Droplet Wealth

A friend of mine asked - How can someone buy things without debt? How is that even possible? Life is impossible without debt is what he said. This conversation kindled me to write this. Can everyone be debt free? Is it really possible? No, everyone cannot be. It's  like asking can everyone be play for Indian cricket team. Nope, only those who work hard and have the determination to play will end up playing (let keep aside the politics). Frankly speaking, it's highly impossible to be debt free in your life.  In some way or the other we will be forced towards debt at some point in time. There could be some unforseen events like health issues for which we might go for debt if not covered with adequeat health insuranse. Whereas in all other cases we are forced to take loans, and that force is not external. We look around the society and force ourselves to buy things what is not needed at all.  There is no harm in taking debt to buy a house where you will live in f...

My Partner called me and told me that we are no different from laymen who know that Short term Interest rates are going to fall. We both know the same and hence we are the same. Yes I would say but only for the sake of that knowledge.                            The 1 Year FD in SBI in 2012 would have fetched a interest of 9.25% per annum but today it fetches only 6.25% and this is of course a grave matter for Fixed deposit holders. Because if they had known the interest rate would fall, they would have bought 10 Year FDs which would have paid the same 9.25 % today instead of ending up getting a measly 6.25 % today. So simple.  Now it is expected that Interest rates can fall further - what do we do? Buy 10 Year FDs and lock the "assumed" higher interest today or Wait for the Interest rates to go up?   Speculate. Speculate. Speculate.  This is where a good financial planner...

Why minimum balance payment on credit card is the worst thing? Of late credit card penetration in India has increased multi-fold. A decade back 1 in 10 would have a credit card. Today 9 in 10 have 3 credit cards each. A ratio of 1:27. All these are mostly owned by salaried people, because they are the ones who pay off at any cost and are easy targets. I myself had six credit cards until 2017. And today I have two, closed the other 4. Stopped using it much.  A recent statistics reveals that there are approximately 50 million credit cards. Of which 25 million are active cards meaning at least one transactions happens every month. The whole purpose of getting a credit card is for emergency needs and/or cashback points. However we start using it for LUXURY WANTS! This is where our financials would go for a toss.  While applying for a credit card, we look out for offers, interest free credit period (as if we will pay it on time), cash withdrawal limit...

In our previous blog , we gave an example where the assumed gentlemen had taken an Insurance of 1 crore. It is natural that most of would think why such an H U G E amount of insurance? Because most of us think of Insurance as "sum that will be paid to you by LIC on Maturity" and hence think such huge amount is only for ultra-rich people. Through this blog, we would like to clarify on this erroneous thinking. Also, let our readers know how much they should cover themselves with?  The Maths  -  This is how the average financial scorecard of Middle class looks like  - Part A - Sum of all the loans that we have comes to about 50 lacs.  Part B - If we assume that "with no loans" & "an Own house", Rs 25k monthly is fair enough to maintain and run life on good standard of living. If we want this income for the next 20 Years (time taken for your kid to grow and contribute to expenses.), then we need to make a one-time investment of 60 lacs...

                         Most of us fail to understand the fundamental purpose of life insurance. We are made to believe that insurance is saving or worse in most cases an investment. However, the whole idea of insurance is to cover the  risk of  loss. In simple terms, insurance is a financial backup for the family highly dependent on their breadwinner. To make it even simpler, let me give you an example as to how insurance should be looked at - You buy a two-wheeler or car and get it insured - what happens here? Your car is insured for a specific amount and in case of any loss/damage to your vehicle; the insurer will pay you, post the inspection and only for the quantum of damage . Wonder how would you feel if anybody asks you - "What is the return I will get for the premium I paid on my motor vehicle ". Won't it sound ridiculous?              The more we talk to people...

        So we promised we will suggest a different (better) way of Direct equity investing in our previous blog . Here we are with our simple thoughts. Read on Build your Capital  1. Give yourself an 8 year time period. Well, the obvious question then would be "Don't stock markets make people rich in quick time?" Not really. One would have "made" the money in one year but by staying invested for decades. 2. In that 8 year period build your capital by saving in products that are exposed to stock markets. aka Equity Mutual funds. 3. Why Equity Funds and not something else? That is because, this will give the experience of "Market Volatility" + compound your capital at a better rate.  That's only about capital. So how about the knowledge?  Built your Knowledge 4. During this 8 year period, Start reading books relating to investing.  5. Based on what you read, Pick the Stocks and make a note of the reasons for your buying ...

Read this interesting  article last week and thought of sharing it with all our readers. A client shared this story with us: It started at the grocery store. Every time we were shopping, my older son, then eight years old, would bug me to buy him a certain cereal he’d seen advertised on morning TV. The same thing would happen when we passed a toy store. He’d beg me for highly advertised action figures.  I realized it was time to teach him about how businesses work and decided that the stock market might be a fun way to do that.  We started small. I told him he could buy the stock of any company he wanted—so long as he paid with his allowance or with money received as a gift. I’d match his funds.   Of course, he was drawn to companies he could relate to: computer stocks, Manchester United, and the like. When we ate in a restaurant he liked, he started asking if it had stock, and if so, how we could invest.  Our stock market game not only t...

A lot of us know mutual funds invest in Stock Markets. Stock markets aka  Equities aka   share markets aka companies. So a simple thought that comes to our mind, why not invest in shares by ourselves. The self-realization that we are smart than others props this thought to the next level and we commit. If not this then the greed of becoming Wealthy soon props this thought. If not now, then at some point it will. So you are caught and our job as advisors is to help you escape. Let us caution you - The very purpose of this post is not to Frighten you from Stock Markets but to frighten those who think stock market is a place to become filthy rich over night by investing based on a random tip. Read on. We have for now kept the legends who take personal loans and invest in the stock market away. We are only talking about individuals passionate about investing and want to make serious wealth by Investing in Stock Markets. By serious, we mean a number no less than a few...

A lot of us might be thinking about making part payments against our home loans. We suggest you look at the below table of savings before you take any such decisions -  For those not adept with numbers/tables, lets us clarify in simple sentences.  1. If we prepay 1 lac of our home loan at the beginning of each year for 5 years. Our Total "Interest Savings" come to about INR 5 lacs for a period of 15 years. 2. If instead of prepaying the home loan, we choose to invest the same in an equity mutual fund, then a fund returning 12.5% per annum, would help us create a corpus of 20 lacs. 3. If instead of prepaying the home loan, we choose to invest the same in an equity mutual fund, then a fund returning 10% per annum, would help us create a corpus of 15 lacs. Before we complete - here are the few reasons why r ecommend delaying the Pre-Payment of the home loan - 1. The Prepayment can be used to create your retirement corpus. 2. Locking up your savings...

C lick here to read in Tamil We know so many people that have a home loan. How much ever they try to, they still pay a minimum of 40% to 90% of principal as Interest to the lender. We delved about this and wanted to give our readers a plan that helps them reclaim the interest portion.  We have normally noticed that most of the home bought are about 40 lacs. WIth 20% down payment, the loan amount comes to 32 lacs. On a loan taken for 15 years at 8.6%, the EMI works out to be INR 31,700. If the loan is duly completed in 15 years, the total interest paid is 25 lacs. Now we have to do plan to get this 25 lacs back.   But the plan is good only if there is no extra payout that the borrower has to make. So we suggest that you extend the loan tenure to 20 years. This will save you 3,700 per month in EMI. Next, Invest the EMI savings in a good equity fund for 20 years. Let's see what happens now.  As one can see by simply managing one's investme...

Click here to read the article in Tamil   Start early.  Be it be health or wealth start early. It does not matter whether you run a full marathon or talk a small walk around the park. Starting early only matters. Likewise, start saving right away, Even Rs 500 is Okay. Avoid excessive calories & fat for a peaceful healthy life. Likewise, avoid debt. Understand the importance of compounding in life. Have a long-term mind set. Be consistent in whatever you do. Let it be gyming, Saving or investing. Only then you will achieve your desired results. Everything in life would take time. You have to believe in the process. Six packs do not appear in a month and neither does wealth. Continue the process and it would happen for sure. Have a plan in place and measure the progress at regular intervals. So you will understand where you are and what needs to be done to reach the destination on time. Understand the significance of diversification. You don't eat the same ...

There are a set of genuine standard questions shot at us from people whoever we have met so far -  Will my capital be safe? Will I seriously make money? How do you say I will make money if I stay invested for a long period? My money in a fixed deposit or LIC is always safe or at least my capital is protected.   Mutual funds are risky. So... WILL I LOSE ALL MY MONEY? This clearly indicates how fearful people are towards equity-related products. We are so tired of answering them with all the possible answers to ensure that they understand it better. Yet, the fear has not moved away. So we thought of writing a blog with an object of making everyone know what will happen to his or her money and whether MF is risky or not! Point 1 - Never put your money anywhere for a period of 20 to 25 years with the intention of protecting your capital alone.  Point 2 - By doing so, you are forcing your money to lose its value.  Point 3 - You have inve...

Everything is associated with Risk. Even NPS does. What matters the most is how long you stay invested. We read an interesting article about NPS and thought of sharing it with our readers. Read on -  Pension funds have marginal exposure to the distressed firm - Many debt funds with the mandate to invest in corporate debt securities have been left saddled with bonds issued by the indebted IL&FS and Essel group companies, resulting in a sharp erosion in their net asset values (NAVs).  While the exposure of mutual funds has been making headlines, the holdings of other investment vehicles have been largely been under the radar. A  BusinessLine  analysis shows that pension funds under the National Pension Scheme (NPS) and Atal Pension Yojana also hold these stressed assets, albeit to a smaller extent.  Scheme-C of the National Pension Scheme invests primarily in the fixed income securities issued by corporates. The portfolios of the ‘Scheme-C’ from the tier...

You need money to make money. Alternatively, you need a disruptive idea to make money for yourself and others. Not everyone would become an entrepreneur like Steve Jobs, Gates or Zuckerberg and hence let us say one needs money to make money. That is the critical resource more than anything is for those who aspire to retire and follow your passion or live a decent life post retirement. This is the reason why we say make your money work for you the moment you start earning!                 A millennial approached us for investment with an expectation of 15% risk free returns. We said, there is risk associated with it and you should invest quite long time (5 to 7 years) and should be OK to adjust for a year or two in case of any uncertainty. And we asked, do you have any savings? NO. Any loans? YES. End of the conversation the millennial said, will get back. After a month the millennial called us and said I'm not ready to take r...