*Time to reset expectations*

Investoshashtra !!!📜📜📜
इनवेस्टोशास्त्र !!!📜📜📜

We are again entering election season, whereby every political leader or party will try to divert attention from real issues and divide us on the basis of religion and casteism.

"Rome was not built in a day and India is an under construction country, thodi dhul to udegi". We are at an inflection point and need to overcome such pity issues. *It's time to reset expectations and concentrate on bigger issues viz employment and housing for all, better cleanliness and hygiene, medical facilities, education, infrastructure etc.*

Similarly, I think it's time for investors to reset their expectation from equity investing as well.

Historically, index has given an average return of 15% and we assume it as an standard for calculating future returns for financial planning.

But, we need to understand logic behind the number 15%. Historically we have seen average inflation of 8-9% and equity generated real return of 6% (15%-9%) (net of inflation).

Now as we know RBI/MPC stated objective to keep inflation in 4% +/-2% range.

If we add real return of 6% then figure of 11-12% will be genuine return expectation from equity over a long term.

Secondly, enough liquidity is flowing in equity market due to TINA effect (there is no alternative for investment) making it more and more costlier, so chances of making additional brownie point there is also limited.

*So, It's time to reset return expectations and alter your financial plan, otherwise chances are high that you might end up way short of required amount.*

Have a fantastic weekend.

Regards,
Raj Talati
www.rajtalati-abminvestment.blogspot.com

Ensure this fund doesn't imbalance your Retirement

Investoshashtra!!!📜📜📜
ईन्वेस्टोशाष्त्र!!!📜📜📜

FUND REVIEW

Ensure this fund doesn't imbalance your Retirement

Mutual fund is witnessing historical inflow for last few years courtesy TINA effect (There Is No Alternative for Investment) and Demonetization.

The biggest inflow came in category named "Balanced Fund" which is a quasi Equity category having minimum equity allocation of 65%, actually most of the time funds are having equity exposure of more than 70-75% in equity in it. This category grown the more than 9 times in last 4 year's.

The reason for big inflow was not for some genuine reason but was for the reason that many fund houses adopted a strategy of declaring monthly dividend ranging from 9% to 12% per annum.

Most of the FD investors and senior citizen tapped this category looking at high dividend payout and decreasing FD rates "without understanding risk involved."

Untill now all such investors who switched to this fund from their traditional conservative investment are having a ball of a time..but remember every party needs to end... today or tomorrow even this party will end.

My worry is for the investors who are dependent on this income. If market falls these funds will also fall in proportion to it and dividend  will make it more worse.

Just to illustrate if you had invested Rs.100000 in one of the biggest and famous balanced fund and have taken a dividend option with payout @12% per annum since 01/01/2008 with all the ups and downs it's value as on 01/04/2018 would have been 23752. It's CAGR return comes to 7.12% worst then bank FD.

Above scenerio we are discussing during a bull period where for last four years market has given us double digit returns.Think of a longer bear cycle.

Second important aspect is dividend is  taxable from this April@10%, effective rate for investors  actually work out to be  12.942% for investors.

So, if you have made such Investments in last 2 years in any such fund on advise of your banker or a MF advisor friend and you don't want your retirement to be at Mercy of a pity advise or markets, it's the best time to review such Investments.

Don't allow balance fund to imbalance your retirement.

Regds,
Raj Talati