diseases is the No. 1 killer of the world.

As in the case of spies, what the media portrays is far away from reality. This is one reason why I have stopped watching TV long back. Next in line, is the newspaper perhaps.

One crore !

2005-11-04T03:20:00.000-08:00

One crore rupees ! Most Indians just choke thinking how much money this is. No wonder those crorepati quiz shows are so popular. Unless you inherit that sum or win a quiz show, there’s no way you can ever create that much sum – right or wrong ?
Wrong … Wrong… Wrong… each person can create that much wealth… I personally know someone who has reached the halfway mark in 5 years. He hopes to reach the one crore mark by 40. No, he is not an Amway agent or made a killing in an IPO. His technique:

- Create a clear goal and calculate the amount needed to be invested every month.
- Live below the means (so that investments can be made to meet the big future goals)
- Invest every month. Ignore the SENSEX and mainstream media.
- Maintain Asset allocation
- Minimize taxes and investment expenses

Say, you are 22 years old and just starting your career. Invest 10,000/- every month into a diversified equity fund (or your chosen bunch of stocks). Reinvest all dividends. Taking a 14% return, in 18 years when you are 40, you have 1 crore ! Go retire and tour the world! That’s the power of compound interest.

Most of us know about compound interest. But we don’t realize just how powerful it is. Back in the 16th century, a bunch of Native Americans sold the entire Manhattan land to Dutch traders for a paltry sum of 24 dollars. Most people mock the Native Americans for being so stupid. But their real stupidity is not the selling. But it is the fact that they did not invest those 24 dollars. Had they invested the amount in something that gives even a measly 8% returns, over the next 400+ years, the amount would have become multi-trillions. Enough, for their progeny to buy back the land of Manhattan, plus those of entire New York state, plus the three neighbouring states.

That’s the power of compound interest. Go figure.

India: SWOT Analysis

2005-10-29T03:28:00.000-07:00

For Indians who have access to western education and possess english speaking skills, times couldn’t have been better. A generation ago, no one could have imagined the plethora of job options available today – IT, BPO, media, finance, insurance. Even traditional professions like journalism provide many more opportunities than they did a couple of decades ago. Economic upliftment can be seen clearly in most parts of urban India. Perhaps, the concept of middle class values is changing. Urban middle class people are coming out of the older “scarcity mentality”. Materialism is no longer a dirty word. Whether this is good or bad, or whether the benefits should be more broad-based is the subject of different discussion. But assuming that this is indeed a good thing, what are we doing to maximize the gains ? India is being seen as the “service” destination, much in the same way China has been the world’s manufacturing destination. Can this be our Great Chance to become a first world nation ? Here’s a SWOT analysis:

Strength:
Service, defined Business processes and knowledge management suits well with the Indian temperament. We wrote treatises on various kinds of wisdom long before people in many parts of the world stopped wearing goat-skin for clothes. Knowledge management has been around here for a long time. Indians have never been renowned for military prowess. We never invaded foreign countries or made colonies abroad (OK, Tibbet campaigns of Mohd Bin Tughlaq or Ranjit Singh don’t count). This just hasn’t been our strength. Our skills have been on the “soft” side like service and knowledge management. Hence the current role India is taking upon is a well-suited one. This is our natural strength. It’s not a coincidence that India is nowhere in the computer hardware industry but has become a powerhouse in the software industry. It doesn’t mean we can’t become a hardware power, just that it hasn’t come to us naturally. Following processes has been an age old tradition for Indians (almost to the detriment of ourselves). Business processes outsourcing, once the processes are established, suits us a lot. This alignment of the nature of work with our natural temperament is our primary strength.

Weakness:
Our attitude of not questioning a tradition is our biggest weakness. See how Indian society is full of wrong and unfair traditions (read “discriminations”). There can be no innovation unless people question tradition or refuse to believe blindly. A typical Indian upbringing doesn’t encourage questioning authority and the existing conditions. We accept way too much and accommodate way too much.
In the new knowledge intensive era of Intellectual Property, the innovative will win. One can’t be innovative unless he questions the status quo. This is not to say that there aren’t bright people around. There are. But our institutions are not as much geared toward innovation, as they should be. How many path-breaking new technologies are coming out of premier Indian technical institutes ? A miniscule. Yet the same students after migrating abroad, are able to unlearn their “accepting” attitude and create innovative things. So it’s not that we lack talent. We need to realign our attitude. For far too long Indians have not had a say in their life – which explains the lack of innovation. But aren’t we independent today ?
The building block of the knowledge era is the intellectual property. Never accept the low hanging fruit. Create intellectual property. It took Infosys 24 years and an employee base of 40,000 to reach a billion dollar revenue. Google reached the same mark in less than 7 years with much higher profit margin and an employee base of one-tenth of Infosys. This is the difference between going after the low hanging fruit and path breaking innovation. (My apologies to Infosys, a company I respect a lot; the comments above are more about India in general rather than Infosys per se. And yes, this is not about the age old dichotomy of products vs. services. This is about path breaking innovation)
Yet, I am afraid that the current glut of jobs will also lead to people going after the low hanging fruit. Potential entrepreneurs who could have started the next Reliance or Microsoft will have cushy jobs and will have too much to lose when starting companies. Most of the successful businesses are started by people who give the business their best shot, because they have nothing to fall back on. With easy jobs around, we may not see too many Dhirubhais in the future.
If today’s good condition is merely due to the labour cost arbitrage, this will go away. Make no mistake about – no economic arbitrage is forever. We cannot ride on it for long. We must go up the value chain and create innovation and more deeper business values.

Opportunity:
We are a young nation – more than 65% of Indian population is under thirty. This is a huge opportunity. More than 650 million people available as resource pool for industries ! No nation, other than China, has this advantage. Historically, this kind of “youth bulge” is associated with higher economic output and general progress. This is India’s moment. We must strike as the iron is hot !
India’s youth bulge has been accompanied by a reversal in the western countries. The young population is reducing in those countries. They need to induce people to migrate and work so industries can run and taxes can be collected. Also, they need to send jobs out as much as possible. This is why business process outsourcing is irreversible. This is not due to cost cutting alone. This is happening due to the fundamental reason – lack of people available locally !

Threat:
Our biggest threat is that we may fail to move up the value chain by the time the cost arbitrage disappears. We have got a good headstart. The only we can sustain this is by businesses and people moving up the value chain. For example, the IT companies need a broader relation with the entire board of the client rather than just the CTO. Indian companies need to become more of a partner rather than just a replaceable service provider. On the other hand, tremendous thrust towards innovation is needed. This is the task for the education system. While we need a focus on primary education, we also need a more innovative higher education system. We just can’t rely on the Nehru era model forever. Similarly, employees need to move higher up on the value chain. Instead of just doing the assigned job, employees need a deeper understanding of the nature of business and come up with path breaking innovations. Unfortunately, here again the glut of jobs will hamper. Many employees are hopping from job to job, industry to industry. While this is necessary and even good to an extent, a good number of employees should try to find a niche and create a big value in that niche. Innovation needs deep understanding of the subject at hand and this can’t be developed if one meanders from subject to subject.

Personal Investment FAQs

2005-10-21T08:14:00.000-07:00

Disclaimer: I am not rich. Follow at your own risk.

I have received questions from friends and colleagues.
So I started writing this FAQ. Nothing is etched in stone.
So fine tune as you learn more. And as Suze Orman says,
"People first, then money, then things !"

1. Why should we invest for future ?
An important question. Since prices of things are rising,
doesn't it make sense to enjoy now rather than save
and consume later when we will get less for the same money ?
Yes, if we are going to keep money under the carpet.
No, if we are going to invest and the ROI is higher
than inflation rate. So if inflation is 5% and we
get 8% return, the money effectively grows 3%. So a
year later, we will enjoy more than what we would
enjoy if you spent now. This is the concept of "delayed gratification".
This is a unique characteristic of human beings.
No other animal has this. We are unique. There
would be NO progress and order in society without
this fundamental human attribute.

So why might we invest ?
To meet future goals that need money. Even if you
don't have a future goal (really ?),
you may want to build a buffer so you can sit out bad times.
If you are confident that you can manage to tide
through bad times, you don't need to invest.
Go ahead and enjoy now !
But for most people, investing is necessary.
Talking about bad times, when we are young we tend
to feel (naively) overconfident.
"What ? Laid off, me ?"
Well, I have seen smart people with perfect GPAs and
patents going through layoffs and bad times. Layoff
isn't a judgment on the people, it's just bad economic
cycles. Over a long term, economies go through cycles.
This is good for the overall economy of the world because
that's how chaff gets separated from the grain.
Or god forbid, a person is disabled and can't work.
Or falls ill and medical insurance won't pick up the
bills. Anything can happen. We can't control it.
But what we can do is to control our response. We can
do that by being prepared for the bad times.
We prepare by investing and creating wealth - also by
investing in self and relationships.

2. Okay, I want to invest. Where should I invest ?
When we went to see the Taj Mahal, did we show more interest
in the Taj Mahal or the way/vehicle we used to reach
there ? Similarly, we should focus on our goals more
than the instrument used for financing it.
"Where to invest" is secondary. "What for" is the
primary question. Over the long term, AAP is more
important than the choice of particular financial
instrument. See my post "Ten steps to wealth creation"
for more on AAP.
Read on for more questions where I talk about how
to select a financial instrument.

3. What is AAP that you keep harping about ?
Why is it important ?
AAP (Asset Allocation Plan or Asset Allocation Policy)
is a product of a lot of research
in Economics and applies to not only personal
finance but pretty much all aspects of
an enterprise (including nations). There are
tomes that discuss but this article should get us started.

In short, AAP has been proved to be the most important
factor in the success of long term investments.

4. Tell me the stock which I should buy and sell at
good profit.
Short answer - I don't know
Long answer - I don't know (do you see me vacationing in Honolulu ?).
In fact, no one knows because it is unknowable
due the very nature of the market. A stock is an asset
(it's a tiny piece of a company) whose fair value
depends on a host of factors. By the very nature of
capitalism, it is not possible to predict which stock
will go up and which will go down. Imagine, if anyone
knew that a business will fail, would he start/continue it ?
Anyone who is sure of a "hot pick" or a "listing gain"
doesn't know and doesn't know that he doesn't know.
This is not to say that there can't be a temporary
mispricing of stocks. But the window of opportunity
where a stock is overpriced or underpriced is short.
Day traders jump on any such oppurtunities and there by
correct the very mistake they were trying to exploit.
But here's the good news. You don't need to know for
sure which stock will go up and which will go down.
Just stick to a solid AAP and over the long term you
will reach your goals.

5. What is diversification ?
It's a fancy way of saying, "don't put all your eggs in the same basket."
Diversification, which is intricately related to AAP,
means you spread your bets. If you buy shares of one
company, it may go down for many reasons.
Even very good companies can falter (death of key
people/unexpected competition).
But if you have shares of 20 companies, it will hurt you less.
Yes, if you buy one share and that happens to be of
Infosys, you will beat the market and diversified
portfolios. But then what if you buy one company
and it happens to be Enron ?
It's all about managing risk. Diversification reduces
the risk of a wrong choice. Theoretically, you may
lose on returns due to diversification.
But a study of last 100 years of data shows that on
the long term, diversified portfolios beat overwhelming
majority of single stock selections.
The probability of our selecting that winning stock
is very very small. Do you want to fight such odds ?
Do you want to take that risk ? If you can afford lose
the principal, you may. But if this money is for kid's
education, it is a bad idea.
So instead of chasing one "hot stock", we need to have
a diversified portfolio and stick to our AAP for the long term.

Diversification means spreading your assets among:
Equity (shares, equity mutual funds),
Bonds (FDs, Post office deposits, RBI bonds,PPF, traditional LIC policies, Debt mutual funds)
Precious metals (Gold,Diamonds,Silver)
Real estate (home, office buildings, rentals, real estate mutual funds)
Cash (cash, Savings bank account balances, Liquid mutual funds)

There are other types like Arts (Picasso paintings)
and commodities (rice/oil/power etc) but these aren't
really for the average retail investors.

So our investment needs to be spread among these
asset classes. Within each asset class, there is a
need for diversification. Not all shares are alike.
Some companies are large, some are small, some are
turnaround candidates, some are asset rich.
Some bonds are high quality, meaning, there is no
chances of the debtor running away (like RBI bonds).
Then there are bonds for rogue companies which
promise very high interest and then run away
with the principal. These bonds are called junk bonds.

The best way to achieve within-class diversification
is to invest through mutual funds. This is the true purpose of
mutual funds - to provide in-class diversification.
Most mutual funds give much more, but this is the primary goal.

Unfortunately, there are no mutual funds in India
which invest in real estate, Art, commodities etc.
So if we want them in our portfolio, we have to do it ourselves.

6. What is Insurance ? Do I need it ?
Insurance is way of managing risk. If the breadwinner
of a family dies, there is a risk that the family will suffer from penury.
Or, an accident makes someone disabled and unable to
work, he will live in physical as well as financial misery.
While the emotional or physical losses can't be
compensated for, Insurance companies can compensate
for the financial loss.
We all should take insurance to manage these risks.
( Read the earlier part on naive overconfidence.
Bad things can happen to anyone. )
What can you insure against ?
- Death (a sum is paid in case of death of the
insured person so that the family can survive
and maintain their lifestyle)
- Accidental death (same as above but this is a
subset of the above since the death must be due
to an accident).
- Damage/Theft of expensive stuff (jewelry/electronic
items/Arts items at home (insurance company will
pay the market value of what you have lost)
- Vehicle (insurance company will pay the market value
of the vehicle of the make/model if lost.
Or the repair value.)
- Professional lawsuits (important for doctors, lawyers
or any service providers)

Do an objective analysis of what kind of insurance
you need. For example, if you are young and have no
financial dependents, do NOT take life insurance.
Even for young people with dependents, chances of
accidental death is much higher than natural death.
So if you really want a life cover, take accidental
death cover. Take disability cover in any case.

Never mix insurance with investments. Take pure term
cover for life insurance. Treat insurance as risk
protection and not as investment vehicle.
Ignore that insurance agent. He is NOT your friend.
He has a family to feed and wants his commission.
(If there are good agents who really advise clients
what's good for them, I haven't seen them yet.
Till then, the above stands)

7. Should I enter the market now ? Isn't Sensex/NAV at a too high level ?
It's impossible to time the market or "optimize"
our timings. Just invest regularly and stick to your AAP.
The odds are overwhelmingly favourable towards you
if you do so. Investment decisions should always be
taken based on your situation and your AAP.
Not based on where Sensex is.
Don't try to time the market. It's not the timing
but the length of time that matters. Invest
regularly, stay invested and stick to AAP.
Mutual Fund NAVs don't mean anything. Higher NAV
does NOT mean that the fund is expensive.

If you are not mathematically inclined, you can
ignore the rest of this answer.
Consider an amount invested (P) for t years getting an ROI of r.
The amount at the end of t years is, A = P * (1 + (r/100))^t
If you plot graphs of A vs. P and A vs. t, you will
see that the final amount varies directly with P but
geometrically with t.
This means that the initial investment amount is not
as important than the time you give to the investment.

Similarly, an amount (P) invested every year for t
years with ROI of r fetches you:

P * [ (1 + (r/100)) + (1 + (r/100))^1 + (1 + (r/100))^2 + ...
... (1 + (r/100))^(t-2) + (1 + (r/100))^(t-1) ]

Again, the investment amount (P) has less control on
the final amount. It's r and t that matter much more.
All those clamouring for salary hikes with their
employers are probably focusing on P. It's much more
financially rewarding to focus on r and t.

8. What are Mutual Funds ? Are they any good ?
A little bit of history. Christopher Columbus and
his motley crew went to a voyage and found a new land.
While Columbus took risk, the Portugese royal couple
also took risk by paying for the costs. But this
investment was wildly successful. Once trades started
and gold looted, unimaginable gains were made. The
ordinary rich folks (what an oxymoron !) also wanted
to do this. But they didn't have the reckless attitude
of the royal family. They were paying for the investment
from their own money. Not like the royal family who were
paying citizen's money. The royal family didn't
care about shipwrecks or pirates. But the regular investors did.
If someone pays for a ship's voyage and that ship sank,
his lifetime wealth sank (literally) ! This problem needed a creative solution.
The risk was mitigated by mutual funds. Investors pooled
in money and paid for voyages. So five people together
pooled in money and together paid for 5 voyages (with
20% share each). This is better than each one paying
for one voyage. Because in case of a wreck, that
investor went broke. At the cost of some returns
(probability of one out of five wrecking is higher
than one out of one), people could feel safer.

Today's mutual funds are similar. They pool money
from investors like you and me. They buy shares
of not one company but many companies.
For this, we pay a salary to the fund investor to
whom we delegate the task of judging, buying and
selling shares. The salary is charged as an "expense"
on the mutual fund. So note that mutual funds are not
free. Besides this salary, they have to pay for
marketing and broker commissions. All this comes
from our money. It's good to invest in mutual funds
because we can achieve diversification.
Suppose you have 10,000/- to invest. If you start
buying shares directly, you cannot achieve enough
diversification (unless you are buying penny stocks).
But with a mutual fund, you get instant diversification.

There are many types of mutual funds.
Equity funds - they invest in equity. Stick to
these. They are the best vehicle for equity investing
for most of us.
But there can be subtypes - Large cap funds who invest
in big companies Small cap/Mid cap etc. - you can guess.
Cap stands for "market capital" which is sort of an
indicator of how much a company is worth.
Market capital = share price * number of shares.
Sector funds - they invest in shares of a particular sector.
ELSS (Equity Linked Savings Scheme) funds - regular
equity fund but gives you tax breaks under 80C.

Debt funds - they invest in debt or bonds
(meaning, they give loans).
There are types based on bond duration. Some invest
in long term bonds. Some in short term bonds.
Some in very short term (like a day to a week) bonds.
These are called Cash or Liquid funds.
Then there are some funds which invest only in
Government bonds (called Gilt funds).
You can stay with general debt funds for your bond
part of the AAP.
For immediate requirement and for keeping emergency
money, use Liquid funds.

Real estate funds - they buy and trade in
houses and commercial property. Also they rent out
to get income. These funds (called REITs in USA) are
great for the real estate part of your AAP. Suppose I
have 1 lakh to invest and I would like to keep 20%
in real estate. But I can't buy a house for 20,000/-.
But these funds allow me to do it.
Unfortunately there are no such funds in India yet.
So regular Joes like me can't invest in real estate
in this way.

Commodities funds - they trade in "things"
like cereals/metals. Advanced countries even have
funds trading in "weather". Go figure that out !!
Again, no luck in India yet. You have to be a guru
or a farmer if you want to make money out of
rice price cycles.

Index Funds
These funds invest in the same stocks in the same proportion
as the Index they track. For example, Franklin India Index Fund
is an Index fund that tracks Nifty. This means that it will
buy same stocks in the same proportion as there are in Nifty.
There is no judgment to be made. Computer programs can be
written that blindly mirror the Nifty. Hence expenses are less.
There is no need for a fund manager.
In advanced markets, it is believed that Index funds beat
actively managed funds over the long term.
I am not yet convinced that this is true for India as well.

Balanced Funds - These invest in a combination of asset classes.
Most common are the funds that invest in a mix of equity and debt.

After looking at all pros and cons, Mutual funds
in some form or other, are the best way to invest
for most of us.

The equity part of your AAP can be in
shares directly or in equity funds. Unless the
portfolio size is more than 2 lakhs, stick to
mutual funds, no matter how lucrative and surefire
that "IPO listing gain" appears.
It's hard not to give in. Specially, when all your
friends are gloating over gains and the media hypes
up everything. But this is what can be the difference
between retiring peacefully at 40 and enjoying life
or, having to work till you are 62 !

9. Boy, I am confused about all Mutual Funds.
How do I pick a mutual fund ? Which option is good ?
If you believe in AAP theory, you will know that asset
class is much more important than the exact investment
vehicle. Meaning, the fact that you are 60% in equity
is more important than whether that 60% is in
Franklin Prima Fund or HDFC Equity Fund.

Having said that, here's what I look for in
mutual funds.

Expenses - lower the better - this is the "fee"
you are paying the fund manager. All fund account
statement will give the expense as a percentage of
the total fund value (called "Expense Ratio").
There are laws which put a higher limit to the
expense ratios. For equity fund, it is 2.5%.
Most actual expense rations are around 2.3%.
But then there are exceptions. Watch for too much
transactions (buy/selling) by a fund. This usually
means higher expense ratio. Look for loads. Lesser
the load, better for the investor.

Fund size - too large is bad as they can't enter
in small companies. Too small is bad because they
can't diversify enough. Also smaller funds
will have higher expense ratio since the fixed
costs need to be spread over smaller fund size.

Philosophy - each fund states what the investment
pattern will be like. What % in shares, what % in
cash etc. How frequently it will trade (buy/sell)
shares. Check if the fund sticks to this stated
philosophy.

Diversification - Unless a fund has stated to be
a sector fund, it should be well diversified across
sectors. There were many funds which had upto 60%
in IT sector back in 2000. You know what happened
to them, right ?

Performance - while looking for performance,
look for consistency of performance with respect
to the benchmark. Don't compare a sector fund
performance with a regular equity fund. And don't
compare equity fund performance with a debt fund.
The fund you choose should be among the top
third in its peers over an extended period of time.
Past performance doesn't mean future performance.
But if the same fund has achieved a good
relative performance over a long term, I will tend
to pick it (provided other factors stated above are
OK). Don't have unrealistic expectations. If the
general market tanked 30%, even the best fund will
go down. This is when to remind yourself that you
invested in equity for the long term.

Note that I have listed the performance as the last parameter.
For two reasons - (i) as I have already stated elsewhere - performance of your portfolio is controlled more by asset allocation than the exact selection of investment vehicle (ii) Past performance is no guarantee of future performance. As Graham said, long term results of two different diversified and representative list will not vary much. Neither has any advantage over the other. Long term returns of instruments of the same asset class revert to the mean. So focus on picking a mutual fund based on the earlier parameters rather than performance alone.

Now about options. Each fund has further options -
growth, dividend, dividend reinvestment etc.
Earlier, these were important due to tax
considerations. But not any longer. Stick to
"Growth" option unless you have invested for
the purpose of regular income.

Watch for conflict of interest. Most mutual fund
agents push those funds that give them highest
commission. See how aggressively they push new
funds (they give them highest commissions). Do not let
agents advise you on which fund to buy.
Agents are not your friends.

10. What about taxes ?
It's very important that your investments are
tax friendly. Tax deferred growth beats taxed
growth by a mile ! Minimize your taxes.
Long term equity capital gains are now tax free.
If you are a follower of AAP, all your equity
investments are for more than a year. So even
the government is telling you to follow AAP and
avoid short term trading.
Real estate gains are taxed at lower rates if
the property has been held for more than
three years.
While bank interest is taxed at regular
slab rates, Mutual fund gains are taxed at
lower rates. This is why I would advocate
mutual funds to just about everyone.

11. What about investment expenses ?
Taxes are the biggest expense usually. But
watch out for loads in mutual funds, any fee
you pay to your investment advisor, subscription
to investment magazines, demat account charges.
If you are investing one lakh a year and you are
paying 5000/- as a fee to your "advisor" you are
effectively paying 5% entry load. The probability
of this portfolio beating a well diversified AAP -
compliant portfolio over the long term is almost nil.

12. Should I invest in IPOs ?
We human beings are irrational. If any proof is
required, we just have to study the IPO phenomenon.
What is an IPO ? It's when company insiders
sell shares to general public. Who knows more about
the company ? The company insiders or us ? Whom will
the price be favourable to - insiders or us ?
A lot of hype is made of the "listing gain".
Unless you are a trader (then you are in the
wrong blog), this gain means nothing to you.
What you need to see is long term returns.
Studies have shown that investment return from
IPOs will lag the general market returns by more
than 5% over the long term.
I am not saying you should completely ignore IPOs.
They can be good opportunities too.
Here's how an AAP compliant investor will look at
IPOs. Let's say you want to put 60% in equity.
Out of which 10% you would like to mid cap stocks.
Let's say this translates to 10,000/-. So you now
look for all the mid cap companies in the market
(and the IPOs happening around that time, if any).
Which is the most investment worthy ?
Let's say you are looking to invest in the Energy sector.
You should will ask myself, which company is the best for
investment in this sector today ?
If it is the one that is having the IPO, go ahead
and invest in it. But now you know why you are
investing in it. Blindly investing in IPOs wishing
for some magical "listing gains" is foolish.
You will ride your luck for a while. But sooner or
later you will burn your fingers.

13. Should I invest in Mutual Fund IPOs
(new fund offers) ? Isn't an NAV of 10 cheap ?
Short answer - No
Long answer - since you wouldn't invest in a fund
without seeing its track record for a long term,
how can you invest in a new fund ?
Do yourself a favour. Ignore that agent who peddles
the new fund. Read my earlier "Mutual Fund - 1" for
more on this.

14. What about futures and options ? What about Technical analysis ?
Warren Buffet calls futures and options financial WMDs
(Weapons of Mass Destruction). Read his articles on
this topic. If you are an ardent believer of these,
go ahead and invest. I don't find it worthwhile to invest
in them.

Technical Analysis ? The black art with which traders
can "predict" short term movements of a stock. Well,
short term stock price movements are random. No amount
of analysis and mining can find any pattern on something
that is mathematically "random". I don't believe one
can make a living by trading based on technical analysis.

15. Is this particular product XYZ good ?
This is the most asked question ! It is asked in various ways -
"Is PPF any good ?" "Is ICICI LifeTime plan good ?"
"Is HSBC Equity fund better than DSP Super SIP ?"
"Should I apply for Suzlon Energy IPO ?"
"When is the last day for Tata Contra Fund IPO ?"

As an AAP believer, you will know that these questions are much less
important than your distribution of investment across asset classes.
Still these are the questions you will hear being asked most often.
These questions are based on a false premise -
that a product is good or bad in absolute terms.
The real question to ask is -
"Is this particular product XYZ good for me at this point of time ?"
BioGene Inc may be a great stock for me today to park the bonus that
I received. But will I recommend it to my mother who is a pensioner ? Hell, no !
All financial products of the same asset class are based on the same principles.
So the real question to ask is whether the
product fits your financial plan. Again go back
to your AAP and decide what kind of products
(asset class) you will invest in.

Still, I will give my views on certain specific
products. I am not in a position in offer advice
on specific stocks as I am no good at it.
Besides, it isn't that important on the long term.

PPF
This is for the bonds part of your AAP for long
term goals. Government backed, investment gives
tax breaks, tax deferred growth, tax free gains.
Can't be attached by court. Can you ask for more ?
Enjoy while Government keeps the interest artificially high.

Life Insurance Policies
(Money Back, Endowment, WholeLife, ULIP)
Stay away. Do not mix investment and insurance.
They serve different needs. The "convenience" of
getting it all in a single product is costly.
Stick to term life insurance. For investment,
look for pure investment products.
For the super rich who want to pass on wealth
without inheritance tax, "WholeLife" is good.
I haven't seen any ULIP policy which can
beat mutual funds in terms of flexibility and
expenses. So they are no good for most people.
"Premium back" insurance policies - stay away.
It gets negative marks for misleading customers.

Debt Funds
Good in general. But because of artificially
high interests in post office products,
they score better. Tax treatment of these vary.
So decision will be specific for the individual.

Equity funds
A big resounding YES.
Diversified equity funds should be the core of
your long term investments.

Individual Stocks
Yes, if you portfolio is large enough so that
expenses are low and you can have adequate diversification.

Real estate
For self use - YES
For investment, wait till real estate mutual funds start in India.
Otherwise, if you have 1 crore to invest, you can
buy that 10 lakh land in Electronic city just for
investment. But taking a second loan to invest in
real estate ? And this land cost is more
than 10% of your total worth ? You are kidding, right ?

Gold/Precious metals
Upto 10% of your total networth. Preferably as bars
(yes, you can buy Gold bars certified for purity).
Precious metal is a good hedge against war times
and calamities. But most Indians buy way too much
gold as Jewellery. This is not good because
(a) it is more than 10% of the networth and hence
they are missing out on higher returns from other asset classes
(b) there are making charges and wastages in ornamental jewellery.

Commodities / Arts
Stay away unless you are a guru or a farmer.
Ditto for Arts. Don't dabble unless you can tell
Raphael from Van Gogh. But if there are mutual funds
for these, consider upto 10% of networth.

16. Does "know thyself" have any relevance to investment ?
Your best friend, and worst enemy, is not the market, not the stars,
but yourself.
Benjamin Graham's classic "Intelligent Investor" has done such a
superb job of explaining this. Read that book before you make your
first investment. After reading, spend a month introspecting.
Try to understand yourself.
You have no control on the market or the SENSEX. But you can and
should control your behaviour.
Here are some of his gems to whet your apetite:
1. "An investment operation is one which, upon thorough analysis
promises safety of principal and an adequate return. Operations
not meeting these requirements are speculative."
Please take the effort to really understand this. Each of the
terms used are defined in his book. All of us tend to think of
ourselves as long term investors.
Chances are, people will accept being shop lifters but not see
themselves as speculators. But with the light of the above rule
by Graham, was your IPO investment in that "hot" company not a
speculation ?
Not that speculation is evil per se. But let's not delude
ourselves that we are investing when we are speculating.
Apply Graham's rule ruthlessly.
2. Emotion is yout worst enemy when it comes to investment.
3. Inactivity and laziness won't make you look cool or popular.
Nor is it advised in general. But when it comes to investment,
inactivity is your best friend.
4. Know what is reasoable to expect from various asset classes.
5. Know the impact of inflation.
6. Know history. The basic tenets of the capitalist system have
not changed since the times of Isaac Newton. Newton could
calculate positions and movements of heavenly bodies but
could never figure out why stock prices are so irrational.
Nothing has changed since then even though we have gone
through tunip bulb craze of 17th century, great depression,
airline stock craze of 1940s, world wars, 1987 crash,
internet and technology craze and subsequent fall.
Those who don't learn from history, repeat it. If this is
true anywhere, it is in the area of investment.
7. Long term wealth is created by lack of trading (activity)
and a balanced portfolio that is in sync with your goals
and temperament. You don't need to get a Microsoft or
Infosys to create wealth.
8. A stock is not a ticker symbol. The stock price charts
are useless. Focus on the business behind.
9. Know how to calculate the worth of a company. And growth
prospects. But this information alone is not enough to make
an investment decision. You need to see the price you are
paying for the stock. Even a great business with a great
growth oppurtunities may not be worth investing into if
the price is too high. Even a so so company with so so growth
prospects may be worth investing into if the price
is low enough. Look for margin of safety in every investment.
10. Even though we need to be "intelligent" investors, this
intelligence doesn't have to do anything with the brain.
Isaac Newton or the Economics Nobel winners who ran LTCM fund
were more than intelligent. Yet they didn't have the character
traits that make it possible to create wealth over the long term.
Do you ?

17. My dad says stocks are risky. Are they ?
Your dad is right. Stocks are indeed risky. This is the truth. However, the complete truth is that there is a risk in everything – including NOT investing in stocks. There are various kinds of risks. It’s good to categorize them. There is the risk of principal loss. There is the risk of losing the purchasing power due to prices going up. While stocks can expose you to the former risk, not holding stocks exposes you to the latter risk. Just focusing on one type of risk is not correct. Since there are various types of risk, a balance needs to be arrived at by looking at your financial goals, your appetite for and ability to tolerate various kinds of risks.
Remember there is a risk of dieing in an accident on the road. But there is also a risk of dieing due to house collapse of one chooses to live indoors. The correct thing to do is trying to minimize the risks. AAP, diversification etc. are the tools to minimize financial risks.

18. What about pension plans ? Is that PruICICI pension plan any good ?
From a financial perspective, "retirement" is just another goal which is
no different from, say, "buy a large car two years later". Once you retire, you need
to live off your investments. There won't be a monthly salary. So you need to generate income out of money invested. To explain, if you have 100 Lakhs invested in
a bank at 7% interest, you will make 7 lakhs a year (pre tax). You have to live on
that. But things are more complex than this. Due to inflation, 7 lakhs will be not
give you the same lifestyle that you enjoy today. Also interest rates can change. If it goes down and you have inflation, it will hurt from both sides ! Then there are taxes ! You may have to part with one third of what you earn as taxes. Here's a more realistic calculation which takes into account inflation and taxes.
Suppose you want to retire in 20 years and at current price levels, you need 6 lakhs rupees a year to live on. Considering a 7% inflation, you will need 23 Lakhs a year 20 years from now to maintain the same lifestyle. Surprised ? Well, that's inflation power ! Inflation is the evil twin sister of compound interest. While the latter can make you a crorepati at 40, the former can reduce the value of that crore. If you need 23 lakhs a year, you need to generate at least that much every year. Actually you need more considering that inflation will be there even after you retire. So at 10th year after retirement, you will need ((1.07)**10) X 23 = 46 lakhs a year. If you are laughing at these numbers, you will be in serious trouble. Because this is the kind of income you will need just to maintain current lifestyle. Now, to the important question of how to plan for retirement, convert it all to numbers. Considering that inflation will stay forever (worstcase scenario), you cannot spend all the income you generate. In addition, you can't afford to pay taxes any more that what you absolutely have to. Which means that you can't withdraw full 7% interest that you may earn. Experts have come to an agreement that a 3% withdrawl rate can sustain someone's life without the risk of erosion of capital while handling inflation. So if 3% of R is 23 lakhs, R = 773 lakhs. With this amount of retirement capital, you are reasonably sure that your principal won't go away and you can live off income. Bank interests are not very tax friendly. So you will have to invest a good part in income funds (mutual funds that invest in bonds). Since capital gains tax rates are lower, bulk of money needs to be here after retirement.
Now we need to see the other side of the game. How to get that 773 lakhs ? Use the good sister - compound interest ! Invest in equity and you can get there. You may have to play aound with the number of years to retire to reach the correct figure. But you can't do anything but invest in equity for long term goals like retirement. Forget PPF, traditional LIC policies (either from state owned LIC or private ones like PruICICI). A lot of insurance companies sell policies as "pension plans". Just because they are called "pension plans", doesn't mean that they are the best way to prepare for retirement. If they don't invest in equity, just ignore them. If they do, see expenses etc, just as you would judge a mutual fund. They usually club some life cover. If you are not looking for life cover, that part of the premium which goes for life cover is a waste. Looking at many factors, one is better off investing in mutual funds even for retirement. I ignore these "pension plans" including those which are marketed as ULIPs. If i need life cover, i just buy term cover. So get cracking, use your calculator and start investing !

Cognate Words

2005-10-20T07:26:00.000-07:00

Etymology is fascinating. Words tell stories.
See some of the cognate words in different languages.

Asti (Sanskrit)
Ist/Ast (Persian) , as in Hanooz Dilli Door Ast...
Is/Ist (English/German)

Asur (Sanskrit)
Ahur (Persian). In many words "s" in Sanskrit becomes "h"
in Persian. eg: Sindhu/Hindu

Bhratri (Sanskrit)
Birader (Persian)
Brother (English)

Dev (Sanskrit)
Deev (Persian)
Diva/Diu/Theo (Latin/Greek)

Do/Dwi (Sanskrit)
Two (English)

Three (English)
Tri (Sanskrit)

Saptam (Sanskrit)
Septem (Latin/Greek)

Ashtam (Sanskrit)
Octo (Latin/Greek)

Navam (Sanskrit)
Novem (Latin/Greek)

Dasham (Sanskrit)
Decem (Latin/Greek)

Agni (Sanskrit)
Aagon (Russian)

Agra (Sanskrit)
Agora/Acro (Greek)

Arya (Sanskrit)
Arya (Persian)
Aryan,Ehre (German for Honour)

Asthi (Sanskrit)
Ostheo (Latin/Greek)

Dwar (Sanskrit)
Darwaza (Persian)
Door (English)

Irshya/Ichcha (Sanskrit/Hindi)
Insha (Persian) (as in Insha-Allah, God willing)

Jaat, ja (Sanskrit/Hindi) (as in Girija, son of mountain,
or Pankaj, borne out of Mud, Lotus)
Zada (Persian) (as in Shahzada or "son of king" or
literally "borne to a king" or "prince")

Kendra (Sanskrit)
Centre (English), Kentron (Greek)

Keshar (Sanskrit)
Khusrow (Persian)
Ceaser/Czar/Kaisar (Latin/Russian/German)

Madhyam (Sanskrit)
Medium (English)(Eg: air is the medium for Radio waves)

Main/Aham (Hindi/Sanskrit)
Mam (Persian)
Me (English)

Manu (Sanskrit)
Man (English)

Matra (Sanskrit)(= Amount)
Meter (Greek/Latin), Measure (English)

Maatri (Sanskrit)
Maadar (Persian) (As in, the famous North Indian swear word maadar-ch**)
Mother (English)

Mrityu (Sanskrit)
Maut (Persian/Arabic)
Morte (Latin)(as in mortal, mortgage)

Naam (Sanskrit)
Nama (Persian) (as in Shahnama, the 11th century "book of kings")
Name (English)

Parth (Sanskrit) (as in Arjun's name in Mahabharata)
Parthian/Parth (Persian) (ancient Persian empire is known as Parthian empire)

Path (Sanskrit)(= way)
Path (English)

Pitri (Sanskrit)
Peter/Father/Pierre (English/French)

Sam (Sanskrit)(as in "samta")
Same (English)

Samiti (Sanskrit)
komitah (Persian)
commitee (English)

Shaurya (Sanskrit)
Shoja/Shuja (Persian) (as in Shah Shuja, Mughal Prince)

Sthan (Sanskrit)
Stan (Persian)(as in Afghanistan, Pakistan)
Station/stall (English) (as in station, install), Stone

Vaar (Sanskrit)
Ber (Latin/Greek) (as in december)

Yama (Sanskrit)
Yima,Jamm (Persian)

Fida (Persian/Arabic)(as in Fidayeen)
Fidelity (English)

Raja,Ray,Rajput (Sanskrit/Hindi)
Reza,Raza (Persian) (like the Shah of Iran, Reza Shah)
Regal(regicide) (Latin)

Kaarwaan (Persian/Arabic)
Caravan (English)

Urdu (Turkish) = Army of men, Army camp
Note: the language that was spoken by the Turkish armies in
the Indian subcontinent came to be known as "Urdu"
Horde (English) (as in "horde of men")

Mythya (Sanskrit)
Myth (Greek/English) (as in Mythology)

Ooper (Sanskrit/Hindi)
Upper (English)

Naranj (Sanskrit)
Orange (English)

Mitra (Sanskrit)
Mithra/Mate (Persian) (as in Shah-k-Mate, king's friend)
Mate (= friend) (Latin/English)

Paththar (Sanskrit/Hindi)
Petro (English)

Arun (Sanskrit)
Arora (English) (dawn)

Dharan (Sanskrit)("to hold", this is the same as
Bengali/Kashmiri surname "Dhar")
Darius (Persian) (to hold), Dario,
Daria (= holder of water, Lake/River)
Note: "Darius" is the Greek way of saying the Persian
name "Dara". in Asia, the word is said as "Dara".
One of Aurangzeb's brothers was Dara who was blinded and
killed by Aurangzeb.

Sthir (Sanskrit)(stationary)
Esther, Sitara (Persian)
Star, Install, Stationary (English)

Atma (Sanskrit)(soul)
Alma (Spanish for soul, also as in "alma mater")

Sant (Sanskrit)
Saint/San (Latin)

Khsatriya (Sanskrit)(warrier)
Xsayathiya (Persian) (King) , "Shah" must have have been
derived from this.

Desh (Sanskrit/Hindi)(country)
Dahyaus ("Country" in Old Persian. This word can be found in Avestha)

Bhumi (Sanskrit)
Bumis (Old Persian)

Bhagwan (Sanskrit)
Baga (Old Persian)

Gatha , Geet (Sanskrit)
Gatha's (Old Persian) (these are parts of the Avesta)

Nav (Sanskrit)(new)
Nou (Persian, as in Nouroz festival)
(Nouroz literally means "new day", however it is used to mean new year.)
New (English)

Shanka (Sanskrit)
Shaq (Arabic/Persian)

Yuva (Sanskrit)
Young / Juva (Latin) (as in juvinate)

Paradise (English/Latin)
Firdaus (Persian)
The word Firdaus has a very interesting etymology. The famous
saying about Kashmir goes:
gar firdaus, ruhe zamin ast
hamin ast, hamin ast, hamin ast
(if there is paradise on earth, it is here, it is here, it is here)

Please add to this list if you come across any other
interesting words.

Ten Steps to Wealth Creation

2005-10-20T02:51:00.000-07:00

Disclaimer: I am not rich. Read and follow at your own risk.

It doesn't take ten steps. Just a single step - Start your own
business. Look at top 500 wealthiest people in the world.
Except for those who inherited wealth, they got rich by owning
businesses ! Yes, that includes Bill Gates, Warren Buffet,
Sam Walmart and Azim Premji.

If you want to be a salaried person and don't want to own
businesses, you can still create wealth - by owning business
vicariously i.e. by owning shares of companies.

Follow the steps below.

1. Write down your goals that require money.
These are usually - Retirement, Education, Marriage, Car etc.
Each person will have his unique financial requirements.
Have you heard the saying, "If you don't know where you
want to reach, it doesn't matter which way you take!"
It's amazing to see people harping about this stock or that
policy without having figured out what their goals are.
Stop being one of those guys !
2. Write down your financial assets.
These are Bank FDs, Shares, Mutual Funds, Insurance policy
surrender values, Gold, PPF balance etc. Don't include "stuff"
(like Car, TV, Home that you need to live in).
3. Write down your liabilities (loan, credit card dues etc.)
4. Take cover - life insurance, medical insurance, accident/death
and disability. Cover costly "stuff" - home and belongings,
professional practice (for doctors and lawyers). Cover self and
those financially dependent on you.
Life cover is only for those who have financial dependents.
5. Pay off any debt whose interest is higher than what you can
earn in the market over the term of the loan. Meaning, if you
have credit card loan at 25% interest for 2 years, pay it off
before you start investing. Same with personal loans.
Home loans are an exception because of the tax
breaks. A home loan at 8% is effectively at 5% since you get a
tax break. Let's say the loan is for 15 years. Can you get returns
better than 5% over a period of 15 years ? Yes ? Then keep
the home loan. Don't prepay.
Otherwise, pay off loans before investing. If you are the type
who borrow to invest (that too in shares!), you are in the wrong
blog. I have wasted your time.
6. After factoring in the liabilities, calculate what your monthly
outgo for those liabilities is.
7. Find your monthly expense. Better, take your yearly expense
and divide by 12. If you don't know your expense, this is very
bad. Start noting down your expenses and find it.
8. Put the amount needed for each of the financial goals.
Also put how many years you have before that goal.
For example, you are 22 and you want to retire at 50
with 1 crore. You have 28 years to the goal.
9. Now here's the big gyan. There is some thing called
Asset Allocation Plan (AAP). I don't know why AAP works.
But Nobel Laureates and smart MBAs believe in it. I take
their word for it. The gyan is: The best way to meet
Financial goals is to create AAP.
For every financial goal, make an AAP.
What is AAP ? It is simply a way to distribute money across
various asset classes. What are asset classes ?
These are the various types of financial instruments - shares,
bonds, precious metals like goad, real estate and good old cash.
The theory is that the distant your goal is, the more you should
be in equity.
The closer the goal is, the more you should be in cash. Bonds
are for intermediate goals. It doesn't mean that you should 100%
in shares for long term goals. This is where allocation comes in.
Here are the rules (roughly put, without the mathematics and
customized to Indian conditions):
(a) Money for a goal which is less
than 2 years away should be in cash (cash can be in bank spread
across branches, under the carpet, or in Liquid Mutual Funds).
(b) For goals between 2 and 6 years away,
keep 80% in bonds (Post Office/Bank FDs, RDs, Debt Mutual
Funds) and 20% in equity (shares or Equity Mutual Funds).
Decrease equity by 5% every year and move it to
bonds. When you are two years away you will be 100% in bonds.
Now treat this as case (a)
(c) For goals more than 6 years away, stay 80% equity, 20%
bond. When you are six years away, treat as case (b)
10.Now some mathematics. You do remember what a compound
interest is, right ?
Consider long term equity returns as 14%. Debt returns as 7%.
Now apply formula to calculate what you need to invest every year.
Divide by 12 to get the monthly investment amount. For example,
you need 10 lakh for your kids education
in 15 years. Consider roughly 14% return. If P is invested every
year for 15 years, here's the equation:
P * [(1.14) + (1.14)^1 + (1.14)^2 + (1.14)^3 + .....
+ (1.14)^14] = 1000000
Solving this (you can use Excel or you ask your geek friend), you
get P = 22808. Monthly investment is 22808/12 = 1900.
So now you know by investing about two thousands a month into
equity, you will have 10 lakh in 15 years.

Do the above exercise for all your financial goals.
Now you know how much you need to invest every month
and in what kind of assets. Obviously, you need to
make sure your investment + expense is equal or lesser
than your income. If not, reduce your expense. or, lower
your financial goals.

Once a year rebalance your portfolio so that you don't stray
from AAP. Suppose you started
with 60% equity and 40% debt. But due to market going up,
your equity portion has ballooned and has become 80% of
the portfolio. Sell some equity and move to debt so that
you reach 60/40 split again.

I started this post by creating a dichotomy - salaried person vs.
business owner. But in reality, even a salaried person is a
business owner. A salaried person is in the business of
selling time and expertise. In business, products need to
move up the value chain. Similarly as an individual, a salaried
person needs to move up the value chain. That's why Warren Buffet
said investing in yourself gives the best ROI. In other words, if you
want to create long term wealth, start moving the product
(i.e. yourself) up the value chain. Get additional training/degrees
and experience. Money may get stolen, share market may crash
but your knowledge and expertise will be with you. And that is
the real wealth you should be after.

Mutual Fund - 1

2005-10-19T21:37:00.000-07:00

Some Mutual Fund Gyan I have gathered over the years:

First, Index vs. Actively managed funds - I have not made up my mind
on whether active always performs worse than Index funds over long
term. Personally, i am sticking to actively managed funds. All that is
written below applies to actively managed funds.

Absolute value of a Mutual Fund's NAV has no meaning. Only %
difference over time with its own NAV matters.

How to judge a Fund ? Past performance (though, there is no
guarantee that it will be repeated), expense ratio, churn ratio
(transaction cost of fund), loads, fund manager style. NAV
value plays no role. Never look at a fund in isolation. Look
at the complete asset allocation plan
- what % will be in equity ? What % in larrge cap ? mid cap ?
Then look for good funds/stocks in each category.

Children's mutual fund schemes are the ideal way to assure your child's
future - Bogus !
These funds are the same as plain balanced funds (which invest in
equity as well as debt). Just marketed differently as "children's fund"
so as to cash in on people's concerns for children.

Mutual Fund IPO investing is good - absolutely wrong ! Fund IPO
investing is very bad !
In fact, technically there is no such thing as an IPO for a Fund.
Authorities are going to ban the use of the word "IPO" for funds.
Because this word confuses investors.
Here are the reasons why you should not invest in a fund "IPO":
1. Since mutual fund NAV absolute value has no meaning and only %
difference matters, there is no special reason to buy units at 10/-.
It is not "cheaper" at 10/-.
Agents and media try to fool people by saying this value is "at par".
There is no such thing as par value for a fund unit. Value of a fund is
the value of underlying stocks - no more no less. A fund unit selling
at 30/- is not more expensive than one that sells at 10/-.
Given this, why should someone invest in a fund just because
something is selling at 10/- ?
Purchase/Sell decisions should be based on your financial plan and
asset allocation plan. Not based on what has come for IPO.
2. There is no entry load during IPO - this is another fraud by the
agents and fund houses.
True, there is no entry load. But the higher initial expense (upto 6%)
is charged to the fund over the first 3 years of a fund's life. This is
from your money ! So in a way there is a load ! Besides, no-load
feature has a "lock in".
If you sell within that period, you have to pay load. "No load" benefit
can be had by investing in SIP as well.
3. You have no information about fund's performance or fund
manager's capabilities when investing in an IPO.
4. From the day of payment, to the day of purchase of stocks by the
manager, funds are idle, generating no returns. (Why do you think
many of the recent fund IPOs opened at an NAV of below 10/- ? )

Fund IPOs are different from stock IPOs. Stock IPOs are when a
company sells its equity to the public. Since they are selling a large
number of stocks, they have to make it more attractive by pricing it
lower than real value of the company/stock.
But fund units have no "real value". Their value is sum of underlying
stocks. So why should there be any attraction for IPO ? Why do we
expect a jump in NAV after IPO (like it happens sometimes with
stocks ) ?
The reason why agents try to sell fund IPOs so much is that they get
higher commissions. Funds give them higher commission because,
being a new fund, that's the only way it can attract money. Guess
where this high commission comes from ? That's right, from your
money.

Wait for my next installment:
For anyone with even average brains and an iota of discipline,
any isnurance policy other than a term policy is not worthwhile.
In other words, say goodbye to ULIP, Endowment, Whole Life,
Money Back policies

Gandhi - A Contrarian View

2005-10-16T03:26:00.000-07:00

Another Gandhi-jayanti has come and gone. It seems to me over the
years, the enthusiasm with which this day is celebrated has gone
down. If true, this could be for many reasons. In a way, I am happy
about it. I am not in favour of blindly eulogizing any person. If a
person does an objective analysis and then venerates Gandhi,
it is fine (and I think I am in this camp). But Indians are never
given a balanced picture of Gandhi's life. Look at our history books
(at least the ones taught in academics). They seem to give a
completely one-sided account of his life. It's always - Gandhi was
great, all-sacrificing, fasting, peaceful messiah - British were bad -
Jinnah was communal and a devil - Congress was secular -
Muslim League created communal violence - ad nauseum!

I would prefer if people do not respect Gandhi based on such
reading. I would rather people do an objective analysis
themselves and then decide to applaud or denigrate
(or both) Gandhi.

Gandhi has had an immense impact on India's destiny. His
hunger strikes, non-violent protests and salt march brought
India closer to freedom. While his colleagues at Congress sat
in meetings and discussions about communal riots, Gandhi
would walk through riot affected areas and appeal for peace.
Noakhali is a good example of how he single-handedly
brought peace to riot stricken areas. Nobody in his right
mind can do anything but revere such a saint.

Yet, I would like Gandhi's failings to be discussed. They too
had as much (and more calamitous) effects on this sub-continent.
What was Gandhi's primary mistake? Before his arrival to India
and joining the Congress party, the Congress party was largely
an elitist institution. Started by Bhadralok Bengalis, the Congress
party was working on the modest aim of legislative reforms that
would give more self-rule, but within the framework of British
rule. Gandhi made it a mass movement. How's this a mistake?
To make this a mass movement, he employed religious symbols.
If he had used symbols from all religions and given equal or
more prominence to minority religions, it would have been fine.
But he chose exclusively Hindu symbols - Bhajans, talk of
Ram raj etc.

His failure to realize the impact of all this was a BIG mistake.
As congress took more and more Hindu appearance, the
political stage was begging to be exploited by the British on
communal grounds. And that they did very well.
Following the old Roman "divide and rule" dictum, the British
suppressed Congress leaders and actively propped up Muslim
leaders. But to blame it all on the British would be unfair.
Even without the prodding of the British, prominent
muslim thinkers realized for the first time that an independent
India would mean Hindu hegemony (as they saw it).

It was during this time that Jinnah left the congress. Jinnah was
once described by Sarojini Naidu as an "ambassador of Hindu-Muslim
unity". Jinnah left Congress in disgust at the vulgarization (as he saw
it) of the national movement. In fact, he left the country itself and
settled in London for barristry. Had it not been for Nehru's pompous
statement that "Jinnah is finished", Jinnah would probably never set
his foot back in the sub-continent.

Mohammad Iqbal, a prominent nationalist and the author of
"Saare Jahan se achcha, Hindostan hamara", too changed
his opinion and became an active supporter of the two-nation theory.
It was under these circumstances that Muslim League (which too
started in Bengal) started gaining popularity.

But there are other sides as well to Gandhi's movement. His talk
of an egalitarian society where the masses would yield power
rang an alarm bell to the landlord muslim Zamindars of Punjab.
For many centuries rich Zamindars in the fertile Punjab region
had an immense control of masses. This system wasn't necessarily
communal - the Zamindari system exploited Hindu and Muslim
peasants with equal harshness. This has a parallel in Bengal,
the other state which was partitioned in 1947. The masses of
Bengal reeled under Zamindari system too. The fact that
the Zamindars were mostly upper caste "Bhadralok" Hindus
and poor peasants mostly Muslim didn't change the intensity
or nature of the exploitation.

But this socio-economic background was ripe for a call for
"Pakistan". In the Indian subcontinent, it isn't religion but it
is the social-economic class a person belongs to, that controls
his destiny. Conversion to Islam/Christianity/Buddhism
never changed the fate of poor caste-oppressed Indians.
They remained the oppressed people even in the egalitarian
religions. (Anyone who doesn't believe this, please visit
"Brahmin" churches in Kerala which bar "Dalit" christians). So if
religion didn't make much of a difference to people's destiny,
why did the call for partition by Muslim league take roots?
This happened because "Pakistan" meant different things
to different people - to the rich Zamindars of Punjab this meant
a continuation of their rule over the masses - to the poor peasants
in Bengal it meant a deliverance from the cruel Zamindars - to the
urban muslims of UP it meant a chance to get new age jobs
(clerical/administrative jobs which so far had been taken mostly
by western educated Hindus). A purely religious analysis of the
partition would imply that the Maulavi class would support
partition. But the Maulavis were vehement opponents of partition
and Jinnah - to the extent of denigrating him as "Kafir-e-Azam".
This proves that we need to take a more complete view of the
partition. Each region had its own dyanmics and complexities.
Viewing through an all-encompassing communal lense would give
an imperfect picture.

Gandhi while making the Congress a mass-movement completely
lacked the foresight to realize the repercussions of his actions.
He made a ripe ground for communal passions that were unleashed
and caused the partition. For this he must take blame.

While this is his most important failure ("strategic" failure in
MBA-speak), his tactical failures were important too.

Look back to 1936 national elections. Congress won handsomely
all over the nation (except in Bengal where the masses voted for
KPP, and in Punjab where the gentry and masses were still solidly
behind Sardar Hayat Khan of Unionist Party). At this point,
Muslim League was still very weak politically - they had very few
representatives in the parliament.
Gandhi had the opportunity to create a bridge of peace with
Muslim League. The League would have been glad to do so since
they were weak. Congress and Gandhi missed this golden
opportunity. It's partly the hubris, partly their inability to read
the situation that was to blame. Either way, this miss was
disastrous for the subcontinent.

During the same election, KPP (Krishak Praja Party) won maximum
seats in Bengal. KPP was led by Sher-e-Bengal Fazl-Ul-Haque.
This party represented the masses of Bengal. For this reason,
the Bhadralok Zamindars of Bengal never liked it. They were solidly
behind the Congress party. Most of the monitory donations to
Congress came from this Zamindar class. Congress wouldn't do
anything to upset this class. Fazl-Ul-Haque proposed a joint
government to Congress with a formula for power sharing.
You would expect Gandhi to lap this offer.
But he didn't. The messiah of the poor masses failed to deliver where
it mattered so much. Subhas Chandra Bose pleaded Gandhi to accept
the offer. But Gandhi and Congress remained on the sides of the class
that fed them.

The minority government of Fazl-Ul-Haque was pulled down by
Congress soon. A disappointed Fazl-Ul-Haque was served on a platter
to the Muslim League. This gave the League a back-door entry to the
Bengal government. From this point on, partition was almost a
certainty. And guess what? It wasn't the muslims in Bengal - but
the Hindu Zamindars now who clamoured for a partition of Bengal.
Since they saw partition as the only way of getting their privileges
back.

The blame for this must go to Gandhi.

Lest someone should get the impression that I am putting the entire
blame of partition and the riots on Gandhi and letting the Muslim
League scot-free, here’s my clarification. The League made
grave errors of judgment. The Pakistan that was created
(“moth-eaten” or otherwise) had a fundamental paradox.
The most vocal support for the partition was in areas where
the muslims were not in majority. This meant UP, Bihar,
Ahom, Punjab and Bengal. The areas with overwhelming
muslim population were never enthused with partition. The
Sindh province was lukewarm. Even in the 1946 elections,
the Frontier province chose Congress backed Abdul Gaffar
Khan, rejecting League’s partition demand. What does all
this mean? After the partition, the most vocal supporters of
partition found themselves in India and those where against
or lukewarm to it found themselves in Pakistan. Bigger irony
is for those muslims who stayed or remained in India, the
creation of Pakistan weakened them instead of strengthening
them. The leadership and educated urban muslims from north
India migrated to what became Pakistan. This left the poorer
and uneducated muslims in a precarious position. They had
no real leadership to speak of – an affliction that has remained
till today. Of course, the migrants didn’t exactly get a welcome
mat in the new land (read about Muhajirs). It’s highly
questionable whether muslims are better off with the partition
than they would have been in a single nation.
This was League’s fundamental mistake. A large part of the
rioting was caused by League’s lower level leadership. Some
of them were pure demagogues. They incited riots and horrible
pogroms. The “Direct Action Day” in Calcutta (August 1946)
called by the League was pure evil. There is no evidence of
Jinnah actively reigning in these elements. Being a leader, it
was his job to control what he started. I will accuse him of the
same crimes as I indict Gandhi for. In fact, in some matters,
he was worse. He should have known what his statements
(like, “muslims are not necessarily docile people… they will
give back in equally harsh manners what they receive”)
would trigger. Similarly, Suhrawardy of Bengal was equally
guilty of inciting riots. Riot happy Leaguers were matched
atrocity-to-atrocity by RSS/Arya Samajis. So both sides
share the blame.

Anyway, let me continue on Gandhi.
Zoom to 1946 - a few days after the political agreement
between Congress and Muslim League (Cabinet Mission Plan).
Mind you, 1946 was very different from 1936.
The Muslim League had won handsomely
in all muslim majority regions (except the Frontier province).
It was no longer ready to play the under dog. With the cajoling
of the British an agreement was reached. The League was still
ready to ditch its demand of partition. Provided, safeguards are
established for the representation of minorities in the legislature
and jobs. Not an earth-shattering unjustified demand.
Alas! Gandhi, the person you least expect it from, chose to display
extreme polemics on wordings of this agreement. He should have
seen the larger picture and adjusted. Yet he said, horror-of-horrors,
"Congress keeps the right to interpret the agreement in its own
ways." This, a few days after the agreement was reached and the
ill-fated press-briefing by Nehru, finally convinced the League
that Congress was never sincere about accommodating the
minorities.

In the final analysis, the blame for partition must go to
Gandhi just as the credit for bringing freedom closer.

Are Ahoms the real Rajputs ?

2005-09-30T05:05:00.000-07:00

First off, we should stop saying "Assam" and "Assamese". These are
british coined phrases the Ahom people can never relate to.

Ok, so what ? Why am I talking about the Ahoms ? And what do they
have to do with the Rajputs ? Read on.

The Ahoms have a proud history. They were originally a shan people
(a branch of the mongoloid family). They started migrating from the
region of upper burma into the Brahmaputra valley about a thousand
years back. Over the centuries, they intermingled with natives and
developed a culture which is mixture of various cultures.
The most significant aspect was that though they got absorbed into
hinduism and yet never developed any caste system.

How did this matter ? While the rest of India had capitulated
successively under Turkish, Afghan and Mughal invasions, the Ahoms
did not. They had their own history of aggressive empire building.
Unfettered by caste shackles, every adult Ahom responded to the
King's call to defend their homeland. For three hundred years Mughal
forces repeatedly tried to extend their suzerainty to the Brahmaputra
valley. Hard fought phyrric mughal victories only led to temporary
subjugation. The central asian battle tactics of mughal forces
which worked so well elsewhere, completely failed in these
marshy lands. Midnight boat raids were common and often annihilated
mughal garrisons. The Ahoms managed to preserve their
independence almost all through the mughal period.

The reason I have chosen to highlight this here is that the history
books taught in India are completely silent about this.
What do they teach instead ? That it was the Rajputs that fought
the Mughals. Maintaining silence about the Ahom resistance,
our history books keep eulogizing the Rajputs.
I wish to destroy this myth. Yes, there were was the Rajput
confederacy which fought Babar in Kanwa. But while the battle
is mentioned, it is conveniently omitted that Babar's strength
was one tenth in number. With a force so much smaller, Babar
defeated a confederacy of Rajput kings. So much for Rajput bravery.
If all Rajput kings together could not defeat a much smaller Mughal
army, what were the chances of individual rulers ? Babar is often
wrongly given the credit of establishing the Mughal empire in India.
He did not. It was Akbar. Babar's sole effect in the Indian scenario
was the final destruction of any Rajput chances of a comeback.
After the Kanwa battle, Rajput resistance to Mughal rule was an
exception rather than the norm. Except for Udai and Rana Pratap,
all Rajput kings accepted Mughal supremacy. Far from fighting the
Mughals, a détente evolved between Rajputs and Mughals. Many
Rajput kings accepted ranks within the Mughal ministries. Many
Rajput warriors fought and led wars to help and extend the Mughal
empire (Man singh, Todarmal, Birbal). Many Rajputs created alliances
through marriages of Rajput princesses into Mughal courts. Salim's
mother (Jodha Bai) is the most well known but there were
numerous such cases.
These facts are glossed over in our history books.

Note that nowhere I am saying that Mughal empire was necessarily
a bad thing. Nor am I saying anyone who fought it was good and
anyone who helped it was bad. The peace agreements between the
Rajputs and the Mughals was a blessing for India as it ushered
in some peace in north India. Objective readers of history will
note however, that this was not a friendship of equals.
The subordinate status of Rajputs in this relationship was obvious
due to Rajput kings paying tribute to Mughal emperor and serving
them with arms and men. Also, flow of brides for marriage was
strictly one-way, towards Mughals (i don't condone this attitude but
the reality of our society is that this is a symbol of inferiority).
My goal of writing this post is merely to correct the myth
that Rajputs fought the Mughals and to create an awareness about the
Ahom history.

The Clock is Ticking !

2005-09-27T06:50:00.000-07:00

Let's face it ! We are living on a borrowed time. With the
end of the 20th century, the era of cheap fossil fuel based
energy is over.
We reached the peak oil production last year and it's down hill from here.
Unless there is a major new oil find, the world will never reach the
past oil production heights. This will have disastrous affects on the world.
Coal, the other fossil fuel, is responsible for 85% world electricity
production. And Coal deposits are not going up either.
Most of us understand the plight of countries which depend on imports
to meet energy needs. Auto industry will come to a standstill without oil.
Electricity production is bound to get affected in a major way.
However, the plight of oil exporters is not well understood. Take
Saudi Arabia. It's sitting pretty on black gold. The doubling of crude
prices has filled its coffers. It should be happy about the global
oil shortage ! However, it will be in deep trouble when the oil export
stops due to depletion of resources. Does Saudi Arabia have any
other industry ? Has it developed its human resources to transition
into manufacturing or services ? In fact, developed nations (mostly
importers of oil) have looked the other way while the Saudi Kings
followed the most regressive regime where women are not even
allowed to drive vehicles or go outside of home without a male
relative's company !
As a country it is the least prepared to handle the coming oil bust.
What are the alternatives ? We need to figure out effective ways of
harnessing renewable energy from wind, water and atoms !
At this point of time, auto majors are controlling the research on
alternative fuel cars. This is like asking the fox to count the
chickens ! Auto companies will try to maximize their profit rather
than find the best solution for the problem.
The governments need to push for more research in the renewable
energy area. Industry should get incentives to produce clean and
renewable energy.
India is rich in Thorium. We should do research in producing energy
from this in a safe and clean way. Similarly, wind and water based
solutions need to be developed. Public transportation system needs
to be set up that is usable and scalable.
The govt should support the industries by giving tax write offs on
new investments. Universities need to be supported with grants.
To pay for this extra expenditure, government should put a
10/- per litre surcharge on retail customers. If we need more funds,
there can be a 50% registration charge on private vehicles. This has
been effective in Singapore where most people do not own private
vehicles. The public transportation is good enough.
Agreed India is different from Singapore, but we can use a
combination of the above to achieve this.
Mankind has faced many challenges in the past. I have no doubt we
will meet this one too. But only if we start our efforts now.

India's Dark Secret

2005-09-23T03:52:00.000-07:00

Every nation has its holy cows. Persons and Institutes revered
by all citizens without exception. No one questions them.
Indian army is one such institute. It's getting away with
egregious blunders, profligacy and abuse.
No one is questioning it. All in the name of "national interest".
While nation ruled by dictatorships can be excused but why is
it that Indians, proud of its pluralist views, never
ask uncomfortable questions about its army.
Here are my peeves about our national army.

First, we have too large an army. This may sound foolish
because the army is fighting battles against separatists,
and of course, the "sent from across the border" terrorists
in Kashmir.The fundamental problem is india's insistence
on solving political problems militarily. India has always
been like this -
hyderabad, goa, north east, bhindrawale, kashmir ...
you name it.
We can't think of one political problem that India has solved
using diplomacy and political acumen. India had time from
1948 to1989 to settle the kashmir in a fair and peaceful way.
There was no popular demand for "azaadi" before. In 1965,
when Pakistan sent its soldiers to Kashmir hoping to incite
unrest, not a single kashmiri cooperated. On many instances
the locals promptly reported outsiders. Why did India not
capitalize on the opportunities ? Right upto the 1987 elections,
which the central government shamelessly rigged, political
solution was possible. Having blundered again and again,
India is now trying to ruthlessly suppress the militants.
So overwhelming is the force that India is applying, that it
is using more than a hundred thousand troops in the valley
to tackle a few thousand militants.

Take the north-east. We had a golden opportunity in 1947
to integrate these states into the mainstream. The popular
sentiment was ready for it. But given that India's central
leadership has always found it hard to think for people
beyond the gangetic valley, it was not surprising that we
managed to alienate the people in those regions. If only we
studied the history of these people, we could have realized
that delhi's rule over this region has always been tenuous.
The mighty mughal army could not establish control over
this area, in spite of trying for 300 years. Trying to
accomplish this with a few decades of Indian army is
repeating a folly. We should try political options.

We now have nuclear weapons. Doesn't this increase
our sense of security ? Why has it not resulted in a
decrease in theexpenditure on the army ?
On the contrary, the defense budget has seen steep
hikes. And this has been done by none other than
P C Chidambaram, a minister whom urban middle class
seems to eulogize as the panacea of all ills.

I have an inkling why the budget never goes down.
We keep importing arms and ammunitions. Who is
benefiting from this ? There are myriad middlemen
who get cuts from defense deals. And this cannot be
happening without the connivance of atleast a section
of army top brass. Bofors and the coffin cases came
out in the open. But every defense deal steals money
from the tax paying citizens. Then there are petty
thefts and pilferage - kerosene being sold outside.
Ration and other items marked for soldiers are
easily available inthe market. The MES (Military
Engineering Service) contracts are so notorious
for corruption that it is euphemistically called
the "10 percent" service. The Army Supply
Corps (ASC) goes by the appellation of
"Atta Sugar Chor" !
Need we see more ?

A large part of the army stays occupied
maintaining itself - serving other soldiers
(barbers, medics, priests etc). While this
can be justified, do we need soldiers running errands
for officers. These soldiers called "batmans" (sic)
are a throwback to the times of british occupation
when the Indians used to do menial jobs for
the british officers.

These are the steps that should be taken to fix the
current situation :
- Use our democratic and pluralistic spirit to solve
political problems with dialog and political process.
Reduce military present and create an atmosphere
for dialogue. A happy population proud to be part
of the nation is the best defense.
- Decrease army headcount by 50%.
Augment the national army by creating a strong
volunteer army that can be called upon duty at a
short notice. This will need NCC to be upgraded.
- Decrease the defense budget. Decrease the
import and stockpiling of arms.

Jai Hind

Complete degeneration of Indian films

2005-09-22T02:13:00.000-07:00

Did this surprise you ? After all, aren't we making it to the
Oscars and Cannes of the world ? Doesn't that mean we are making
better films nowadays ?

No. We are making terrible films. A large majority of the films made
in Bombay are so bad that the producers should be jailed.

Time was when the films used to have a distinct storyline,
a good script and memorable songs that you could hum.
These days, films don't have even a semblance of a storyline.
Wafer thin plots masqueraded with titillating visuals are being
released, friday after friday. Even those which have some storyline
tend to be jingoistic fluff created to pander to the public just like our
politicians do to hide their ineptness ("Lagaan").

How come the central characters of most films are punjabi, upper
caste hindus (look for the surnames in the films: khanna,karan,
chaddha, chowdhri....) ? I bet the stock of people this represents is a
tiny part of the country. Yet, film after film,we go through the heroes'
love for "sadda punjab" or the heroines go through "karwa chouth".
Do you know what percentage of married women in India perform
karwa chouth ? You will be surprised.
I have nothing against any community but it's about time we saw a
malayalior a kashmiri or a manipuri character in the lead role.
Aren't they Indians ? Whatever happened to films like
"Amar Akbar Anthony" ?
Though sometimes reduced to stereotypes, you could find characters
from minority communities in mainstream films (not just in
"alternative" films like those by Nagesh Kukuanoor). I bet you will not
find any film today with a song like "Kancha re kancha re". Why ?

Talking about minority communities, have you noticed how we no
longer write the name of the film in Urdu on posters or on screen.
Why ? There was a time when Urdu words sprinkled dialogues and
film names -Muqaddar ja Sikandar, Namakharam, Noorie. And now ?
Unnoticed by the common man, Indian films have undergone a clear
de-Urdufication, much in thesame way German films purged out
everything semitic in the 1930s.

Yes, we made one film with a sikh protagonist recently. But how did
we portray him ? As a brainless policeman who cavorts with scantily
clad women !

Ah women ! they have received the worst treatment. We protest
about the daily soaps on TV and how they portray women as
weaklings. But what about films ? Do they portray women as
people or as objects ? Women are portrayed either as always
"sacrificing" for others sake (ala "karwa chouth") or as a brainless
seductress doling out item numbers.
What about the generation of children growing up on these signals ?
Girls who constantly watch this will growup with low self-esteem.
Scary.
And the boys growing up watching this, will have an unbalanced
view towards women ?
Scarier !

Even though the society was no more enlightened back then,
at least the heroines would take charge of her life and take
people head on ("Seeta aur Geeta").

Call them simplistic. Call them unreal. The films earlier had a clear
message - you do good, you get good. You do bad, you get bad.
Black and white. But now, our misplaced sense of realism condones
today's genre of films where bad is cool and good is passe'.
Anything goes and is accepted in the name of realism. So women
are either shown as "all sacrificing" for others (how regressive!)
or breaking societal rules completely and indulging in the forbidden
or the unnatural.

Can there be a balance ?

Wrong history taught in Indian schools - Why ?

2005-09-21T21:39:00.000-07:00

The history that Indians read in schools is full of misinterpretations,
selective leaving out of facts and utter falsifications !
Over the next few posts, I will substantiate this claim.
But first, the "why" ? Many people, who agree with this,
attribute this wrong teaching to the British occupation.
While I have no love lost for the British (God, I can never
forgive them for the Bengal famines that killed in millions),
I do not attribute this to them. We have been independent
for more than half a century. This is about time we stop
blaming the British for all ills in our country. This wrong reading
of history is mostly our own doing. Why do we read wrong history ?
Because this is suitable to some people !
We Indians take pride in our democracy and waste no chance to
deride our neighbour on this front. Little do we realize that
when you see who really wields power in our societies,
India and Pakistan are no different. The ruling class has been in
power down the centuries of our entire history - the changes in
political structure has had very superficial influence on
the grassroots. And it is this ruling class to whom the falsification
of history is convenient.
The falsification is not an accident or a foreign occupation
(aka "colonial") hangover.
It is by design. It exists because it makes it possible for the ruling class
to continue the current unfair setup of Indian society.

First page

2005-09-21T21:30:00.000-07:00

Welcome !
Watch this space for discussions on these areas:

Indian and world history
Indian films
Media and people
Children
Women's status in india
Indian society
India's geopolitical strategy
Energy
Bengal's history
Personal finance (stocks and stuff.... proof that I am not a commie)
Employees and Employers

Charu