Make more money from your property: Short-term rental [Airbnb]

Medium Article Preksha Chand edit post Make more money from your property: Short-term rental [Airbnb] Medium Article Preksha Chand edit post Make more money from your property: Short-term rental Medium Article Preksha Chand edit post… June 11, 2024 edit post GOA Airbnb Laws: What Hosts Need to Know [2024] Medium Article Preksha Chand edit post GOA Airbnb Laws: What Hosts Need to Know Medium Article Preksha Chand edit post… June 4, 2024 edit post How to Build a Startup How to Build a Startup Embarking on the journey of building a startup can be both exhilarating and intimidating. Shows like… May 23, 2024

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GOA Airbnb Laws: What Hosts Need to Know [2024]

Medium Article Preksha Chand edit post Make more money from your property: Short-term rental [Airbnb] Medium Article Preksha Chand edit post Make more money from your property: Short-term rental Medium Article Preksha Chand edit post… June 11, 2024 edit post GOA Airbnb Laws: What Hosts Need to Know [2024] Medium Article Preksha Chand edit post GOA Airbnb Laws: What Hosts Need to Know Medium Article Preksha Chand edit post… June 4, 2024 edit post How to Build a Startup How to Build a Startup Embarking on the journey of building a startup can be both exhilarating and intimidating. Shows like… May 23, 2024

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How to Build a Startup

How to Build a Startup Embarking on the journey of building a startup can be both exhilarating and intimidating.  Shows like Shark Tank make the process look easy.  You show your model You raise funds And you make a lot of money. But it’s important to recognize what works and what doesn’t. How to actually cultivate and nurture an idea. And that’s what we will cover. Building businesses that focus on: Profitability  Value  Fundamentals Drawing from my experience of launching multiple profitable ventures, including an Airbnb rental business in Goa, We have distilled a practical roadmap for aspiring entrepreneurs.  In this blog, we will cover: Ideation: Generating and refining business ideas through brainstorming and strategic analysis. Choosing the Right Idea: Selecting a business concept aligned with your goals and resources. Narrowing Down the Idea: Conducting SWOT analysis to refine your chosen idea further. ROI Analysis: Maximizing Returns and Minimizing Risks Due Diligence: Understanding the importance of thorough research and compliance to mitigate risks. Building the Product: Developing a minimum viable product (MVP) to test your idea in the market. Distribution: Devising effective strategies for product distribution and customer acquisition. Scaling Up: Exploring opportunities for growth and expansion beyond the initial stages.   Step 1: Ideation – Planting the Seed of Innovation Every successful startup begins with a spark of inspiration.  The ideation phase is all about generating and refining ideas that have the potential to address a specific need or pain point in the market.  Start by casting a wide net and brainstorming a diverse range of concepts. Whether it’s launching an ice cream shop or starting your own YouTube channel, explore every possibility. As a start, Jot down 30-40 ideas. How do you do this: a. Brainstorming  Speak with a bunch of people. This could be through networking events or college/work groups. b. Storyboarding  Envision a customer journey and find gaps that you can fill. c. Mind Mapping  • This is the process of structuring your processes.• For eg: If you have a distribution problem for your book, you can break it down into either Building your own distribution  Get outside help by paying extra Go to a publishing house  This way you can identify a problem and find a solution for it.   Step 2: Choosing the Right Idea: Aligning Passion with Profitability With a plethora of ideas at your disposal, the next step is to narrow down your options and select the idea that resonates most with your goals and aspirations.  Consider factors such as your interests, expertise, and long-term vision for the business. Your business needs to fit with your goals. For eg: If your goals focus on: Offline Physical Business  That requires less of your time  The Airbnb space would make sense to you. You could: Buy a house And then list it online or Give it to a property manager This is not a push to try out the business, It’s more focused on showing you how to choose your type of business. Step 3: Narrowing Down the Idea: From Concept to Concrete Plan Once you’ve identified a promising idea, it’s time to flesh out your concept and develop a concrete plan of action.  Conduct a SWOT analysis to evaluate the strengths, weaknesses, opportunities, and threats associated with each idea.  Assess the market demand, competition landscape, and feasibility of execution. Ultimately, choose an idea that not only aligns with your passion but also demonstrates strong growth potential and market viability. Define your value proposition, target audience, and revenue model with precision.  Taking the example of the Airbnb business: Once you have a property, your options are either to manage it on your own or lease/rent it out. This will purely depend on your situation. Step 4: ROI Analysis: Maximizing Returns and Minimizing Risks A crucial aspect of building a startup is conducting a comprehensive return on investment (ROI) analysis.  This involves assessing the potential returns relative to the initial investment required to launch and operate the business.  To perform an ROI analysis effectively, consider the following steps: Calculate Expenses:  Determine the total cost of launching and operating your startup, including upfront investments, ongoing expenses, and overhead costs.  This may encompass expenses such as operations, marketing, and personnel. Estimate Returns:  Project the potential revenue streams and returns generated by your startup over a specified time frame.  This may include revenue from product sales, subscription fees, advertising, and other sources of income.  Use realistic assumptions and conservative estimates to account for uncertainties and fluctuations in the market. Determine ROI:  Calculate the ROI by dividing the net profit (total returns minus total expenses) by the total investment.  This will yield a percentage that represents the return on each rupee invested in the startup.  Aim for an ROI that exceeds your minimum threshold for profitability and justifies the risks associated with the venture. For eg: In the Airbnb business, you need to calculate: 1. How much expense you will incur: Property Cost  Maintenance Charges Renovations etc. 2. How much Return that I can expect: Work with the worst-case assumption Follow a 4% yield rule as a threshold Ie: For a 2Cr villa, I should make at least 8 lakhs a year. Now, if you are setting up an online business, your focus should be on the time investment. If you are taking debt to start your business, ensure that your ROI makes sense. Conducting an ROI analysis enables you to maximize returns and minimize risks, ultimately enhancing the long-term viability and sustainability of your startup. Step 5: Due Diligence: Mitigating Risks and Ensuring Compliance Before diving headfirst into your startup venture, it’s essential to conduct due diligence to mitigate risks. ensure regulatory compliance and protect your downside.  Research local laws, regulations, and industry standards relevant to your business niche.  In the case of Airbnb business, conducted extensive research on  Societal laws, Licensing requirements to avoid potential legal pitfalls. How does this Due Diligence apply to you? This could be: Rules and Regulations in your business space GST Registration Again,

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Understanding Electoral Bonds: A Deep Dive into India’s Political Funding System

Understanding Electoral Bonds: A Deep Dive into India’s Political Funding System Did you know that some Electoral Bond donors donated more than 5-10x times their net profits. The data does not lie. Where is all this money coming from? Where are they going? Electoral bonds have been a topic of discussion and debate in India’s political landscape.  These bonds were introduced to tackle the issue of black money in political funding and provide transparency in the process.  However, recent revelations have raised questions about the effectiveness and fairness of the electoral bond system.  In this blog, we will cover: What are Electoral Bonds? Why was it introduced? Does Electoral Bonds really help? End-to-End system of Electoral Bonds Is there a Quid-Pro-Quo System at play? Is there a Solution to all of this?   The Need for Electoral Bonds Elections in India are known to be extremely expensive endeavors.  As per legal limits, INR 95 Lakhs and INR 70 Lakhs for Parliamentary Constituency  INR 40 Lakhs and INR 28 Lakhs for Assembly Elections  However, as per unofficial data, the actual spend is around 40x the allotted budget for parliamentary elections and 15 times for assembly elections.. The legal limit for campaign expenditure is significantly lower than the actual amount spent by candidates.  To bridge this gap, political parties often rely on donations from individuals and corporations. However, this traditional method of funding raised concerns about the influence of black money in politics.  To address this issue, electoral bonds were introduced as a solution.  By using electoral bonds, it was believed that the flow of black money could be curbed. The Concept of Electoral Bonds Electoral bonds are essentially a financial instrument for making donations to political parties.  A key element of an EB is that it would be a Bearer Instrument. They were designed to maintain the anonymity of the donor while ensuring transparency in the process.  This is simply to avoid internal and external conflicts between political parties and with donors. However this anonymity isn’t very much there. If you take a look at a sample of an Electoral Bond, you can see SBI at the top. This is because SBI is the Nodal Agency which manages the process of Electoral Bonds. This brings the anonymity of electoral bonds under scrutiny. As the SBI, a government-appointed institution, manages the entire process, the concept of anonymity becomes questionable.  Now the key point is that: The SBI chair is elected by the government. In that case, the whole point of Anonymity is no longer there. It just means that the Party controlling SBI has exclusive access to this Electoral Bonds List. This raises concerns about the privileged access to information that the ruling government may have compared to other political parties. Ask yourself: Can this information not be used by this Party to initiate a Quid Pro Quo system? What do you mean by a Quid-Pro-Quo system? A political party that has access to the information of the donors, can initiate a system where they can return favors in return of getting donations. In simple words: You give me X, I return the favor through Y. The Challenges with Electoral Bonds While electoral bonds were intended to eliminate the problem of black money, several shortcomings have emerged.  The main issue still stands. More than 50% of the money used in Elections are still not financed through Electoral Bonds. This means that Black Money is still the leading contributor to the elections financing. And there is also a new problem at play. The introduction of EB abolished the ceiling on contributions that can be made by corporations. This in turn led to a surge in  funding from corporations, raising questions about the source of these funds and the potential for undue influence on political parties. And the situation clearly shows that most companies are donating amounts that are much higher than their net income to Electoral Bonds. Let’s further break down this data. Corporations and their Donations The above data reveals significant contributions made through electoral bonds.  Some companies, despite reporting low profits, have managed to donate substantial amounts.  Some even report negative profits. This raises questions about the legitimacy of these donations and the possibility of temporary funding arrangements.  Furthermore, the timing of certain donations raises suspicions. Cases have been observed where companies faced scrutiny from government agencies, and shortly after, made significant purchases of electoral bonds.  This has led to speculation about the existence of a “carrot and stick” approach, wherein rewards or punishments are meted out based on political donations. This is precisely what the Quid-Pro-Quo system highlights. If you take a look at top donors, you can clearly notice the trend. This favors could be through: Contracts or Projects awarded Leeways after Raids/Scams (14 out of the top 30 donors were raided before they placed their donations) Taking an example: Future Gamings & Hotels On April 2nd 2022, ED attached assets worth INR 410 crore. 5 days Laters, company purchased bonds worth INR 100 crore In total INR 1,368 crore EB were purchased by this company. Close to 50% was purchased after the ED raid. This was not a one off case. As per reports,14 out of the top 30 Donors were raided by Probe Agencies, prior to most of their donations. FAQs: 1. If all parties are benefiting from EB, why is the current government getting heat? Its because they have received the highest portion of this funding Almost 57%. They have exclusive access to this data, which they can use for the quid pro quo system. 2. How are firms able to donate 1000s of crores of money without being profitable? Where is all these donations money coming from?Most likely answer is that they are getting temporary funding which could either be legitimate or not.   3. Why can’t judges show the same level of transparency that they are expecting from parties? The key difference that you need to understand is that it’s not just about

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Future of Indian Stock Market & the Reality Behind India’s GDP

Future of Indian Stock Market & the Reality Behind India’s GDP The Importance of Understanding Market Trends Understanding market trends and economic indicators is crucial for making informed investment decisions.  The Indian Market Dynamics are likely to change quite dramatically over the next coming years. The last year has been great for Indian Investors with Nifty giving around 30% run up in just one year. But now a new set of question arises, Have we missed the rally? What are the options that we should look out for? What major triggers are left in the market? What happens Post Elections? Will India continue to give these types of returns? In this blog, we will delve into the current market outlook and the reality behind India’s GDP.  While some parts of the information may seem technical, we will break it down in simple terms to make it easily understandable for everyone.   The Key Factors Affecting the Market Currently, the market is hovering around 22,500 Nifty and is approaching the psychological level of 25,000.  This might happen in the next 6 months (or might take more time), but that’s the short term outlook. This year, it is anticipated that this level will be broken due to several key factors. So what exactly are these triggers? Reason 1: Interest Rate Cut An interest rate cut is expected, which will stimulate economic growth and make the market more bullish.  This will create favorable conditions for investors. Take a look at the US FED Interest rate chart from 2008-2016: The interest rates were at near zero levels.  This meant that governments could take on debt at very low cost of borrowing, which boosts economic activity. And therefore in this period the Indian Stock Market gave almost 370% return. This happened again during the covid crisis, when interest rates were again cut down to near zero levels. Currently we are at high interest rates of 6.5-7% in India, which when brought down will be a trigger for the stock market. Reason 2: India Election The upcoming India election is predicted to be won by the existing government. If this happens, this is again good news for the market since the markets prefer certainty and stability. Reason 3: US Election The US election also plays a significant role in the global market, including India.  As the US dollar is the reserve currency of the world, any changes in the US market will have a substantial impact on India’s economy.  Therefore, the outcome of the US election will influence the Indian market. Great, there is a possible rally in the short term. But what will happen post elections? Once all these triggers play out and the market has given a rally, things will start changing. There will be no more incentives to drive the market.No Major Trend.No Major News.So then what? The Markets will move as per the Fundamentals of the Economy. What are the Fundamentals? Problem 1: The Discrepancy in India’s GDP Data India’s Real Growth is what will matter. Ie: If India’s GDP is truly going up, If productivity and growth continues. Then the markets will continue making new highs. But what if it does not? There will likely be a correction. But note that its very much possible that the government intervenes and puts this off by a few more years. Now, the major question to ask will be: Is the GDP actually growing? As per recent data,  India’s GDP growth is around 8.4%. This is a big number. But here are the facts: • Despite the high GDP growth rate, India continues to face significant challenges in terms of unemployment.  Approximately 800 million people, almost 50% of the population, rely on government subsidies for basic necessities.  • Additionally, the savings to GDP ratio has hit a five-decade low, indicating a lack of financial security among a large portion of the population. There is a mismatch here. Let’s take a deeper look. How is GDP Calculated? GDP is calculated primarily through 3 methods  Output Input Expenditure Ideally they should all come at a similar range. The Output and Expenditure method are more popular.  The Output method primarily deals with finding the primary sectors that contribute to a nations growth.  And using them to calculate the GDP of the country as shown below: The Expenditure method calculates the GDP using values such as Public Expenditure, Private Expenditure, Gross Value Add and so on. Now without going too deep into the specifics, If we take the first and third method, The discrepancy (difference in the 2 methods) was: 3.4% in 2022-23 2.8% in 2023-24 This is a 6.2% rise in GDP discrepancy. Which raises questions about the reality of these numbers.   As per an article (shown above), Prof Arun Arun Kumar raised the same issue. Problem 2: GDP vs GVA Mismatch Second key problem is around the Gross Value Add (GVA). In simple terms, GVA is the total value of output product without including intermediary costs. (Avoids double counting). Technically, GVA is considered a better metric than GDP in determining a nation’s growth. But the GDP and GVA should not be too far apart, which is not the case in India. GDP in India ~ 8% GVA in India ~ 6.5% Taking a different look at what GVA is, GVA = GDP + subsidies on products – taxes on products In India, Taxes are going up Subsidies are going down This shows a trend of decreasing GVA. India’s Plan of Action So now what does the road forward look like. Let’s take a final look at GDP, GDP includes Private Expenditure and Public Expenditure. Over the last few years, private expenditure has come down while public expenditure has gone up. Now all tehse public expenditure adds to the country’s GDP, but not necessarily to its GVA (Productive Expense). This is one of the core problems. Now how does the government finance these expenditures? Loans (Deficit) Taxes In the recent budget, India announced that their

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IPO Investing: A step-by-step Framework to find good IPOs!

IPO Investing: A step-by-step Framework to find good IPOs! In this blog, we will explore the intriguing world of IPO investing.  IPOs, or Initial Public Offerings, have become a popular investment option for many individuals looking to enter the stock market. But before you jump in, it’s crucial to have a solid risk mitigation framework in place to analyze and assess IPOs effectively.  Here’s what we’ll cover: Understanding IPOs How can you scout out new IPOs? Step-by-step approach to understand and evaluate IPOs What Important points to keep in mind Understanding IPOs Let’s begin by exploring the story of IPOs.  IPOs offer an opportunity for companies to transition from private ownership to public ownership by selling shares to the general public for the first time.  This transition enables companies to raise capital for growth and expansion. IPOs can be highly rewarding, as they often provide substantial returns to early investors.  However, it’s important to note that IPO investing comes with its fair share of risks. How can you Scout out new IPOs? A website to check out upcoming IPOs in India is As a company closes up on its IPO, it files a Draft Red Herring Prospectus (DRHP). It’s a document filed by a company with financial regulators before going public, providing information to potential investors about the upcoming initial public offering (IPO). Now this is an extensive document that holds more than 400 pages of data. Since most investors won’t have the time to go through the entire document, let’s go through a step-by-step process to analyze an IPO. The IPO Analysis Framework Now, let’s dive into the IPO analysis framework that will help you assess and evaluate IPOs effectively: 1. Market Situation and Hype First and foremost, consider the market situation in which the IPO is getting launched and assess the level of hype surrounding it.  A good market situation is generally favorable for IPOs, but excessive hype can be a red flag. Look for IPOs launched in a good market with moderate levels of hype. Even an euphoric type of market dynamic can be favorable for IPO investments. As an example Tata Tech was a hyped IPO under the right market conditions that gave almost a 140% listing gain. Issue price was INR 500 and the stock listed at INR 1200. The stock price closed at around INR 1310. However Jio Financial Services was extremely overhyped and that led to low returns and since then has been sideways. Since listing at INR 265, it dropped down by 22% the very next day. 2. Understanding the Business Model Next, gain a clear understanding of the company’s business model.  It’s crucial to know how the company generates revenue and makes money. This can work even if you believe that the business model is not set as of now, but going forward the company will make money.For eg: Jio Financial Services was one such company where the business model was not quite clear.But however people truly believed that the involvement of Mukesh Ambani and his Jio group will ensure that the company will flourish.However as a counter example: Nykaa (FSN E-Commerce Ventures Ltd) had listed at around 78% listing gains.However since its listing it has gone down by 58%. This was because the company’s path to strong profitability was not clear given their low profit Margins. The DRHP of the company before its IPO will show the company financial and business data.Take a good look at these numbers. If the business model is unclear or you don’t have confidence in its future prospects, it’s best to avoid investing in that IPO. 3. Identifying the Competitive Advantage Identify the competitive advantage or “moat” of the company. A moat refers to the unique advantage that sets a company apart from its competitors.  For eg: ● Zomato Strong Brand  Advertisements and Distribution ● Apple  Luxury Brand Pricing Power Ecosystem play Look for factors that give the company a significant edge in the market, such as strong branding, innovative technologies, or strategic partnerships. 4. Evaluating the Valuation Assess the valuation of the IPO to determine if it’s reasonable. Look at the price-to-earnings (P/E) ratio of the company and compare it with industry averages.  A lower P/E ratio relative to the industry may indicate that the IPO is undervalued, while a higher ratio could suggest overvaluation.It’s also crucial to check who the underwriter of an IPO is. An underwriter for an IPO is like a financial middleman that helps a company go public. They assess the company’s value, buy its shares, and then sell them to the public, assisting the company in raising funds for its initial public offering. Ensure that this is legitimate and that they are credible.  5. Examining Red Flags Be vigilant for any apparent red flags or warning signs. This could be bad management, wrong intention for IPOs etc. Look into the company’s offer for sale versus fresh issue, which indicates whether existing stakeholders are selling their shares or new equity is being added.  An offer for sale in an IPO is when existing shareholders, like company founders or early investors, sell their shares to the public for the first time, allowing new investors to buy a stake in the company.  It’s a way for the company’s original owners to monetize their investment and for the public to become shareholders. An IPO, or Initial Public Offering, faces fresh issues when a company offers new shares to the public for the first time, raising funds for expansion or other business needs.  These issues involve the company’s financial health, market conditions, and investor sentiment. Now it becomes important to research why the company wants to do an IPO: Is it an OFS/Fresh Issues/ Mix What will they do with the money? This can be found through the DRHP report.  Also take a look at the amount that is being bought by big players like HNIs and Large Institutions vs Retail Investors. Big players should be equally if not more involved in the IPO. Additionally,

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Stock Markets: Next 10 years, outlook!

Stock Markets: Next 10 years, outlook! As we ride the current wave of euphoria in the stock markets, it’s crucial to recognize that the investing landscape will witness a seismic shift over the next 10 years.  This transformation is rooted in a macro analysis that spans the golden years of 2008-2020 to the challenges governments face in managing debt. In this exploration, we unravel the intricate dynamics that will shape the future of investing. Here’s what we’ll cover: 1. The Golden Phase of 2008-2020: Globalization’s Pinnacle 2. The Catalyst: 0% Interest Rates (2008-2016) 3. Debt-Driven Growth: Mirage or Reality? 4. 2020: The Turning Point 5. Dealing with Inflation: The 2021-2023 Phase 6. The Dilemma: High Interest Rates in 2024 7. Governments at Crossroads (2024) 8. The Solution: Cutting Interest Rates 9. The New Normal (2024-)   1. The Golden Phase of 2008-2020: Globalization’s Pinnacle This was the period post the 2008 financial crisis. To fight the slowdown of the economy caused by the crisis, the government had to intervene. To mitigate an economic recession and very low inflation, the government did one of the first instances of Quantitative Easing. Quantitative easing is the method of printing new money with the aim to increase liquidity in the economy. This will eventually lead to more activity for financial assets, aiming to increase the money supply, lower interest rates, and stimulate economic activity. This was also backed by a high level of trading and globalization between countries. And this eventually led to one of the best periods for the stock market. The Indian Index NIFTY went from 2500 to 12500 during this period. That is almost a  400% gain in 12 years! The interconnectedness of economies was what led to the most significant bull run in recent history. 2. The Catalyst: 0% Interest Rates (2008-2016) A ket catalyst that drives the stock market is the interest rates. A lower interest rate simply means that the rate at which governments borrow will be very high. This will ultimately lead to more growth in the economy through government expenditures and projects. The excess money in the economy will be ingested into the stock market and other major asset classes which lead to accepting price appreciation. And during the period of 2008-2016, this interest rate was kept at close to 0%. This enabled the governments to to borrow extensively and undertake substantial spending without the traditional fiscal constraints. This led to a growth in GDP of these countries as well. And also for the Stock Market to give massive bull runs. 3. Debt-Driven Growth: Mirage or Reality? But now the key question needed to be answered. Was this level of growth sustainable? What are the implications to these actions? Answer: Extremely high levels of Debt! Although most countries and their asset classes grew exponentially, this led to excess amounts of money in the economy. The high levels of debt and excess money meant two things: Higher Inflation Higher Taxes The government needs to control their spending. They need to bring inflation under control. And the answer to that is by either increasing the interest rates to reduce borrowing and remove liquidity from the economy. Or by increasing the taxes of the country to increase government earnings to poy off these high debts.  4. 2020: The Turning Point Post 2016, the governments had to increase the interest rates to bring inflation and global debt in control. So from 2016, the interest rates were increased from close to 0% to almost 2.5% by 2019 in the US. However that’s when the world was shaken apart. Through the COVID crisis. This was an extreme and uncertain event that the world wasn’t prepared for. To avoid collapse and extreme slowdown of the economy, the governments had to bring down the interest rates back to near 0% levels. They had to borrow more to keep the economy running. They had to print more money. The M1 money supply (which is the amount of money in the economy) went from 5000 billion USD to almost 20,000 billion USD in 2 years. That’s a 4x jump. These new levels of debt and the ones amassed over the last 12 years had led to record amounts of debt. The number was massive and the governments had never seen such levels of debt before. Add to this the inflation in the economy was rising exponentially and there was only an extent to which this false illusion of growth could be shown. All parts of the globe saw extreme levels of inflation. Countries like Argentina, Zimbabwe, Sri Lanka saw upwards of 100% inflation. This was unbearable. India also saw high levels of inflation. Daily items like vegetables, gas cylinders, fuel all were rising in costs exponentially. 5. Dealing with Inflation: The 2021-2023 Phase Given the dire circumstances the governments again had to increase the interest rates. Not just increase, but jack it up quickly. This was the only way to bring the inflation and excess liquidity in the economy under control. The interest rates were brought up to almost 6% within the span of a year. The phase from 2021-2023 was pretty much about dealing with the inflation problem This led to an overall slowdown in the stock market returns as well. From the period of Oct 2021 – May 2023, the stock market gave close to 0% return. 6. The Dilemma: High Interest Rates in 2024 Now as we sit in 2024, the inflation problem is slowly getting solved. It seems that we are bringing it back in control. But now we have a NEW problem: The Interest rates are at 15 year HIGH! And what does High Interest Rate mean? The governments have to spend a lot more on debt repayments. And as we noted before, the world is sitting at a record level of debts. 7. Governments at Crossroads (2024) Now this is situation: Total debt in the world is way too high. Most of the growth coming in the world is

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 10 high value money making skills for 2024

10 high value money making skills for 2024 As the new year unfolds, many embark on the journey of resolutions, often envisioning significant changes in their lives.  However, how many resolutions genuinely translate into transformative actions?  Actions are what bring about changes, so that’s where your focus should be. In this blog, we delve into a comprehensive guide on high-impact, high-value skills crucial for 2024.  Here’s what we’ll cover: The Power of Effective Communication Analytical Skills Problem Solving Learning Investing Risk-Taking and Dealing with Uncertainty Understanding Macro Trends Learning Fast through Structured Thinking Avoiding Distractions by Focusing on What Matters Gaining a Range of Experiences Building Distributions   1. The Power of Effective Communication: Effective communication serves as the cornerstone for personal and financial success. It goes beyond mere language proficiency and high end vocabulary. It’s about focusing on 3 core steps:  speaking reading writing.  The key point is that all of these 3 skills are interconnected; one boosts the others. Working on these helps you structure your thoughts coherently, which is an evergreen skill irrespective of the field that you are in. How to develop these skills? Start writing everyday.  Pick a topic and just spend 15 minutes a day putting your thoughts into words. Consume content that interests you and then break them down into simple concepts. The Feynman technique is a learning technique where you absorb a complex topic, break it down and try teaching it in a simple format to others. 2.Analytical Skills: Analytical thinking, often hailed as a vital skill, involves the ability to read, comprehend, and apply information in a structured manner.  Merely reading through content is insufficient to apply into your day to day lives.Rather, you should delve deeper, think mathematically, and create frameworks for better understanding. For eg: The book “Zero To One” by Peter Thiel covers the concept of “0 to 1” and “1 to N” type of business.Upon consuming this content, you should structure your thoughts around which type of business you would build.This would depend on a variety of personal and professional factors.But what this does is it helps you present information in an executable format. How to develop these skills? You can start by picking up an area of interest and start consuming and analyzing this space.  Expand your knowledge base.Seek out different perspectives and analyze how each of them would help you.You can go further and prepare for analytical exams like CAT, GMAT which test this foundational concept. 3. Problem Solving: Problem-solving emerges as a pivotal skill which is directly proportional to financial success.  The key point to remember is that how lucrative your solution/work/business idea will be is directly proportional to the complexity or the number of problems that you solve.Therefore your focus can be to develop highly niche skills, like artificial intelligence or finance which offer such opportunities. Problem solving primarily consists of 2 things: Identifying a problem Creating definite but varied solutions taking in all sorts of information Generating insights on the solutions. How can you cultivate this skill?Start by absorbing complex information daily.Instead of looking for 1 minute explanation or simplified examples, read information in its raw form.Use this to create your own opinions and perspectives before consuming other people’s views.Consuming oversimplified information will ultimately hamper your ability to digest and make decisions. 4. Learn Investing: Investing is a core necessary skill at this point. Given the impact of high global debt, rising inflation on our day-to-day lives, Investing is more of a need it is a necessity. The only way to safeguard your hard earned money is to educate yourself on personal finance and money management. Understand that money management is a skill of its own and that you need to at least know where your money is going.Start by doing Systematic Investment Plans and creating your own Investment Portfolio.Consumer content that helps with these and start doing your own research. 5. Risk-Taking and Dealing with Uncertainty: Every major decision that you take in your life will come with some level of risk. There will be pros and cons that you need to account for, so therefore it becomes crucial that you know how to handle these situations. How to cultivate this skill? Keep these 2 points in mind: You will almost never have 100% information. Be it when investing, or making a job shift, or starting a new business. A road map and a clear goal helps you deal with uncertainty a lot better. Learn to make practical decisions based on limited data.  And take steps to mitigate your risks and have a safety net to protect your downside. 6. Understanding Macro Trends: The complexity of the world will keep going up, and so will the need for understanding these macro trends.Macro trends are big-picture changes or patterns that affect a large part of society, often over an extended period.The ability to read into these trends will massively help you make long term career and personal decisions.It helps you direct your efforts effectively as per the dynamic of the world. How to develop these skills? Learning about macroeconomics (about how the world works) is a foundational step in comprehending macro trends influencing various aspects of life, career, and investment.Develop opinions on various emerging trends.This will make decision making a lot easier down the line. 7. Learning Fast through Structured Thinking The ability to learn fast is highly linked to your ability to think in structures.Structured thinking involves categorizing information, making it easier to comprehend and retain.  It’s about breaking down a problem into easier digestible buckets.This helps massively when consuming and learning new things. How to develop these skills? When learning about a new topic, start by breaking it down into buckets. Bring it out down to its simplest form and start understanding and analyzing instead of just consuming or byhearting. 8. Avoiding Distractions by Focusing on What Matters: The diminishing attention span is a large concern for the new generations. Human Attention span in2000: 12 secondsNow:  8 seconds What other business

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Step-by-Step Process to Invest for Your Long Term Goals

Step-by-Step Process to Invest for Your Long Term Goals In the ever-evolving landscape of personal finance, planning for your long term goals like your children’s future is paramount. This blog will dissect the nuances of their financial strategy, covering topics from determining the investment milestone to the allocation of funds in index funds, equities, and real estate. Here’s what we’ll cover: ● Setting the Financial Milestone How do you calculate your target amount? What considerations will influence this decision? ● Government Schemes: Sukanya Samridhi Yojana and Sovereign Gold Bonds What are the pros and cons of Sukanya Samridhi Yojana and Sovereign Gold Bonds? How do these government-backed schemes fit into your diversified portfolio? ● Cash Flow-Based Assets Why is building alternate cash flow important in financial planning? How can you leverage Real Estate to create a cash flow? ● Investment Vehicles: Index Funds, Equities, and Real Estate How much to allocate? What role do different vehicles play in your portfolio? How can real estate fit into your investment strategy? ● Mutual Funds and Flexi Cap Funds Why consider mutual funds, especially for risk-averse investors? What is the significance of Flexi Cap Funds in a long-term investment plan? ● Portfolio Returns and Risk Management How does this diversified approach contribute to risk management? Setting the Financial Milestone: Determining the right financial milestone is pivotal.There is no one-size-fits-all approach here. It depends on: Family Needs Future Goals Major Expenses (For eg: Education Abroad) It is also essential to recognize that the value of money would decrease over time.  So it is important to keep inflation in mind when deciding on this number. Setting this substantial milestone ensures a robust financial foundation for the child’s educational journey. If you are looking to invest a Lump Sum amount, the process becomes easier as you can invest in a safer asset that at least beats inflation consistently. If you are looking to start a Systematic Investment Plan (SIP), then you can calculate the amount accordingly using an Investment Calculator. But make sure to plan for an inflation adjusted return. So if you invest INR 25,000 every month for the next 20 years and grow it at a CAGR of 12%, you will have a corpus of 2.5 crores. But as noted above, this 2.5 crores will be worth 62.5 Lakhs after inflation adjustment. Government Schemes: Sukanya Samridhi Yojana and Sovereign Gold Bonds: Government-backed schemes play a crucial role in the diversified approach.  Example 1: The Sukanya Samridhi Yojana gives you a 8% return with a very long locking period of almost 21 years (or when the female child gets married). Considering the inflation in the economy is close to 7%, your adjusted real return is extremely low. So this instrument is not a method to grow your investment. (Source: However, it’s good to consider such schemes to invest your surplus money once your equity investments goal is met or to avail tax benefits. Example 2: Sovereign Gold Bonds SGBs are government backed gold bonds that offer a 2.5% annual interest rate paid every 6 months. They don’t have any more charges involved and attract zero capital gains tax on maturity.  It’s a way to circumvent owning physical gold and avoiding making charges and other commissions. (Source: However, ● Gold has longer cycles and offers less attractive returns than equity or debt. ● Additionally SGBs are government bonds and are still paper assets. They don’t come under physical hard assets and if the government defaults, these SGBs also loses its value. Cash Flow-Based Assets: It is also very important to invest in assets that generate cash flows. Purchasing Real Estate is one of the best ways to go about doing it. Consider buying real estate on leverage. For eg: it’s possible to purchase a 1 crore property by paying a down payment of 20 Lakhs. This will work as long as the property is generating a consistent cash flow. These cash flows allow opportunistic buys when unique circumstances like market falls presents itself. Good Real Estate, similar to Stocks, are ones that are purchased at good rates. Most of the opportunities that you see are inflated, so it’s important to scout and do your own research. Look for properties that get you at least a 4% rental yield and have growth opportunities. Investment Vehicles: Index Funds, Equities, and Real Estate: Allocation of funds is a cornerstone of a robust investment strategy. Here’s one possible way to consider investing across asset classes for medium risk investors   ● Earmarking 50% of funds for index funds provides a secure and growth-oriented avenue over a 20-year horizon.  This investment is made with a goal to make 10-12% CAGR over 20 years. Data on the historical performance of index funds showcases their resilience and consistency.  (Source: The remaining 50%, diversified into direct equities (or Mutual Funds)  and real estate, aligns with a strategic approach.  ● You can look to invest 20% in Direct Stocks or through Mutual Funds.  These can be invested with a goal to make >12% over the span of 20 years. If you are a serious investor and are looking for advanced techniques with a focus on better returns, join our Wisdom Hatch community where we give live and timely updates on the Stock Market. ● Real estate, specifically chosen for its means as a hedge, lesser risk, and as a means to create cash flows can be your final 30%. Let’s take a deeper look at some of these instruments. Mutual Funds: ● For risk-averse investors seeking professional management, mutual funds emerge as a preferred choice. ● The statistics on mutual fund returns compared to traditional government schemes underscore their safety and higher returns. ● The introduction of Flexi Cap Funds, with the flexibility to mix debt and equity, aligns seamlessly with a long-term investment horizon.  Historical data on the performance of Flexi Cap Funds substantiates their potential to deliver optimal returns. If you are investing for a long term horizon of 15-20 years, then such funds could be good choices. Source:

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Mastering the 80/20 Rule for Better Decision-Making in Investing and Beyond

Mastering the 80/20 Rule for Better Decision-Making in Investing and Beyond In the fast-paced world of finance and investments, making the right decisions can be challenging. Whether you are an experienced investor or just starting out, understanding a fundamental concept known as the 80/20 rule can be a game-changer.  This rule, also known as the Pareto Principle, can help you achieve better results with less effort in various aspects of life, from investing to risk mitigation and beyond.  In this comprehensive blog, we will delve into the 80/20 rule, breaking down its applications and exploring how it can be a powerful tool for making informed decisions. Here’s what we’ll cover: ● Understanding the 80/20 Rule (Pareto Principle) ● Applying the 80/20 Rule to Investing ● Deciphering the 80/20 Principle in the Stock Market Choosing the Right Stocks Risk Mitigation through Nifty 50 ● Extending the 80/20 Rule to Real Estate Investments   Understanding the 80/20 Rule (Pareto Principle) The 80/20 rule, also known as the Pareto Principle, is a concept that states that roughly 80% of outcomes result from 20% of causes. In simpler terms, it implies that a small portion of effort or input often yields the majority of the results [1].  This principle has been applied to various fields, including economics, management, and decision-making. (Source: Management consultants often use the 80/20 rule to streamline their efforts and focus on tasks that have the most significant impact. It’s not just about having more knowledge; it’s about structured thinking and focusing on the most critical elements that drive results. Applying the 80/20 Rule to Investing Structured Thinking vs. Lack of Knowledge Successful decision-making isn’t just about having knowledge; it’s about structured thinking.  People often lack structured thinking because they aren’t taught how to think effectively. The 80/20 rule offers a way to overcome this deficiency by helping individuals focus on the critical 20% of information that drives 80% of the results. Mitigating Investment Risks Investing can be fraught with uncertainties and risks. Many people are afraid of making investment decisions due to fear of losing money.  This fear arises from a lack of analytical abilities. However, the narrator suggests that risk mitigation is possible by gaining knowledge and improving analytical skills.  One way to mitigate risk is through the use of insurance, such as health and life insurance Deciphering the 80/20 Principle in the Stock Market Analyzing Market Trends In the stock market, it’s common for investors to panic when the market experiences a downtrend.  As it stands, the market has corrected by around 7% from it’s peak [2]. (Source: This has led to a wide variety of questions on how investors should react. So let’s try to apply the 80-20 principle here.  A 5% to 10% fall is not considered significant, and a major correction is only around 15% to 20%.  Since Oct 2021, the market has been consolidating and has given almost no returns. A market almost never consolidates to go down, it’s always preparing for an up move. Analyzing market trends through the 80/20 lens can help individuals make more informed decisions. This simple analysis gives you more confidence to stay invested! Choosing the Right Stocks Follow the 80-20 principle and try to avail 80% information about the stock by focusing on the main 20%. Avoid absorbing news blindly. Industry Growth Rate When selecting stocks, understanding the industry’s growth rate is essential.  Focus on industries with higher profit potential, as not all industries offer the same level of profitability. Profit Margins Profit margins are a crucial factor in stock selection. The operating profit margin, which measures revenue relative to the cost of acquiring a customer, is a key indicator of a company’s financial health. Consistent Profit and Revenue Growth Successful stock selection involves identifying companies with consistent profit and revenue growth.  Look for businesses that demonstrate sustained growth, as this aligns with the 80/20 rule’s principle of focusing on factors that drive results. Avoiding Red Flags Investors are cautioned against investing in companies with red flags. Red flags include issues like scandals, scams, or unfavorable media coverage.  These negative aspects can indicate problems within a company and should be carefully considered before making an investment. Valuation Considerations Always consider the stock valuation. Check the current price against the IPO price and all-time high low price.  This evaluation is crucial to ensure that the stock is reasonably valued. Risk Mitigation through Nifty 50 Nifty 50 as an easy and low-commission investment option, highlighting that it aligns well with the 80/20 rule. The 80/20 rule simplifies risk management by offering an approach that focuses on the most critical factors affecting investment performance.  It encourages a more straightforward and practical approach to managing risk in the stock market. If you are a serious investor and are looking for advanced techniques with a focus on better returns, join our Wisdom Hatch community where we give live and timely updates on the Stock Market. Extending the 80/20 Rule to Real Estate Investments Applying the 80/20 Rule in Real Estate The 80/20 rule is not limited to the stock market but can also be applied to real estate investments.  The rule can simplify and improve decision-making in the real estate sector. For eg: Instead of doing your due diligence for the plot and its background, take a bank loan. This will lead to the Bank doing the diligence for you on the plot. Use paperwork extensively to decreased your overall risk Conclusion In a world where information overload can paralyze decision-making, the 80/20 rule stands as a beacon of simplicity and effectiveness.  By understanding that 80% of results come from 20% of efforts or focus, we can streamline our decision-making processes and achieve better outcomes with less stress and confusion. Whether you are investing in the stock market, considering real estate investments, or making life’s crucial decisions, the 80/20 rule can be your guiding principle.  Remember, knowledge alone is not enough; structured thinking is the key to success. Mastering the 80/20 rule can be your

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